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Customer Segmentation Using RFM

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Aisyah Nisrina Hamidah
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28 views

Customer Segmentation Using RFM

Uploaded by

Aisyah Nisrina Hamidah
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Customer Segmentation at The Retail

Company Using RFM Method


Dicky Satria Dwiputra – Data Fellowship IYKRA Batch 6 – Data Engineer
1.Background
CONTENT

2.Objectives

3.Results

4.Conclusions
Project Summary

The nature of retail has changed dramatically over


the past few years, and with it, so have the
expectations of the consumer. Modern customers
look at more than just a product, they also value
companies that identify their individual needs and
meet their increasing expectations. Based on those
problems, customer segmentation is one of
appropriate method to identify customer
characteristics and further helps the retailers to
increase their revenue.
The Objectives

The Objectives of this research are:

1. To find out what items


customers buy the most and
items that should be ignored

2. Strategy to increase sales


based on export destination
countries

3. Conduct customer
segmentation

4. Get the hidden insights


Objective 1

From The chart above we can see that the


most bought item is “World War 2 Guiders
Asstd Designs” with the amount of 53847
items or contribute 1.05% of sold items
Objective 1

Data Understanding

The chart above shows the distribution of percentage of


sold items. As we can see, there are a lot of items that
contribute only 0 – 0.2% of sales. Based on this
condition, we can ignore the items which are in
those percentage ranges.
Objective 2

There are also several countries that


give a sizeable contribution, even
though not as much as UK. They are
Netherlands (3.86%), Eire
(2.73%), Germany (2.27%),
France (2.14%), and Australia
(1.59%).

As we can see, the retail’s customers are


dominated by United Kingdom. The items sold to
United Kingdom reach 4234487 (82.42 %)
Objective 2

Based on the conditions in previous slide,


the appropriate strategy to increase the
sales based on export destination
country is using Pareto Principal
Objective 2

Pareto uses 20:80 approach. It


means that 20% efforts can get
80% results or 80% revenue
got by the company actually
comes from only 20%
customers
Objective 2

So as seen from the data, there are only several countries that contribute to most of the sales
of the retail company. UK even dominates by having 82.42% of sales contribution. By only
focusing the marketing campaign and sales strategy to those countries, the company is
expected to increase the sales. They can do several strategies such as giving various promos
or conducting social media campaigns to those countries.
Objective 3

Recency, Frequency, Monetary


In this process, we will try to segment
or group the customers based on 3
characteristics. The characteristics that
will be considered are:

1. Recency : Recency of customer


orders
2. Frequency: The amount of times
the customer has ordered
3. Monetary: The amount of money
the customer has spent
Objective 3
As we can see from the graph above, the customers can be
separated into 4 cluster that is:

1. Cluster 0 which has a high recency but low monetary.


2. Cluster 1 which has a high recency and high monetary.
3. Cluster 2 which has low recency and low monetary.
4. Cluster 3 which has low recency but high monetary.
Objective 3

It can be said that cluster 1 is the


best customer for the company. The
cluster 1 consists of Belgium, EIRE,
Germany, France, Netherlands,
Norway, Portugal, Spain, and UK
Objective 4

As we can see that the sales start to


increase after August and
reach the peak in the end of
the year
Objective 4

Although World War 2 Guiders Asstd Designs is the


most purchased item at supermarket, but item that has
the highest total price is AMAZON FEE with the total
price of 249042.68 or contribute 10.02% of sales
Objective 4

The items most purchased by


each country. UK as the highest
export destination country bought
the most World War 2 Gliders
Asstd Designs in the amount of
48326.
Conclusion

1. The item bought most is World War 2 Guiders Asstd Designs

2. Strategy used to increase the sales is Pareto Methodology

3. There are four clusters which are Cluster 0 which has a high recency but low monetary,
Cluster 1 which has a high recency and high monetary, Cluster 2 which has low recency and
low monetary, Cluster 3 which has low recency but high monetary.

4. the sales start to increase after August and reach the peak at the end of the year,
Amazon Fee is the item which has the highest total price, and UK as the highest export
destination country buy the most World War 2 Gliders Asstd Designs in the amount of
48326.
Project Summary

THANK
YOU!
1. For source code, you can visit:
https://github.com/satriaadicky/MachineLearningDataFellowshipIYKRA

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