Marketing and Retail Analysis – Project 1

Automobile parts manufacturing company

Yaresh Vijayasundaram
Post Graduate Program in Data Science and
Business Analytics
BATCH: PGPDSBA.O.SEP22.A
CONTENT

1. Agenda & Executive Summary of the

data
2. Exploratory Analysis and Inferences
3. Customer Segmentation using RFM
analysis
4. Inferences from RFM Analysis and
identified segments
5. Recommendations
01. Agenda & Executive Summary of the
data
• Problem Statement
• About Data (Info, Shape, Summary Stats, your
assumptions about data)
• Assumption on the data
Problem Statement:
An automobile parts manufacturing company has
collected data on transactions for 3 years. They do
not have any in-house data science team; thus, they
have hired you as their consultant. Your job is to use
your data science skills to find the underlying buying
patterns of the customers, provide the company with
suitable insights about their customers,
and recommend customized marketing strategies for
different segments of customers.
Executive Summary of the data:

Objective: The objective of this analysis was to identify the underlying buying
patterns of customers, provide insightful information about customer behaviour, and
recommend customized marketing strategies for different customer segments.

• The dataset consists of 2,747 transactions made by customers of an automobile

parts manufacturing company.
• The dataset consists of 20 columns, including 2 float, 6 integer, and 12 object
data types, providing a diverse range of information about the transactions and
customers.
• The dataset is free from duplicate entries.
• Customers on average ordered 35 items per transaction, with a minimum of 6 and
a maximum of 97.
• The average number of days since the last order is 1,757.09, with a minimum of
42 days and a maximum of 3,562 days.
• The average Manufacturer's Suggested Retail Price (MSRP) of the products is
$100.69, with a standard deviation of $40.11.

RFM (Recency, Frequency, Monetary) analysis is a powerful technique used to

analyse customer behaviour based on their transaction history. By evaluating the
recency of their last purchase, the frequency of their transactions, and the monetary
value of their purchases, RFM analysis helps businesses identify and segment their
customers into different groups to tailor marketing strategies and optimize customer
retention efforts.
Assumption on the data
• The dataset contains information about
orders placed by customers. Each order is
identified by a unique ORDERNUMBER.
• The dataset contains information about
customers' transactions and their associated
details, such as the number of items
purchased, days since the last order, and the
MSRP of the products. This implies that the
dataset includes transactional data related to
customer purchases.
• The dataset does not contain duplicate
entries. This means that each transaction
entry is unique, and there are no repeated
records for the same transaction or
customer.
02. Exploratory
Analysis
and Inferences
Product Line Analysis

Inferences :

• Classic cars and vintage cars are

the most popular product lines,
indicating a strong demand for
these vehicle models.

• Ships, trucks, buses, and trains

have relatively lower counts,
suggesting a niche market or
specialized customer base for these
product lines.
Deal Size Analysis

Inferences :

•The majority of the deals fall into

the small and medium categories,
with counts of 1,246 and 1,349,
respectively. This indicates that
the company primarily engages in
transactions of moderate to
smaller deal sizes.
Order Status Analysis

Inferences :

The significant count of 2,541

successfully shipped orders reflects
the company's outstanding order
fulfilment capabilities and
commitment to delivering orders
promptly.
Quantity Ordered Analysis

Inferences :

The bins with quality orders of 21,

28, 35, and 42 have the highest
counts, indicating their popularity
among customers. With counts
ranging from 576 to 631, these
quantities meet the demands of a
significant portion of customers
Sales over Years

Inference:

* Sales showed a positive trend and grew

significantly from 2018 (3,353,014) to 2019
(4,669,925), suggesting that the business
performed well and experienced an increase
in customer demand.

* However, since we only have sales data

until May for 2020 (1,737,283), it is difficult
to make conclusive statements about the
entire year.
Sales over Month

Inference:

* The sales data exhibits fluctuations

throughout the year, with peak sales
recorded in November (2,088,537) and
October (1,001,377), indicating heightened
customer activity likely influenced by
seasonal factor.

* In contrast, June records the lowest sales

(454,757), suggesting a potential decrease
in customer demand during that period.
Sales by Quarters

Inference:

* The quarterly sales data over the three-

year period reveals a consistent pattern of
higher sales in Q4 (3,699,161) compared to
other quarters. This indicates a potential
seasonal trend where the end of the year
witnesses increased customer spending.

* Q1 (2,254,029) and Q2 (2,048,120) show

relatively stable sales figures, while Q3
(1,758,911) records the lowest sales among
the quarters.
Sales by Week

Inference:

* Sundays have consistently shown the

highest sales (2,175,121) over the three-
year period, indicating that customers tend
to be more active and likely prefer shopping
on weekends.

* Wednesdays, on the other hand, have the

lowest sales (1,374,952) among the
weekdays, suggesting that customers may
be less engaged or influenced by factors
that affect their buying behaviour on this
specific day.
Sales by Country

Inference:

* The sales data by country indicates that

the USA (3,355,576) has significantly higher
sales compared to other countries,
suggesting a strong market presence and
potentially a larger customer base.

