CUSTOMER LIFETIME VALUE

Team 3

Segmentation – Bhoir, Sapna; Singhi, Mohit; Siyoum, Admas

Modeling – Chowdavarapu, Indra; D Vivek; Musuku, Prashanth Reddy

Presentation – Bhargava, Juhi; Kawitkar, Nachiket; Varadarajan, Kisorkumar

If we don’t sell it, you won’t need itWebsite http://customer-ltv.weebly.com

BUSINESS OBJECTIVES

Increase revenue by identification of target customer segments

Segment based marketing strategies based on Customer Future Value (CFV)

Identify schemes to migrate customers from low/medium CFV to high CFV

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APPROACH - SEGMENTATION

Churn datasetSegmentation

Demog dataset

RFM Analysis

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RESULTS – SEGMENTATION USING BASE VARIABLES

Legend Variable with baseline value > 100 Variable with baseline value < 100 3

RESULTS – PROFILING USING DESCRIPTOR VARIABLES

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INSIGHTS FROM SEGMENTATION

Happy segments

Segments 1 and 5 have the lowest churn rate

Other variables like home value income, purchase, purchase count, RFM are above baseline

Unhappy segments

Segments 2 and 7 have the highest churn rate

Other variables like home value income, purchase amount & count, RFM are below baseline

Availability of email address in segment 2 high with low average number of marketing emails

High Call in count with low Call out count

Important findings

Segments 3 and 9 have a very high churn rate

Other variables like home value income, purchase, purchase count, RFM are above baseline

Relook at strategy adopted with these segments due to which churn rate is high

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INSIGHTS FROM SEGMENTATION

6Legend 102 < Value < 120 Value >= 120

…INSIGHTS FROM SEGMENTATION RESULTS

Segment 2 has disproportionately larger share of customers with Bronze Tier

Segments 1, 3 and 5 have disproportionately larger share of customers with Gold, Platinum and

Diamond Tiers

Segment 5 also has disproportionately larger share of customers with Silver Tier

Customers with Bronze Tier represent over 64 percent of the total number of customers Appendix-

table analysis

Customers with Silver Tier represent over 20 percent of the total number of customers

☼Focusing marketing resources to migrate bronze and silver tier customers to the next

tiers can improve the bottom line7

APPROACH - MODELING

Churn dataset

Margin dataset

ModelingScore on

Holdout dataset

Customer Future Value

Profiling

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Demog dataset

Data prep onHoldout dataset

Customer

Future

Value

RESULTS - MODELING

High

HighLow Margin $

Rete

nti

on

Lik

eli

ho

od

Q3 - Med CFV

• CFV - $ (1,174) to $ 478

• No. of Accounts – 9,112

Q4 - High CFV

• CFV - $ 416 to $ 8,290

• No. of Accounts – 18,609

Q1 - Low CFV

• CFV - $ (981) to $ 403

• No. of Accounts – 18,455

Q2 - Med CFV

• CFV - $ 5 to $ 6,977

• No. of Accounts – 9,258

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Future Margin Value Split Point $195

Probability of Retention Split 0.91

CFV DISTRIBUTION ANALYSIS

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Total Negative CFV $ (237,599)

Total Positive CFV $ 37,884,709

Net CFV $ 37,647,109

INSIGHTS & FINDINGS-MODELING

CFV Value State wise Top 5 CFV

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INSIGHTS & FINDINGS-MODELING

Average CFV Value State wise Top 5 Avg. CFV

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INSIGHTS & FINDINGS

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RECOMMENDATIONS

Quadrant 1

Low Response count(response to mailers)

