June 25, 2007
New Book By UI Professor Helps Businesses Grow With Experimental Design
Readers would rather buy a magazine from Kelly Ripa than Dr. Phil.
A University of Iowa business professor discovered that fact as part of a project he undertook that helped Des Moines-based Meredith Publishing increase subscriptions for its Ladies Home Journal title.
Johannes Ledolter, professor of management sciences in the Tippie College of Business, said his work with Meredith also demonstrates that many businesses are missing an opportunity to build their customer base by ignoring a statistical technique called experimental design.
"It's a very powerful and inexpensive tool that can help businesses become more efficient and improve their profitability," said Ledolter, who explains how to use the method in a new book, "Testing 1-2-3: Experimental Design with Applications in Marketing and Service Operations." The book was co-written with Yale University business professor Arthur Swersey and was published this spring by Stanford University Press.
Experimental design is a statistical method in which researchers study the outcome of a process by changing the factors that might affect it. Most methods test by changing only one factor at a time, but Ledolter said efficient experimental designs allow numerous factors to be tested at once.
"The beauty of experimental design is that you can run tests with multiple factors simultaneously, instead of changing just one factor, then another factor, then another factor," Ledolter said. "Changing factors simultaneously not only reduces the costs of experimenting but also provides more and better information."
The method has helped manufacturing and engineering businesses improve their production methods for decades through such efficiency programs as Total Quality Management and Six Sigma, both of which include effective methods of experimental design. Ledolter is one of the field's top scholars and practitioners and is a leading advocate in urging other types of businesses to adopt its methods to improve their efficiency, productivity and profitability.
Many of those businesses, however, have been slow to take advantage of designed experiments. In part, Ledolter said that's because most books about experimental design focus entirely on industrial applications. "Testing 1-2-3" is meant to fill that void.
The book shows the power of experimental design through dozens of case studies where the method helped companies increase their business. The book includes examples of how experimental design helped Mother Jones magazine increase its circulation, and how it helped a company called PhoneHog design its Web site to sign up more customers for its subscription-based long distance phone service.
Included in the book is a design strategy Ledolter helped develop for Meredith's Ladies Home Journal in 2005. The company was planning a direct mail campaign for the title and wanted to know what visual elements should be included on the brochure to generate the most new subscriptions. For instance, should the brochure show covers of previous magazine issues? Or which announcement would be more enticing, "double our best offer" or "never had a bigger sale?"
The company also wanted to know who would be a more appealing spokesperson to feature on the brochure, Kelly Ripa or Dr. Phil.
Ledolter helped design an experiment in which more than 120,000 test brochures featuring various combinations of those and other factors were mailed to prospective readers. In the end, the brochures featuring the perky talk show host outsold those with the plain talking psychiatrist in nearly every combination. The combination of Kelly Ripa on the brochure and the announcement "never had a bigger sale" on the order card increased the number of subscriptions by 12 percent.
After examining the results, Meredith opted for a brochure featuring Ripa.
STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Suite 371, Iowa City, Iowa 52242-2500.
MEDIA CONTACT: Tom Snee, 319-384-0010, firstname.lastname@example.org.