Vicky Brock Customer Profitability Analytics eMetrics London 17
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Are you acquiring customers that lose you money? eMetrics presentation on using customer segmentation, machine learning, random forests to predict returns and identify profitable & loss making customers.
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Vicky Brock Customer Profitability Analytics eMetrics London 17
- 1. VICKY BROCK |DATA FOUNDER & GEEK @BROCKVICKY HELLO@VICKYBROCK.COM
- 2. @brockvicky
- 6. £72.94 of beer fuelled shopping Will Vicky keep what she bought? @brockvicky
- 7. It is not really a sale until the customer decides to keep it and that decision is taken in a data black hole
- 8. Artificial Intelligence Deductive Reasoning Knowledge Representation Planning Perception: Computer Vision Machine Learning Robotics: Motion and Manipulation Natural Language Processing Social Intelligence Supervised Learning Decision Tree Learning Association Rule Learning Support Vector Machines Unsupervised Learning Clustering Similarity and Metric Learning Genetic Algorithms Reinforcement Learning Bayesian Networks Neural Networks Deep Learning @brockvicky
- 9. @brockvicky
- 10. Clustering for Segmentation Data SegmentsIteration 1 Iteration 2 Iteration 3 Customer Attribute Customer Attribute Customer Attribute Customer Attribute Customer Attribute CustomerAttribute CustomerAttribute CustomerAttribute CustomerAttribute CustomerAttribute @brockvicky
- 11. Example Segments Average Customer Sales (Annual) Average Customer Actual Sales Less Returns Costs (Annual) Average Purchase Frequency (Annual) Keepers Highest Value £908.3 £908.3 2 Super Loyal £389.9 £389.9 7 Bundler £205.1 £205.1 2 Potential Sensitive £147.4 £147.4 3 Thrifty £ 68.6 £ 68.6 2 Returners Accidentals £345.0 £297.5 6 Low Risk Explorers £287.0 £200.7 5 High Risk Explorers £312.1 £171.5 5 Typical Overbuyers £320.9 £129.4 4 Serious Overbuyers £368.1 £ 98.2 4 Delinquents £405.1 £ 56.9 4 Negative Value £189.7 -£ 6.8 3
- 12. Accessories Purchased 96 items Gross Sales = £1,144 Womenswear Purchased 104 items Gross Sales = £1,845 Menswear Purchased 28 items Gross Sales = £349 Health & Beauty Purchased 8 items Gross Sales = £352 After refunds & ops costs £23 Total Sales £3,690 How Can It Be Used? After cost to acquire & retain - £7 -£45 after refunds & costs -£223 after refunds & costs -£61 after refunds & costs £352 Net - it get’s kept @brockvicky
- 13. Decision trees operate by splitting data on conditions Random Forests are collections of Decision Trees utilising different subsets of features Comparing the outputs from each tree in the Forest, exposes relative importance of each feature Returns Drivers @brockvicky
- 14. ● As customers become loyal they tend to return products more often ● Customers returning their orders are less likely to churn ● Exception is return-sensitive customers those who churn when they return an item Churn Rate Analysis “We LOVE returns - they make us money. Returns are a positive thing” ? @brockvicky
- 15. ● Marginal net revenue declines as customers place more orders ● Costs suddenly become very very important @brockvicky Churn Rate Analysis
- 16. What kind of costs? @brockvicky
- 17. Target for keeps Suppress or nudge loss making behaviours Service to reduce churn, not reduce margin Policy and service optimisation SANITY NOT VANITY @brockvicky
- 18. THANK YOU VICKY BROCK |DATA FOUNDER & GEEK HELLO@VICKYBROCK.COM VISIT MY BLOG: VICKYBROCK.COM/BLOG @brockvicky