2. Agenda
• Background Information
• Managerial Decision & Research Objectives
• Secondary Research
• Exploratory Research
• Survey
• Findings
• Limitations
• Recommendations
• Questions
3. Background
• Fully automated DVD
rental kiosk typically
located in McDonalds
offering new release
rentals for $1 per night
• redbox holds 9% of the
video rental market
share
4. Managerial Decision
• Should redbox extend its product line to
increase market share among students?
Research Objectives
Considerations:
• Add more locations
• Offer video game rentals
• Create a rewards program
5. • Sales totaled $519 million in 2008
• Sales projected to reach 1.4 billion in
five years
Secondary Research Findings
Video Rental Kiosks
6.
7.
8. Secondary Research Findings
• Currently 15,000 redbox
kiosk locations nationwide
• Slated to increase to 20,000
by the end of 2009
• Main U of M campus
locations include:
o McDonald’s on 15th
Avenue
o Lund’s on University
Avenue
Location
9. • In survey of 5,000 Gamefly.com customers
(90% male) more than 50% of respondents
rent video games – on average about 11
games per month
• A study from Pew Internet Research finds
that 70% of college students play video
games at least “once in a while”
Secondary Research
Findings
Video Games
10. • Create a sense of customer loyalty without
requiring more commitment on the part of the
consumer
Customer Acquisition vs. Customer Retention
It costs 5 times as much money to find a new
customer than it does to get a current customer to
come back and do business with you
Secondary Research Findings
Costumer Loyalty
11. Exploratory Research
Sample Questions:
• When you watch a movie do you
usually stay home or go to a
theater?
• How often do you rent movies?
• Where do you rent movie from
most frequently? Why?
• How much money do you spend
per month on DVD rentals?
• In your opinion, what company
do you think is the top in video
rental service?
Conducted 6 Interviews
Why?
• In-depth, individualized
responses
• Notice themes
• Avoid external
influences
12. Exploratory Research
Findings:
• Price and convenience are the most important
factors for college students
• Non-committal service is key (no monthly or late
fees)
• Rental decision is unpredictable
13. • Likert, Interval, Nominal Questions
What factors are most important to you in terms of redbox locations?
(Please circle a number 1-5.)
Close to where you live
Close to where you work
Close to where you shop
Close to where you eat
On your daily route
Where would a new redbox location be the most useful to you?
(Please rank the following choices from 1 to 6, 1 being the most
important and 6 being the least important.)
By the dorms
In Coffman Union
At popular bus stops
Near the library
Outside restaurants and bars
Near campus ATMs
Survey Design
14. Are you a member of any rewards
programs/points/loyalty programs? (Used for the
purpose of promotions only, this does not include
corporate credit cards.)
If yes, does being a member of a loyalty program
influence you to do business with the company more
often?
If redbox offered a loyalty program, how likely would you
be to sign-up?
Survey Design
Sample Questions Continued:
15. • Convenience Sampling
• Sample Size: 214
• n=196; 95% Confidence Interval so z=1.96;
p=0.50; H=0.07 (precision level)
• Distribution: Paper & electronic formats via
qwiksurvey.com
• Response Rate: 100% for paper surveys;
unclear for internet
Survey Methodology
21. Video Games
• 196 out of 214 do not rent video games
• How often video games rented + likeliness to
rent from kiosk had means below 1.7
• Not a practical market based on our sample
22. Locations
Considerations:
• redbox “users”
• Daily route and
where you live
t-Test: Paired Two Sample for
Means
Q7: Daily
Route Tested #
Mean 4.042105 3
Variance 1.232251 0
Observatio
ns 95 95
Pearson
Correlation #DIV/0!
Hypothesiz
ed Mean
Difference 0
df 94
t Stat 9.150058
P(T<=t)
one-tail 5.9E-15
t Critical
one-tail 1.661226
P(T<=t)
two-tail 1.18E-14
t Critical
two-tail 1.985523
t-Test: Paired Two Sample for
Means
Q7: Live Tested #
Mean 4.663158 3
Variance 0.715118 0
Observatio
ns 95 95
Pearson
Correlation #DIV/0!
Hypothesiz
ed Mean
Difference 0
df 94
t Stat 19.16931
P(T<=t)
one-tail 1.53E-34
t Critical
one-tail 1.661226
P(T<=t)
two-tail 3.06E-34
t Critical
two-tail 1.985523
23. Locations
Ideal Kiosk Spots:
• redbox “users”
• Examine ranking of 6
options
• Coffman only statistically
viable option
t-Test: Paired Two Sample for Means
Coffman
Union Tested #
Mean 2.673684 3
Variance 2.349832 0
Observations 95 95
Pearson
Correlation #DIV/0!
Hypothesized
Mean
Difference 0
df 94
t Stat -2.07483
P(T<=t) one-
tail 0.020368
t Critical one-
tail 1.661226
P(T<=t) two-
tail 0.040735
t Critical two-
tail 1.985523
24. Rewards Programs
• Are rewards programs
with it?
• Chi-Square to test the
relationship
• P-value smaller than
.05
• We can conclude that
there is a relationship.
Actual Yes Member Not a Member Row total
Yes do business
more often 97 9 106
No, do not do
business more
often 24 84 108
ColumnTotal 121 93 214
Expected yes no
yes 59.93458 46.06542056
no 61.06542 46.93457944
Chi-Test Results
1.55958E-24
25. Rewards Programs
• How likely are people to sign up for a redbox
rewards program?
• We wanted to find out about the range of
interested individuals, not just frequent users
• We tested those who have rented before and
those who rent from redbox most often
26. • Time & Money
• Survey Representation
• Nominal Questions
• Video Game Rentals
Limitations
27. Recommendations
Due to our research findings, we suggest:
• Putting a redbox kiosk in Coffman Union
• Not offering not offering video game rentals
• Introducing a rewards/customer loyalty
program
28. Further Research
If we were to pursue further research, it would be
interesting to explore:
• What location within Coffman Union is most
ideal
• Which rewards programs are most effective
