Department of Mathematics

ACO Hardware

Proposed Project for the MSU Industrial Math Students

Phase I: Developing a "strong store profile" for future expansion

Analyze and interpret multiple business performance and financial factors and comparing these factors to multiple demographic, economic and behavioral factors to develop a "Strong Store Profile". This profile would be used when analyzing new store sights, moving locations and store remodels to determine business success within a defined time frame.

ACO Hardware has been and continues to be a dominant force in the retail Hardware Industry in Michigan for over 60 years. Currently ACO operates 69 retail locations throughout Michigan. We continue to face the ever fierce onslaught of competition with confidence and determination. As part of our plan to remain a strong and vital retail operation we are in the process of a multi faceted business review process. One Initiative is to evaluate our current operations and determine which factors contribute to the success of many of our locations when there is diverse and conflicting data. We have gathered a large amount of financial data, combined with site, demographic, traffic, consumer behavior and competition data in an effort to build a "Successful Store Profile". This equation would then be used as a tool for evaluation when developing a new location and expanding or moving an under performing location.

ADVO is partnering with us providing the strategic demographic and customer spending profiles based on actual historical zip code surveys taken at each store location. ADVO is a nationwide distributor of advertising media and conducts sophisticated consumer research and targeting. They have an enormous database with an incredible amount of customer behavioral profiles based on what they call "sharpshooter Targeting Variables" which break down every demographic group by behavior models. Some of their targets are "Upward Mobility", "Ethnic Yuppies", "Ethnic Elders" "Suburban Starters", "Kids on Decks", "Blue Collar Blues" just to name a few. There are over 300 categories. They also have extensive demographic data that will be available to us.

The goal would be to identify 10 or more factors that create the dynamics for a successful store operation and use the factors as an evaluation tool for our business model.


Phase II: Developing a “strong customer demographic profile” for future sales growth and expansion

This is an exciting project to apply mathematical and analytical skills to create consumer profiles based on actual real life data from multiple sources.

Analyze detailed breakdowns of population profiles from a variety of census and economic data by zip code. These would include average household size, age breakdowns of the population group, economic conditions, and education levels, age of head of household and marital statistics from all 69 of our stores. These factors would be compared to actual spending habits and dollars spent for services. The percent of employment by industry of each zip code area would also be factored into the results. These factors would then be compared to actual percentages of customers from each zip code profile that shop at our stores. The data would be combined with actual transaction based data that details the percentage of products sold in combination of a loss leader or other promotional products to determine a “profitable” customer profile and a strictly promotional or “loss” customer profile. This customer profile would be used to determine promotional success rates in customer profiles and placement of new stores based on an area demographic profile. We hope to use this profile in conjunction with the results of Phase I of this project.

We would be partnering with ADVO for to provide specific consumer data and spending profiles. Their target profiles include “Upward Mobility”, “Ethnic Yuppies”, “Suburban Starters”, “Kids on decks”, “Blue Collar Blues”, and “Golden Years”, There are over 300 categories.

ACO Hardware has been and continues to be a dominant force in the retail Hardware Industry in Michigan for over 60 years. Currently ACO operates 69 retail locations throughout Michigan. We continue to face the ever fierce onslaught of competition with confidence and determination. As part of our plan to remain a strong and vital retail operation we are in the process of a multi faceted business review. One initiative is to evaluate our current operation to determine which factors contribute to the success of many of our locations when there is diverse and conflicting data. We have gathered a large amount of financial data, combined with site, demographic, traffic, consumer behavior and competition data in an effort to build a “Successful Store Profile”. This equation would then be used as a tool for evaluation when developing a new location and expanding or moving an underperforming location. ACO will provide much of the data and provide resources to mine the remaining data necessary for successful project completion.

The goal would be to identify what customer demographic factors are significant as related to our best performing stores and poorest performing stores and create the “Demographic Profile” of the best demographic mix to place a new location.