Abstract
Studying about customer segmentation and creating a customer ranking plan has attracted more attention in recent years. In this regard, this project tries on providing a methodology for customer segmentation depending on their value driver parameters which will be extracted from transaction data. The objectives of this project is to identify the High Value Customer Profile, using data mining techniques such as classification and clustering approaches. In the first phase, the data will be cleaned and patterns will be developed. In the second phase, the data will be profiled and clustered to identify High Value Customer Profile. Background and the Problem Domain
Companies are increasingly interested in identifying customers who
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For example, according to Selden and Colvin (2003) FedEx Corporation is categorizing its clients as “good”, “bad” and “ugly” based on their turnover potential and is charging higher prices from less profitable customers while providing enhanced services to more profitable customers. Numerous industry experts and researchers support this practice. Therefore, it is argued that by treating all its customers equally a company is not only wasting its resources on unprofitable customers, but also is underserving the profitable customers and risks losing them (Selden and Colvin 2003, Venkatesan and Kumar 2004, Gupta and Lehmann 2005).
Therefore, by knowing the fact that 80% of business of an organization often comes from 20% of their customers (the Pareto law), it is important for organizations to identify a model to classify the customers as high value customers or not. Most of the past researches (Kim et al. 2006, Khajvand M. and Tarokh M. J. 2011) have performed customer segmentation based on the traditional Customer Relationship Management (CRM) variables. However, these variables might not be sufficient to identify the profile of High Value Customers since traditional CRM variables do not consider the online activities of customers and also the dispute that a customer might influence other
Customer profitability was a determinant used for segmenting and targeting, studies were done on customers’ likes, dislikes and types of products they would benefit from and models were developed to determine their propensity to buy.
Market segmentation as a term came up to describe the concept that all customers are not alike. Because in hospitality industry marketing money and resources are limited, it has to concentrate on specific groups of people, or target market, to avoid waste in time, money and quality. As a result, it’s ensuring the highest returns. [1 pp19] The reasons why segmentation is so important for hospitality industry are – more successful use of marketing money, clearer perceptive of the needs and wants of special customer groups, more effective developing of service, greater correctness in selecting promotional vehicles and techniques. [1 pp173]
With data segmentation, your team can offer amazing service that resonates with your customers. Designing an attractive loyalty program centers around satisfying your customers.
So many companies segment their customers by size and other such criteria because this approach is easy to carry out, and the companies falling into these gross categories do tend to have similar needs. But to have a truly actionable segmentation scheme, you must divide your customers into much more precise groupings based specifically on their needs.
This case analyses Prof. McPherson’s service experience with respect to two Airline carriers, which was not expected in this age of Network and Information Technology and also the service level expectations from the customers. First we analyze the setting/situation, issues Prof. McPherson experienced and his assumptions; and then try to address them. The bottom line: addressing such situations would improve efficiency, customer loyalty, brand name and increased profits
Every customer is different in many different ways and represents different levels of value. Besides, they all have different needs. Once the identification process is complete, differentiating them comes in hand and this will help a company to strategize and focus its efforts on gaining more advantage with the valuable customers. Thus, you can now tailor the company’s communication and service to each individual
An effective Customer Relationship Management (CRM) program can be used to identify, retain, satisfy and obtain customers by using technology to optimize strategies for understanding customers’ needs to manage business interactions with current, former, and prospective customers. Additionally, CRM also enables companies to maximize internal, external, marketing and customer service operations to better address the needs of the customer building a better relationship with customers that a more profitable. (Ahmad & Buttle, 2001)
The segmentation has been done on the basis of buying behavior of the customers. Knowledge of segment buying behavior can help redirect marketing resources for profit gain.
Customers are assets, and their values grow and decline. Segmenting customers based on their lifetime value is a powerful way to target them because marketing mix activities can then aim at enhancing customer value. (Ho, 2006)
As every customer has unique needs and expectations towards certain products, the ultimate goal of market segmentation is to organize customers into groups which allows targeting of customers with similar needs of and response to the products. The key is to minimize differentiation within each segment
It is imperative to satisfy customers and give them an amazing experience at the company. While it cost less to sell to existing customers and companies can increase profit by selling to the same customers; if customers are satisfied, there is more chance they will come back for more services or products. Satisfied customers are a free marketing for the company. However, it is the opposite if customers are dissatisfied. Dissatisfied customer will tell 8 to 10 people about his or her experience (O’Brien, A & Marakas, G. 2004). If by any reason, representatives see that the customer is not satisfy, they should act fast and fix the problem. Furthermore, there is more chance for sale representatives to sell to an existing customer that to a new customer. A good strategy for customer retention is to reward good customers. Companies can easily do
Today, customer relationship management is very important to the business world. Most of the companies established a department and the programs to manage their relationship with the customers. Customer relationship management (CRM) is a business strategy which designed to help a company to understand and look forward to the needs of its potential and current customers (Anderson & Stang, 2000). Customer data is being collected in several different areas of the company, stored in a central database, analyzed, and distributed to key points (Anderson & Stang, 2000).The business world once was “product-centric”, the companies just provided what they could produce. However, it is now become “customer-centric”, they provide products and service
Despite companies segmentation practices, customers decide for themselves what their required needs are, once this was realized by Dow Corning, evident from their self-audit, and 5 years of customer surveys and discussions with sales force. They reviewed their segmentation to a needs-based segmentation scheme (Xiameter Case Study).
Organisation realises that if they are not able to understand the overall details of their customers, it results in the loss of sales and customers. Currently, we are in the era of customer – oriented market, manufacturers and organisations are looking to identify ways to create products which will enable them to compete against their competitors. Market segmentation is very vital for the business and marketers, as it enables them to classify the customers based on behavioural, psychographic and profile etc.
General knowledge is that customers are more perceptive to losses than gains which means that worse-than-expected service is more damaging than better-than-expected service is beneficial (Rust et al. 1999).