Database: Get a Little Closer
Capturing feedback from any touchpoint—in any language—provides a clearer understanding of customers’ needs, preferences and attitudes, and improves the segmentation process.
3. Perform Recency, Frequency and Monetary (RFM) Analysis. To obtain the most accurate picture of customer lifetime value, organizations first should perform RFM analysis to classify customers according to: those who have spent the most—the most often and most recently; those who have spent the most—the most monetarily, but may not have purchased in a long time; those who spend the most in the fewest number of transactions; and those who spend the least, or rarely, and have not purchased in a long time.
4. Outline the Segmentation Process. Once an organization has identified customers based on purchasing patterns, it then can begin segmentation analysis to get to the core of the audience it wants to target.
The key to a successful segmentation program is to first define the many ways the results can be used. A simple approach might take the following path:
- Create customer segments to enable differential marketing programs.
- Use past purchase data and demographics to construct customer subgroups.
- Isolate key performance factors linked to long-term customer value as major data drivers for the segmentation.
- Use cluster analysis to form homogenous groups of differently valued customers.
- Use techniques such as rule induction to automatically extract the profile of each cluster.
- Align the marketing spending priorities against each subgroup.
- Link product line or category affinity to each subgroup.
- Develop marketing plans incorporating value-based budgeting and category affinity to make programs more relevant and efficient.
5. Auto-Segmentation. With a customer base more clearly defined through effective segmentation, organizations then can add predictive modeling functionality within each segment to produce greater insight that’s required to more effectively and efficiently acquire, grow and retain the right customers, and also identify fraud and minimize risk.