Low Length of Residence, Home value

Low RFM score

Low Call out compared to high Call in

Quadrant 1 Recommendations

Identify & focus on customers with high Length of residence

Better handling of Call in from customers

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RECOMMENDATIONS

Quadrant 2

Low Length of residence

High Average purchases count compared to Q4

Home value and Household income (course & fine) higher than

the values in Q4

Assets value are nearly equal to home value in Q4

Quadrant 2 Recommendations

Cross-sell to increase retention and thereby revenues

Customers characteristics similar to Q4, appropriate schemes will

retain customers

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RECOMMENDATIONS

Quadrant 3

Low - High Call in count with low Call out count

Assets, Home value, Household Income (course & fine) similar to

Q1

Customers response rate is high

Quadrant 3 Recommendations

Leverage Call in from customers

Upsell to increase margins

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RECOMMENDATIONS

Quadrant 4

Significantly higher Mail count with high Response count

Low order count compared to Q3

Purchase amount high with a slightly lower avg purchase count

Quadrant 4 Recommendations

Target customers with high Length of Residence and high Purchase

amount life

Retain loyal customers with sustained quality customer service

Marketing scheme to increase revenues and incurring less cost

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RECOMMENDATIONS

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Target customers with high Length of Residence and high Purchase amount life

Cross-sell to customers in Quadrant 2 to increase retention and thereby revenues

Upsell to customers in Quadrant 3 to increase margins

Retain loyal customers with sustained high quality customer service

Marketing scheme to increase revenues and incurring less cost

Leverage Call in from customers

FUTURE APPROACH - MODELING

Churn dataset

Margin dataset

ModelingScore onHoldout dataset

Customer Future Value

Segmentation

Demog dataset

RFM Analysis

Churn dataset

Predict the segment to which each customer

belong to

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Thank You

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APPENDIX-FREQUENCY OF STATES

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APPENDIX-SEGMENT PROFILING

Segment Profiling

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APPENDIX-TABLE ANALYSIS

1-Bronze 2-Silver 3-Gold 4-Platinum 5-Diamond

Segment Id

Frequency

Percent 5.64 2.57 1.76 0.42 0.48 10.88

Row Pct 51.86 23.59 16.21 3.9 4.43

Col Pct 8.78 12.71 15.69 18.73 24.17

Frequency 28520 6007 2590 460 285 37862

Percent 11.87 2.5 1.08 0.19 0.12 15.75

Row Pct 75.33 15.87 6.84 1.21 0.75

Col Pct 18.45 12.37 9.58 8.44 5.94

Frequency 8999 2799 2023 507 685 15013

Percent 3.74 1.16 0.84 0.21 0.28 6.25

Row Pct 59.94 18.64 13.47 3.38 4.56

Col Pct 5.82 5.76 7.49 9.3 14.29

Frequency 23970 7045 3330 664 354 35363

Percent 9.97 2.93 1.39 0.28 0.15 14.71

Row Pct 67.78 19.92 9.42 1.88 1

Col Pct 15.51 14.51 12.32 12.18 7.38

Frequency 16349 7425 4664 966 836 30240

Percent 6.8 3.09 1.94 0.4 0.35 12.58

Row Pct 54.06 24.55 15.42 3.19 2.76

Col Pct 10.58 15.29 17.26 17.72 17.43

Frequency 12407 4428 2123 375 245 19578

Percent 5.16 1.84 0.88 0.16 0.1 8.15

Row Pct 63.37 22.62 10.84 1.92 1.25

Col Pct 8.03 9.12 7.86 6.88 5.11

Frequency 18712 4163 2147 379 284 25685

Percent 7.78 1.73 0.89 0.16 0.12 10.69

Row Pct 72.85 16.21 8.36 1.48 1.11

Col Pct 12.11 8.57 7.95 6.95 5.92

Frequency 18702 6730 3483 605 402 29922

Percent 7.78 2.8 1.45 0.25 0.17 12.45

Row Pct 62.5 22.49 11.64 2.02 1.34

Col Pct 12.1 13.86 12.89 11.1 8.38

Frequency 13320 3787 2424 475 545 20551

Percent 5.54 1.58 1.01 0.2 0.23 8.55

Row Pct 64.81 18.43 11.8 2.31 2.65

Col Pct 8.62 7.8 8.97 8.71 11.37

Frequency

Percent 64.29 20.2 11.24 2.27 1.99 100

48555 27023 5452 4795 240368Total

5

6

7

8

9

154543

1

2

3

4

tier

Total

13564 6171 4239 1021 1159 26154

Table of Segment Id by tier

Table Analysis - The Frequency Procedure

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Back

APPENDIX-CHURN MODELING OUTPUT

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APPENDIX-MARGIN MODELING OUTPUT

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