Data Mining in Customer Acquisition Essay

1220 Words Nov 18th, 2008 5 Pages
Managing the customer lifecycle is the last activities in primary stage of CRM value chain. This activities involves customer acquisition, customer retention and customer development. However, why the companies needs to focus to customer acquisition when the cost involved in customer acquisition is high rather than customer retention?

We know that even the most customer-centric company like amazon.com can't assure its customer to be royalty to them forever. The existing customer may switch to competitors, they don't need that products/services anymore, or even die. So, there is time where the customer are losing its value and need to be replaced by acquiring new customer.

Acquiring new customer does not always means get a totally new
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To offer the right product to the right customer via the right channels.

4. To measure sales activity and performance overtime.

Differentiate and value customer

The ability to identify prospects that will ultimately bring value to the organization relies heavily upon clustering, undirected form of segmentation. This is an Exploratory Data Analysis (EDA) technique used to dissect a heterogeneous collection of data into manageable number of homogeneous subgroups.This would group customers that posses similar characteristics and clearly describe why one group is different from another.

Once the customer has been grouped, the next step is to calculate the customer lifetime value (CLV). CLV is a measurement of what a customer is projected to be worth over a lifetime. It is the potential contribution of the customer to the company over period of time. Projecting CLV helps the company in benchmarking for how much it would or should be willing to invest to acquire a customer.

In calculating the Customer Lifetime Value, the company needs to refer to the customer purchase history to find out the retention rate in a period of time and value generated in its lifetime. With the forecast of acquisition cost per each customer, the company would get the potential revenue that it will earn in future. Says the promotion cost is RM1 million to 100,000 selected customer and the company get 5.5%

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