How we segment our customer

1. Customer Segmentation Idea for CRM
Final Project in MADT6004
Mr. Eakarat Pimthai
ID 6310422067

2. Revisiting the Basics…
• An outline of the data source from which the mockup and analysis will be done
• How we get the key finding from Exploratory Data Analysis
Proposed Customer Segmentation Approach…
• New Customer –> Retention Problem
• Regular Customer –> Cross Categories
Strategies for using the Customer Segments
• Cultivating New Customers for Better Retention
• Targeting High Potential Regular Customers for Greater Share of Wallet
2
Agenda

3. 3
Data Source
Source = An unnamed retailer in Thailand
Year = 2015 – 2021
No of Customer = 1,793K
Adjust = Product Categories
Thai Categories EN Categories
ขนม Snack
ชา, กาแฟ, ซี
เรียล Tea, Coffee, Cereal
อาหารสัตว์ Animal feed
นมผง ผ ้
าอ ้
อมเด็กผลิ
ตภัณฑ์
สาหรับเด็ก Milk Powder, Baby Diapers, Baby Products
เครื่องปรุงรส Condiments
น้าหวาน / น้าอัดลม Soft drinks
น้ามันพืช/ ข ้
าวสาร Vegetable Oil / Rice
น้ายาทา
ความสะอาด Fabric Softener or Cleaner
เครื่องสาอางค์ Cosmetics
อาหารเสริม Supplements
สินค ้
าไลฟ์สไตล์ Lifestyle products
อุปกรณ์เบ็ดเตล็ด Home Equipment
อุปกรณ์อิ
เลคทรอนิค Electronic
เครื่องเขียน Stationery
Ready to Eat Ready to Eat
Frozen Food Frozen Food
Bao Café Bao Café

4. Data Processing
Exploratory Data
Analysis
Segment Definition &
Strategy Formulation
• Single-View-of-Customer
• Analytics Data Mart
Cluster Profile &
Behaviour Analysis
4
• Visualisation of customer
base
• Key trends on Spend, Freq,
Retention
• Geographic visualisations
• Insights into subsequent
purchase behaviours
• Relevance of various
dimensions to key measures
• Customer Segmentation Rules for New
Customers and Regular Customers
• CRM Strategy for cultivating and
optimising key customer segments

5. • How many customers have signed up each year?
• What type of house do they have?
• Where do they live?
• What is Customer’s penetration rates across Thailand?
5

6. 6
Customer Tenure Distribution
When did the customers sign up for Member Card?
2015 2016 2017 2018 2019 2020
50% of Customers are
less than 2 Years old &
73% of Customers are
less than 3 years old.
2021
Launch

7. 7
Customer Demographics Profile (1)
Around 50% of customers are
in their 30’s – Mid 40’s
Most of the Gender
are unknown
27% of customers have their own business which may
relate to life stage.
Current Age

8. 8
Customer Demographics Profile (2)
14% are Affluent Customers
Do the Affluent Customers buy Expensive Houses?
If they don’t, are those houses for investment?

9. 9
Where are the customers located?
Customer Distribution by Province
Although this data is merely a sample, our
goal is to illustrate how we can explore data
in various ways.

10. 10
What’s the main difference between
Bangkok and Up-country?
Although this data is merely a sample, our
goal is to illustrate how we can explore data
in various ways.
Green  Larger Ticket Size
Red  Smaller Ticket Size

11. • How many Active Customers are there in 2021?
• What are their Purchasing Behaviours?
11

12. 12
How many customers were active in
2021?
Total CRM Card Customers: 1,793 K
Active in 2021
1,281 K
71%
Inactive in 2021
512 K
29%
What are the active customers
purchasing behaviour across
different demographics profile?

13. 13
Trends to Remember #1
New Customer Retention is key to future success!
Active Period: Jan’21 – Dec’21
But those who are retained into the 2nd year
rarely lapse in the subsequent years…
Retention from Year 1 to Year 2 is key!
New Growing Mature
2021 2020 2019 2018 2017 2016 2015
The biggest attrition of active customers happen
between Year 1 and Year 2. Of the 466K customers
who made their first purchase in 2020, only 64%
remained active in 2021.

14. 14
Does Age affect purchasing behaviour?
RFM across Customer Age
Active Period: Jan’21 – Dec’21
Increasing Spend
until Retirement
Age.
Increasing
Frequency
across age
group.
Older Customer
tend to have
smaller but more
frequent purchases.

15. 15
Wealth Classification
Household Income VS Home Price
High Wealth
Low
Very Low
Middle
Middle
High
32K
House Price
Income

16. 16
Does Wealth affect behaviour?
RFM across Wealth Groups
Active Period: Jan’21 – Dec’21
Higher Income
Customer have
higher spend and
visit in a year.
Middle Income Customer
have lower ticket size but
higher frequency than
Low Income Customers.

17. 17
Does Occupation affect behaviour?
RFM across Occupation Groups
Active Period: Jan’21 – Dec’21
Business Owner
spend more and visit
more compare to
Office Worker.
Retiree visit the
Store more than
Office worker and
Housewife.
(consistent with age
group.)

18. 18
What are the behaviours by Region?
RFM across Region
Active Period: Jan’21 – Dec’21
Bangkok &
South
customers
have high
frequency and
lower spend
per
transaction
compare to
other region.
Rural Area
tend to buy
more when
they visit?

