customer analytics and segmentation
DESCRIPTION
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.TRANSCRIPT
Applied AnalyticsCount your customers - multiply your sales!
Introduction
•What is analytics?
•Basic ‘customer scoring’
•Loyalty and Defection
•Cross and Up-Selling
•Advanced Techniques
What is analytics?
•The scoring and ranking of customers and products based on key ‘metrics’
•Primarily used to segment customers and create highly relevant, targeted offers into your customer base
•This information is readily available from the accounting system
Basic Customer Scoring
•Three key ‘metrics’ or measurements used in scoring:
•Recency - When a customer last purchased
•Frequency - How often a customer buys
•Monetary - How much a customer spends
Customer Scoring (contd.)
•Break large customer bases down into deciles or quartiles
•Apply further scoring to each decile to adjust number of customers per campaign
Recency
•How recently a customer bought is a good indicator of loyalty
•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.
•Can also be used to prevent possible customer defection
Frequency
•Determine your best customers from those that buy most regularly
•Or target a campaign specifically to infrequent buyers
Monetary
•Simply put, those customers that spend the most!
•Typically scored independantly of the Recency and Frequency metrics as it can ‘skew’ data
Cross and Up-selling
•Determine which customers have bought which products and measure buying ‘patterns’ within your stock ledger
•Use the ‘amazon’ model; Customers who bought X also bought Y - at most critical time - just before purchase
Advanced Techniques
•Latency
•Customer Lifetime or Lifecycle value
•Automatic ‘Trigger’ and exception marketing
•Combine one or more metrics to generate a ‘Customer Value Portfolio’
Latency•Latency is the amount of time between
each customers’ purchases
•Each interval is measured (days between purchase 1 and 2, 2 and 3 etc.)
•An ‘average’ can be applied to produce a ‘trigger’ campaign
•Use latency for loyalty and to prevent customer defection
Customer Lifetime/Lifecycle
Value•An extremely important metric for the acquisition of new customers
•Lifetime is the length of time a customer remains a customer and the total revenue in the ‘lifetime’
•Once a ‘value’ has been obtained this can be used to determine the budget to incentivise new customer acquisitions
Trigger Marketing
•Use triggers based on exceptional behaviour or to follow patterns
•e.g. average latency determines that customers make second purchase 21 days after first purchase
•Setup a trigger 21 days from when customer buys to send them an offer
Customer Value Portfolio
# Sales# Sales > 180 > 180 DaysDays
91-180 91-180 DaysDays
61-90 61-90 DaysDays
31-60 31-60 DaysDays
< 30 < 30 DaysDays
> 25 > 25 SalesSales
12170 543 121 169 2053
10-24 10-24 SalesSales
7905 432 71 73 1452
4-9 Sales4-9 Sales 4433 299 32 58 817
3 Sales3 Sales 569 57 0 15 173
2 Sales2 Sales 617 51 2 10 143
1 Sale1 Sale 382 33 6 7 128
Potential Value
Potential Value
Cu
rren
t V
alu
eC
urr
en
t V
alu
eLow potential Low potential
valuevalueHigh current valueHigh current value
Grow these Grow these customerscustomers
Low potential Low potential valuevalue
High current valueHigh current valueGrow these Grow these customerscustomers
Low potential Low potential valuevalue
Low current valueLow current valueSpend money Spend money
here?here?
Low potential Low potential valuevalue
Low current valueLow current valueSpend money Spend money
here?here?
High potential High potential valuevalue
Low current valueLow current valueGrow these Grow these customerscustomers
High potential High potential valuevalue
Low current valueLow current valueGrow these Grow these customerscustomers
High potential High potential valuevalue
High current valueHigh current valueKeep these Keep these customers!customers!
High potential High potential valuevalue
High current valueHigh current valueKeep these Keep these customers!customers!
Summary
•Your accounts system is the key to analytics data
•Measure the basic metrics first and run small scale trial campaigns
•Use technology as much as possible, email is a cheap and effective way to communicate
•More info? e: [email protected]