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Long live customer segmentation at Delhaize

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While everyone is talking about AI and hyperpersonalisation, customer segmentation might sound ‘old school’. But on the contrary: Segmentation is back, and is here to stay! In this talk, we show how we combined segmentation and machine learning (prediction) to enable personalised campaigns towards the entire customer base at Delhaize.

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Long live customer segmentation at Delhaize

  1. 1. Customer segmentation is dead, long live customer segmentation! XAVIER VALENTINI WOUTER BUCKINX SEPTEMBER 19, 2019
  2. 2. CUSTOMER PERSONALISATION Personalisation is key to build a close and long relationship with your customers.
  3. 3. SEGMENTATION IS DEAD AI “SEGMENTATION IS TOO SIMPLE TODAY” It seems that Segmentation is too simple to tackle this challenge. AI is more trendy… However, AI can be too complex, too blackbox to use and implement…
  4. 4. “SEGMENTATION BRIDGES THE GAP BETWEEN TECH AND BUSINESS” LONG LIVE CUSTOMER SEGMENTATION! VALUE BASED SEGMENTATION NEEDS BASED SEGMENTATION Personalisation Product Assortment Channel Management Pricing Prioritisation Targeting Rewards Store Management Up- & Cross-sell € So Segmentation still has a future, since it is easy to understand, and it enables immediate marketing action!
  5. 5. OUR CHALLENGES LONG LIVE CUSTOMER SEGMENTATION! Scalability Missing information - OUR SOLUTION Combine best of both worlds by using Machine Learning Survey Database We combine survey and database information to segment large customer bases based on interesting shopping needs.
  6. 6. WHO WE ARE Wouter Buckinx Managing Partner Xavier Valentini Data & Analytics Manager
  7. 7. OUR JOURNEY TO A NEEDS BASED SEGMENTATION Belgian shopping behavior survey. MARKET SURVEY OUR PROCESS Step 1: send a survey to understand the Belgian shopping market for FMCG.
  8. 8. MARKET SURVEY Setup
  9. 9. OUR JOURNEY TO A NEEDS BASED SEGMENTATION Belgian shopping behavior survey. MARKET SURVEY CLUSTERS Build segments from the survey. OUR PROCESS Step 2: build clusters based on general Belgian shopping behaviour.
  10. 10. CLUSTERS Result: 5 Market Segments Segment A Segment B Segment C Segment D Segment E Segments
  11. 11. OUR JOURNEY TO A NEEDS BASED SEGMENTATION Belgian shopping behavior survey. MARKET SURVEY CLUSTERS Build segments from the survey. Collect key information from 5000 Delhaize customers. DELHAIZE SURVEY OUR PROCESS Step 3: collect crucial information of a representative group of Delhaize customers.
  12. 12. DELHAIZE SURVEY Result: 5 Delhaize Clusters Golden questions to 5000 Delhaize Customers Assign surveyed Delhaize customers to 5 discovered clusters Based on a limited number of important questions, Delhaize customers are assigned to our 5 segments.
  13. 13. Challenge: Less than 0.25% of our customers are assigned to a segment… DELHAIZE SURVEY As a result, the surveyed customers can already be segmented. But what about the other 99,75%?
  14. 14. OUR JOURNEY TO A NEEDS BASED SEGMENTATION Belgian shopping behavior survey. MARKET SURVEY CLUSTERS Build segments from the survey. Delhaize survey based on golden questions to 5000 customers. DELHAIZE SURVEY Build model to predict segment membership of all customers. PREDICT OUR PROCESS Step 4: we use machine learning to assign all other customers to a segment.
  15. 15. PREDICT CLUSTERS Segments Predictors 5000 Delhaize customers Combine surveys and Delhaize’s database to build predictions.
  16. 16. PREDICT CLUSTERS Data Preparation Model Building Model Validation A robust machine learning process is used to build our predictive model.
  17. 17. PREDICT CLUSTERS Data Preparation Model Building Model Validation HABITS Data linked to the number of visits, the moment of visit, usage of self- scan… PRODUCT Data linked to properties of a product, such as nutriscore, fairtrade, bio, top brand… PRICE Data linked to the value of items and the total amount on the ticket PROMO Data linked to coupons, actions, promo displays… OTHER Lifetime, age,… Predictors are created to include different dimensions.
  18. 18. PREDICT CLUSTERS Data Preparation Model Building Model Validation Algorithms Accuracy Different algorithms are checked to optimize performance.
  19. 19. OUR JOURNEY TO A NEEDS BASED SEGMENTATION Belgian shopping behavior survey. MARKET SURVEY CLUSTERS Build segments from the survey. Delhaize survey based on golden questions to 5000 customers. DELHAIZE SURVEY Build model to predict segment membership of all customers. PREDICT Profile the segments for better personalization. PROFILE OUR PROCESS Step 5: we validate the final segments by profiling and comparing.
  20. 20. SEGMENT C What is in my basket? TOP products XX% +25% Prepared meals XX% +53% Food cat x XX% +21% Drugstore XX% +25% Non-food XX% +21% World food XX% -39% What are my shopping habits? Number of SKU XX +39% Delhaize shops XX% +15% Visits per year XX +25% Visit on weekends XX% -16% How and how much do I pay? Credit card XX +56% Amount spent XX +35% Do I make use of promotions? Promo stands XX +57% % of € from promotions XX% -57% Who am I? Age XX +18% Male XX% +33% Dutch XX% +10% Services E-commerce XX% +32% Traditional POS XX% +10% Fictive profile of one of the segments.
  21. 21. SEGMENT E What is in my basket? 365 products XX% +200% Cheapest products XX% +100% Bread XX% +5% Beer XX% -28% Bio XX% -8% Fair trade XX% -27% What are my shopping habits? Visit on Sunday XX% -89% AD shops XX% +12% Number of SKU XX -31% Delhaize shops XX% -23% Visits per year XX -22% How and how much do I pay? Credit card XX% -47% Amount spent €XX -40% E-commerce XX% -9% Do I make use of promotions? % of € from promotions XX% +7% Scanned coupons XX -26% Who am I? Age XX -4% French XX% -20% Services Self-scanning XX% +60% Self-pay XX% -93% Clearly different from other segments…
  22. 22. OUR JOURNEY TO A NEEDS BASED SEGMENTATION Belgian shopping behavior survey. MARKET SURVEY CLUSTERS Build segments from the survey. Delhaize survey based on golden questions to 5000 customers. DELHAIZE SURVEY Build model to predict segment membership of all customers. PREDICT Profile the segments for better personalization. PROFILE Use and test the Segmentation. USE OUR PROCESS Step 6: how will Delhaize use the outcome?
  23. 23. USAGE OF THE SEGMENTATION Performance Management Commercial Plan CRM Category Management Different ways to deploy the segmentation scheme.
  24. 24. THANK YOU Departement Name/first name DATA & ANALYTICS XAVIER XAVIER VALENTINI WOUTER BUCKINX

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