* Canada (224,079), Singapore (288,488),

Denmark (245,637), and Finland (329,582)
also demonstrate notable sales figures,
indicating significant market opportunities
and customer demand in these respective
countries
Sales and Deal size by Product line

Inference:

The graph reveals that Classic Cars and

Vintage Cars are the most frequently
ordered product lines, followed by
Motorcycles, Planes, Trucks & Buses, and
Ships. In contrast, Trains had the lowest
number of orders. Interestingly, across all
product lines, most orders fell into the
medium and small deal size categories.
Higher deal sizes were relatively less
common among the popular product lines.
Customer Sales Analysis by Year (2018-
2020):

1.Euro Shopping Channel:

Highest sales across all three years.
Maintained consistent sales
performance.
2.Mini Gift Distributor Ltd:
Second-highest sales.
Demonstrated steady sales growth over
the years.
3.Australian Collectors Co:
Ranked third in sales.
No sales recorded in 2020.
4.Muscle Machine Inc:
Fourth in terms of sales.
No sales recorded in 2020.
5.La Rochelle Gifts:
Joined as a new company in 2019.
Showed promising sales in the year of
establishment.
Summary:
• Product Line Analysis: Classic cars and vintage cars are the most popular product lines, indicating a
strong demand for these vehicle models. Conversely, ships, trucks, buses, and trains have relatively lower
counts, suggesting a niche market or specialized customer base for these product lines.

• Deal Size Analysis: The majority of the deals fall into the small and medium categories, with counts of
1,246 and 1,349, respectively. This indicates that the company primarily engages in transactions of
moderate to smaller deal sizes.

• Order Status Analysis: The significant count of 2,541 successfully shipped orders reflects the company's
outstanding order fulfilment capabilities and commitment to delivering orders promptly.

• Quality Ordered Analysis: The bins with quality orders of 21, 28, 35, and 42 have the highest counts,
indicating their popularity among customers. With counts ranging from 576 to 631, these quantities meet
the demands of a significant portion of customers.

• Sales Analysis: Sales showed a positive trend and grew significantly from 2018 (3,353,014) to 2019
(4,669,925), suggesting that the business performed well and experienced an increase in customer
demand. However, since we only have sales data until May for 2020 (1,737,283), it is difficult to make
conclusive statements about the entire year.
03. Customer Segmentation using RFM analysis
(4 segments)
• What is RFM?
• What all parameters used, and assumptions made?
• Showcase the KNIME workflow image.
• What results are there in the output table head?
RFM
RFM analysis is a customer
segmentation technique commonly
used in marketing and retail to analyse
and categorize customers based on
their purchasing behaviour. RFM
stands for Recency, Frequency, and
Monetary Value, which are three key
metrics used to evaluate customer
engagement and profitability.
PARAMETERS

• Monetary: Calculated by multiplying the price each with the quantity ordered. It represents the monetary
value or revenue generated by each customer.
• Recency: Determined by subtracting the order date from a fixed reference date, such as 01-06-2020. It
represents how recently a customer made a purchase.
• Frequency: Calculated as the count of customer names. It represents how often a customer has made
purchases.
• Auto-binning: Customers are segmented into four categories based on their RFM scores - High, Moderate,
Low, and Very Low. This segmentation helps in categorizing customers based on their value and behaviour.

These parameters are utilized in RFM analysis to evaluate customer behaviour, identify customer segments,
and make data-driven marketing and sales decisions.

ASSUMPTION:

• Higher Monetary value indicates a higher spending customer: The assumption is that customers who
generate higher monetary value through their purchases are likely to be more valuable and potentially more
profitable for the business.
• Recent purchases are more indicative of customer engagement: The assumption is that customers who have
made purchases more recently are likely to be more engaged with the company and its offerings. They may
have higher potential for repeat purchases or upselling/cross-selling opportunities.
• Higher Frequency of purchases reflects customer loyalty: The assumption is that customers who make
purchases more frequently are more loyal to the company. They may have a stronger connection to the
brand, higher customer satisfaction, and a higher likelihood of recommending the company to others.
 KNIME
WORKFLOW

Tool Used
Output table head
04. Inferences from RFM Analysis and identified segments:

• Who are your best customers?

• Which customers are on the verge of churning?
• Who are your lost customers?
• Who are your loyal customers?
 TOP 5 Best Customers

The top 5 best customers are determined by calculating the RFM score, which is the sum of
scores for Monetary, Recency, and Frequency. Higher RFM scores indicate more valuable
customers.
 Customers at Risk of Churning: Identifying Potential Churners

The customers with very low to low recency, high to moderate monetary value, and high to
moderate purchase frequency are at an increased risk of churning.
 Top 5 Lost customer

• Customers with low frequency of purchases, indicating reduced engagement.

• Customers with low recency, implying prolonged inactivity.
• Customers with low monetary value, suggesting decreased spending.
 Top 5 Loyal Customer

Loyal customer refers to customers who are consistent and repeat purchases over
time. They may not necessarily have the highest monetary value, but they
demonstrate a strong commitment to the brand by repeatedly choosing to do
business with the company.
 05. RECOMMENDATIONS:

Customer Retention Strategies: Engage and retain customers who are at risk of
churning. Offer personalized incentives, loyalty programs, or exclusive promotions
to encourage their continued loyalty

Continuous Monitoring and Analysis: Regularly monitor customer behavior, sales

trends, and key performance indicators to identify changing patterns and
proactively address any potential issues.

Upselling and Cross-Selling Opportunities: Identify opportunities to upsell and

cross-sell to existing customers, especially those with a high monetary value.
Recommend relevant products or services based on their purchase history to
increase their average order value and enhance customer loyalty.