Study Unit 2 Customer Acquisition and Segmentation ANL 309 Business Analytics Applications
Introduction Different aspects of customer acquisition Role of business analytics in customer acquisition Different aspects of customer segmentation Role of business analytics in customer segmentation
Customer Acquisition Identify prospects or potential customers Understand their profiles Assess their customer value Formulate an acquisition strategy
Traditional Approaches to Customer Acquisition Mass Marketing includes advertising in the mainstream newspapers or magazines Direct Marketing includes mail marketing and telemarketing targeted t approach with specific demographics
Business Analytics and Customer Acquisition As the number of customers increases along with the complexity of data, it is an increasingly daunting task to identify prospective customers. The use of business analytics can help to optimise acquisition campaigns by targeting a specific number of customers with a high propensity to respond, and are profitable.
Customer Acquisition Campaign Designed to acquire new customers and is undertaken within a specific time frame, usually not exceeding one year. The objective is to generate a profile of prospective customers so as to target customers who are profitable for the business.
Planning Identify the objectives of the campaign. Define the strategies. Identify the customer segment. Develop offer. Plan pilot testing.
Execution Implement the campaign. Monitor the outcome of the campaign. Fine-tune the campaign where necessary. Important: t identify those customers who show promise of profit and sustainability over the long run. To increase the acceptance of offers, it is crucial to fine-tune the roll out time.
Analysis Evaluate the results of the customer acquisition campaign. Develop and apply appropriate metrics to measure the success of a campaign. Analyse the response rate of the campaign. Analyse profile of respondents and non-respondents.
Customer Segmentation Asubdivision sub-division of a market into discrete customer groups of individuals that are similar in specific ways, relevant to marketing, such as age, gender, interests and spending habits. A powerful tool to target groups effectively, and allocate marketing resources to the best effect.
Traditional versus Value-based Traditional Segmentation: Identifies customer groups based on demographics and attributes, such as attitude and psychological profiles. Value-based Segmentation: Looks at groups of customers in terms of the revenue they generate, and the costs of establishing and maintaining relationships with them.
Business Analytics and Customer Segmentation Decide what data to be collected and how it will be gathered. Collect data and integrate them from various sources;. Develop methods of data analysis for segmentation;. Establish effective communication among relevant business units, such as marketing and customer service, about the segmentation. Implement applications to effectively deal with the data and respond to the information it provides.
Benefits of Customer Segmentation Segmentation improves a company s focus on the following dimensions: Profitability Customer Product differentiation Competition Resources
Types of Customer Segmentation Customer segmentation can be performed in many ways. Approach 1: Segment the customers according to their average number of transactions and average amount spent. Based on this segmentation, high spending but low transaction customers form a profitable segment to target. Products can be customised based on the needs and preferences of the grouping g if it demonstrates a high response rate, and if it is not too costly to court.
Segmentation by Transaction and Spending
Types of Customer Segmentation Customer segmentation can be performed in many ways. Approach 2: Segment the customers according to their customer lifetime values (CLVs). As shown in next diagram, minimal marketing expense should be incurred on customers with low CLV scores and low response potential. For customers with high CLV scores and low response potential, the company should maintain the current level of marketing budget. It should invest more to court customers with high response potential; whether they have high or low CLV, encouraging higher level of spending amongst those customers with low CLV, and sustaining the spending level amongst those customers with high CLV.
Segmentation by CLV and Response Potential
Segmentation by CLV Scores
Customer Profile Analysis