CASE STUDY

Customer Lifetime Value Analysis Helps a Leading Retail Industry Client to Improve Customer Loyalty

Feb 24, 2018

The client: Retail industry client

Area of engagement: Customer lifetime value

The retail industry accounts for 31% of the world’s GDP and employs millions of people throughout the globe. Supermarkets and hypermarkets account for 35% of the retail sector’s direct sales, with China and the USA at the forefront. Since e-commerce is another sector that is exhibiting a rapid growth rate, it has a direct influence on the retail industry, which is expected to rise to US$ 28 trillion by 2019. To sustain themselves amidst the rising competition in this market space, leading retailers are focusing on understanding the art and science of catering to the customers.

The combination of a machine learning-based dynamic approach to customer lifetime value analysis combined with our domain-specific expertise results in an unparalleled degree of customer-centricity and a unique value proposition. Contact us to know more about our analytics solutions.

Moreover, the changing retail trends have also impacted the growth of this industry. The exponential growth of technologies has brought about several transformative possibilities, both in the store and beyond. As a growing number of customers seek new products and experiences, retailers have been forced to find new ways to delight their customers and improve loyalty. Now, let’s take a look at some of the major trends and their potential impact on the retail industry:

  • Deflation: Inflation remains dormant, despite the unusually aggressive monetary policies in leading developed countries. The failure to revive inflation can be attributed to several factors, including the temporary effect of declining commodity prices and weak demand. However, inflation is likely to remain low in most of the developed economies. For retailers, this means a reduction in pricing power, price competition, and the necessity of explicitly differentiating themselves from competitors to regain pricing power.

  • The backlash against globalization: In leading countries, there is a growing aversion to free cross-border migration and trade. This is a primary concern for firms operating in the retail industry space since retailers benefited from expansions in the trade that helped them reduce prices and improve customer spending power.

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The Business Challenge

The retail industry is an experiential motley that is currently going through a robust transformation, by employing new technologies, exploring new store formats, and revamping business strategies to creating personal experiences.

The client, a leading player in the retail industry with several business units spread globally, wanted to perform an in-depth customer lifetime value analysis to segment the customers based on their profitability. The client also wanted to gain a detailed understanding of what drives high customer lifetime value. Additionally, the retailer also wanted to develop personalized strategies to improve customer loyalty and brand recognition.

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The Solution and the Business Impact

The customer lifetime value study offered actionable insights that helped the client in identifying and analyzing customer behavior over a period of time.  The solution offered by our team of experts also helped them in predicting future customer behavior to improve loyalty. Moreover, our customer lifetime value solution assisted the client in predicting churn and enabled the design of new programs to reduce customer attrition levels.

Customer Lifetime Value Insights

Since retaining and organically growing customers is a far more cost-effective task than acquiring new customers, leading organizations have started realizing the importance of calculating customer lifetime value. Customer lifetime value also considers the financial value of each customer and helps in building strategic customer relationships. It also helps in developing optimal strategies for customer engagement, which, in turn, aids retailers in delivering tailored services to profitable customers and retain them for more extended periods.

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