19. 19
Does Type of House affect behaviour?
RFM across Housing Types
Active Period: Jan’21 – Dec’21
Customer that
owned a shop
houses have
the highest
spend and
frequency,
follow by
Single House
Customers.

20. • How does Frequency, Recency and Tenure affect Retention?
20

21. 21
Jan’20 Apr’20 Jul’20 Oct’20 Jan’21 Apr’21 Jul’21 Oct’21
Retained!
Lapsed!
Recency: 5 Months
Frequency: 2
Recency: 8 Months
Frequency: 1
2020 2021

22. 22
Trends to Remember #2
Frequency and Cross-Category are keys to Retention!
Retention Rate increases dramatically
with each additional visit!
Correlation between Retention and
Category Count is extremely strong!

23. 23
Trends to Remember #3
Regular Customers are better at Retention
… one reason is because
Regular Customers have more
frequent visits
Retention rate of Regular
Customers is much higher
compared to New Customers…
(81.2% versus 64.6%)
… as well as buying products
from more Home Stage
categories

24. • Do customer redeem their points?
• Do customer that redeem points shows better affinity with this store?
• What are the behavior of customer that shop during the ‘Promotion
Period’?
24
Copyright 2014 PulseMetrics Pte Ltd

25. 25
Spend & Frequency Behaviour by
“Promotion Category”
Active Period: Jan’21 – Dec’21
Ticket
Size
Average
Spend
per
Head
Frequency
(Day)
Customer that went to
expo period and not other
promotions have the
highest ticket size.
Higher Spend and
Frequency for customers
that go to promotions.

26. 26
Do Promotion Lover Still Show a Higher
Retention in the same Frequency Category?
Retention
Rate
Increase
Active Period: Jan’20 – Dec’20
Retain Period: Jan’21 – Dec’21
Encourage customer to visit during promotion can be a strategy to get customers to come back
Making Customer aware of the promotion period helps retention
Confirm
Value
Seeker!

27. 27
Does Burn Point Customers have Higher
Retention Rate?
Customers that redeem their
points have higher retention
rate.
More Loyal to Store?
20%
Active Period: Jan’20 – Dec’20
Retain Period: Jan’21 – Dec’21

28. 28
Is there Customer with High Point but
doesn’t Redeem?
Most of the customers that don’t burn point have lower point balance. However, customers that
burn point even if their point balance is low shows much higher retention rate.
Encourage customer to Burn Point can be a strategy to get customers to come back
Active Period: Jan’20 – Dec’20
Retain Period: Jan’21 – Dec’21
Retention
Rate
Increase
Retention
Rate
Increase
Retention
Rate
Increase
Retention
Rate
Increase

29. Regular Customers
New Customers
29
Increase Affinity!
Improve Retention!
สมาชิกใหม่ ที่สมัครภายใน 1 ปี สมาชิกเก่า ที่สมัครมากกว่า 1ปี
1. เพิ่มความถี่ในการมาซื้อในปีแรก
(Frequency Day)
2. เพิ่มจานวนกลุ่มการซื้อสินค ้าที่
หลากหลาย (More Category)
กลยุทธ์
เสนอสินค ้าที่ซื้อครั้งถัดไป
(Subsequent Purchases)
1. เพิ่มความค่าความผูกพันธ์
(Affinity Score)
1. ความถี่ (Frequency day)
2. จานวนกลุ่มสินค ้า (Category Count)
3. เดือนที่มาล่าสุด (Recency)
4. ยอดซื้อต่อปี (Spend)
5. การแลกคะแนน (Redemption)
6. การมาซื้อสินค ้าในช่วงPromotion
กลยุทธ์
เสนอสินค ้าที่มีการซื้อที่สัมพันธ์กัน
Product Relevance Score

30. 30
How can we identify “Customer Affinity”
Attributes Weightage
Frequency 30%
Category Count 25%
Recency 20%
Spend 15%
Redemption 5%
Promotion 5%
Relevant Questions
• How often does this customer visit Store?
• How many categories of products has she bought?
• How long ago was her last visit?
• How much money has she spent (compared to her peers)?
• Does she use her points to redeem rewards?
• Does she participate in the promotions?
Customer
Affinity
Score

31. 31
How many Regular Customers have High Affinity?
Skewed towards the lower end, as is commonly the case in retail business
Low Affinity Mid-Low
Affinity
High Affinity
Zero Affinity Average Affinity Maximum Affinity
Mid-High
Affinity

32. 32
How much do High Affinity customers contribute?
The top 20% of customers bring in >60% of the revenue!
Revenue
Customer
Count
62%
10.8B
Active Period: Jan’21 – Dec’21
27%
4.6B
9% (1.6B)
2% (0.3B)
30%
181K
30%
178K
20%
119K
20%
119K
Low Affinity Mid-Low Affinity Mid-High Affinity High Affinity

33. 33
How different are High and Low Affinity customers?
The difference is huge in Spending and Retention
Ticket
Size
Average
Spend
per
Head
Frequency
(Day)
Retention
Rate
Active Period: Jan’20 – Dec’20
The biggest difference is in Frequency, which then translates into huge difference in Spend.
High Affinity customers also basically do not lapse!
Retain Period: Jan’21 – Dec’21
Low Affinity Mid-Low Affinity Mid-High Affinity High Affinity