The key asset of any company is its customers. It is therefore very important to identify their needs and preferences as well as to know the factors affecting their behavior. The collected customer data allows predicting customer behavior and creating appropriate marketing offers, sales plans, and retention programs that match customers’ needs.
Data mining tools are used to create models that predict customer behavior by using historical data. These methods can be applied to answer questions like:
- Which product to offer to our customers?
- Which customers will respond to a particular marketing campaign?
- How to identify customers who will resign from our services?
- Which customers are the most valuable, and how to keep them?
Below we present examples of challenges which can be solved by applying Data Mining methods.
| Challenge | Solution – analysis type | Benefits |
|---|---|---|
| The Marketing Department is planning a “direct mailing” campaign. To minimize the cost of the campaign it should determine which customers are most likely to respond to the offer. | Scoring – assessing the probability of the response to a particular offer The result is the client’s score calculated on the basis of the available information on him. Scoring shows the probability, that a given event will occur (eg. if the client will respond to a particular offer: yes / no). |
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| The Sales Department, in order to increase sales, has to decide which combination of products should be recommended to a particular customer. | Cross/Up Selling Cross/Up selling, supported by statistical data analyses and Data Mining techniques, provides the means to offer optimal product combinations to particular customers in ways, that best match their current needs. Basic analyses, that support Cross/Up Selling include Market Basket Analysis (identification of products or services that are most frequently purchased together) and Best Next Offer models (which product should be recommended to a customer). |
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| The Marketing Department is to prepare or modify the products and services offer so that it optimally matches the needs of different customers. | Automatic customer segmentation and profiling Segmentation is based on the grouping of customers with similar profiles and behavior. This kind of analysis is based on automatic allocation of customers into segments based on the available customer data. The division can be carried out by taking into account a variety of characteristics, such as demographic and behavioral data. On the basis of this segmentation it is possible to infer the customers’ profile from the segments they have been assigned to. |
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| The CRM Department is to determine the profile of clients who intend to resign from our services, and then take actions to keep them. | Churn Analysis Churn Analysis combined with Data Mining methods allows to specify, on the basis of historical data, the probability that a certain client will stop using company’s services at a given moment. |
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In the next part you will learn, what types of analyses are used in estimating the customer value over time, in selecting best parameters for the given product or service and in effective sales forecasting.
