Business Challenge
Dependence on traditional market segmentation strategies that did not yield expected returns and profits. The client, a large retail chain in Europe was facing issues with the effective segmentation of its customers, as it was using traditional customer segmentation strategies. As a result of this, the firm was not able to achieve expected returns from the marketing investment.
Situation: Unable to derive granular insights from vast customer data
The client had access to vast data, still was not able to identify critical parameters for classifying the customers at a granular level based on profitability, for the deployment of targeted marketing strategies.
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Solution
Customer segmentation and predictive modeling to classify customers based on profitability
We assessed the client’s existing strategies to identify gaps and propose an improved scheme for better customer segmentation. We developed a predictive model for assessment of profitability levels of customers and segment them accordingly. Recommendations were provided on which segments to focus more and which segments to be treated lightly.
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Impact
Improved ROI from Spend on Marketing Activities
The client was able to understand which customer segments and sub-segments provided them maximum profitability. Based on this customer segmentation study, they devised an improved customer segmentation strategy that helped them direct marketing and promotions spend on these identified segments. Less importance was given to customer segments that promised less profitability.
