Customer Analytics and Segmentation


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You know customer acquisition is the biggest cost your business undertakes. What if you want to identify and maxise opportunities in your current base? Effective segmentation allows you to create targeted campaigns.

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Customer Analytics and Segmentation

  1. 1. Applied Analytics <ul><li>Count your customers - multiply your sales! </li></ul>
  2. 2. Introduction <ul><li>What is analytics? </li></ul><ul><li>Basic ‘customer scoring’ </li></ul><ul><li>Loyalty and Defection </li></ul><ul><li>Cross and Up-Selling </li></ul><ul><li>Advanced Techniques </li></ul>
  3. 3. What is analytics? <ul><li>The scoring and ranking of customers and products based on key ‘metrics’ </li></ul><ul><li>Primarily used to segment customers and create highly relevant, targeted offers into your customer base </li></ul><ul><li>This information is readily available from the accounting system </li></ul>
  4. 4. Basic Customer Scoring <ul><li>Three key ‘metrics’ or measurements used in scoring: </li></ul><ul><li>Recency - When a customer last purchased </li></ul><ul><li>Frequency - How often a customer buys </li></ul><ul><li>Monetary - How much a customer spends </li></ul>
  5. 5. Customer Scoring (contd.) <ul><li>Break large customer bases down into deciles or quartiles </li></ul><ul><li>Apply further scoring to each decile to adjust number of customers per campaign </li></ul>
  6. 6. Recency <ul><li>How recently a customer bought is a good indicator of loyalty </li></ul><ul><li>Campaigns can be created to re-invigorate customers e.g. create an offer to all those who have not bought in the last 90 days. </li></ul><ul><li>Can also be used to prevent possible customer defection </li></ul>
  7. 7. Frequency <ul><li>Determine your best customers from those that buy most regularly </li></ul><ul><li>Or target a campaign specifically to infrequent buyers </li></ul>
  8. 8. Monetary <ul><li>Simply put, those customers that spend the most! </li></ul><ul><li>Typically scored independantly of the Recency and Frequency metrics as it can ‘skew’ data </li></ul>
  9. 9. Cross and Up-selling <ul><li>Determine which customers have bought which products and measure buying ‘patterns’ within your stock ledger </li></ul><ul><li>Use the ‘amazon’ model; Customers who bought X also bought Y - at most critical time - just before purchase </li></ul>
  10. 10. Advanced Techniques <ul><li>Latency </li></ul><ul><li>Customer Lifetime or Lifecycle value </li></ul><ul><li>Automatic ‘Trigger’ and exception marketing </li></ul><ul><li>Combine one or more metrics to generate a ‘Customer Value Portfolio’ </li></ul>
  11. 11. Latency <ul><li>Latency is the amount of time between each customers’ purchases </li></ul><ul><li>Each interval is measured (days between purchase 1 and 2, 2 and 3 etc.) </li></ul><ul><li>An ‘average’ can be applied to produce a ‘trigger’ campaign </li></ul><ul><li>Use latency for loyalty and to prevent customer defection </li></ul>
  12. 12. Customer Lifetime/Lifecycle Value <ul><li>An extremely important metric for the acquisition of new customers </li></ul><ul><li>Lifetime is the length of time a customer remains a customer and the total revenue in the ‘lifetime’ </li></ul><ul><li>Once a ‘value’ has been obtained this can be used to determine the budget to incentivise new customer acquisitions </li></ul>
  13. 13. Trigger Marketing <ul><li>Use triggers based on exceptional behaviour or to follow patterns </li></ul><ul><li>e.g. average latency determines that customers make second purchase 21 days after first purchase </li></ul><ul><li>Setup a trigger 21 days from when customer buys to send them an offer </li></ul>
  14. 14. Customer Value Portfolio Potential Value Current Value Low potential value High current value Grow these customers Low potential value Low current value Spend money here? High potential value Low current value Grow these customers High potential value High current value Keep these customers! # Sales > 180 Days 91-180 Days 61-90 Days 31-60 Days < 30 Days > 25 Sales 12170 543 121 169 2053 10-24 Sales 7905 432 71 73 1452 4-9 Sales 4433 299 32 58 817 3 Sales 569 57 0 15 173 2 Sales 617 51 2 10 143 1 Sale 382 33 6 7 128
  15. 15. Summary <ul><li>Your accounts system is the key to analytics data </li></ul><ul><li>Measure the basic metrics first and run small scale trial campaigns </li></ul><ul><li>Use technology as much as possible, email is a cheap and effective way to communicate </li></ul><ul><li>More info? e: </li></ul>