SPI REPORT

Marketing Management: Customer and POS Data Analysis using the CRM Approach

The development of the Internet environment enables companies to directly connect customers and, naturally, customers to directly connect companies. A vast amount of information available to customers through mass and new media, building a strong dependable relationship and mutual trust between the company and the customer becomes a critical matter. One of methods of constructing a dependable relationship is CRM (Customer Relationship Management).

SPI is consulting CRM as a part of Marketing Communication to be implemented by applying the following techniques.

Customer Analysis

The following analyses can be achieved by applying customer data.

- Demographic Analysis:
  • To deduce customer characteristics by sales history of demographic segments
  • A central customer can be identified
- RFM Analysis:
  • To categorize customers in 5-point scale for Recency (Last Purchase Day), Frequency (Purchase Frequency) & Monetary (Purchase Amount)
  • Tracking of customer movement, which leads to effective sales promotion strategies
- Decile Analysis:
  • To divide customers into 10 segments in order of purchase amount
  • Loyal customer characteristics can be identified and leads to an effective loyal customer program

Product Analysis

The following analyses can be achieved by applying POS (Point Of Sales) data.

- Product Trend Analysis
  • To reveal product sales trends
  • Sales and stock relationship leads to effective sales improvement strategies
- Price Elasticity Analysis:
  • To find a relationship between price and product
  • Understanding of the relationship leads to effective sales promotion schemes
- Cross-Purchase Analysis:
  • To find an interrelationship between products in terms of sales trend
  • Inter-product relationship leads to effective promotion and setout of goods strategies

Characteristics of customers and products reveal key elements such as When, Where, Who & What to appeal and enables marketers to develop more detailed communication and promotional strategies

Sample Cases

High Involvement Product

As for a High Involvement Product, it tends to involve a clear profile of the customer by age group and therefore, it is crucial to analyze its data in terms of age group composition (Figure 1) and purchase amount (Figure 2).

This case study indicates that the 30’s has the highest new customer composition but the 60’s has the largest purchasing amount. As results, the 30’s becomes the core target and the most vital age group in the future development of this product. However, the 60’s is an equally important group in short-term retention/improvement.

These types of analyses identify focal points for sales retention and development and enable marketers to work out effective strategies corresponding to various age groups.

Figure 1: Customer Type Composition by Age Group

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Figure 2: Purchase Amount by Age Group

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Low Involvement Product

As for a Low Involvement Product, it tends to involve an unclear customer age-group profile, unlike the High Involvement Product. Although customer profiling is still important, it is more critical to analyze product sales characteristics such as cross-purchasing (Figure 3) and price elasticity (Figure 4).

This particular case illustrates both analyses. The cross-purchasing result implies that Product H and C/D were purchased at the same time; however, it also revealed that Product A and D were not in a similar interrelationship where one sales increases as the other decreases.

The price elasticity analysis identifies a price point for large sales development. The case study shows that the sales of this particular product largely increased after implementing a 20% price discount.

Product sales are most likely to increase as prices reduced if they are, particularly, popular products, but there is still a case that price reduction does not necessarily have a strong relationship with product sales; in other words, too much price reduction may weaken product sales. This is why a good understanding of the price elasticity of products is an important matter.

Ultimately, understanding such results enables marketers to develop effective/efficient communication or promotional strategies.

Figure 3: Cross-Purchasing

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Note: Numbers in table a correlation coefficient

Figure 4: Price Elasticity

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The presented case here was for High/Low Involvement Product, which is in quite a large frame. Customer and product characteristics most likely differ amongst industries and even within brand/product levels. Thus, to maintain the value of the brand/product in this changing customer environment, it is critical to collect and analyze data in a manner that corresponds with the characteristics of the business.

Written by SPI

Please contact us with questions or for more detailed information.
spiindex@spi-consultants.net

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