Customer Segmentation & Lifetime Value
Challenge
Previously, customers were only measured based on who spent the most in a transaction.
There was a lack of understanding of the purchase behaviour of different customers.
The company did not have a way to measure customer value.
What’s the best way to categorize customers to tailor interactions and improve the customer experience?
Solution
Built a segmentation model to categorize customers by recency of purchase, purchase frequency, and total amount spent.
Identified different behaviour patterns in different segments.
Built a model to calculate customer lifetime value.
Results
Customized customer interactions and promotional campaigns.
Reduced costs by targeting promotions only to customers more likely to buy on sale.
Knowing customer value enabled data. driven decision making when allocating campaign costs.