Customer analytics

Customer analytics is a process by which data from customer behavior is used to help make key business
decisions via market segmentation and predictive analytics. This information is used by businesses for
direct marketing, site selection, and customer relationship management. Marketing provides services in
order to satisfy customers. With that in mind, the productive system is considered from its beginning at the
production level, to the end of the cycle at the consumer. Customer analytics plays an important role in the
prediction of customer behavior.[1]

Uses
Retail
Although until recently over 90% of retailers had limited visibility on their customers,[2] with
increasing investments in loyalty programs, customer tracking solutions and market
research, this industry started increasing use of customer analytics in decisions ranging
from product, promotion, price and distribution management. The most obvious use of
customer analytics in retail today is the development of personalized communications and
offers and/or different marketing programs by segment. Additional reasons set forth by
Bain & Co. include: prioritizing product development efforts, designing distribution
strategies and determining product pricing.[3] Demographic, lifestyle, preference, loyalty
data, behavior, shopper value and predictive behavior data points are key to the success
of customer analytics.

Retail management
Companies can use data about customers to restructure retail management. This
restructuring using data often occurs in dynamic scheduling and worker evaluations.
Through dynamic scheduling, companies optimize staffing through predictive scheduling
software based on predictive customer traffic.  Worker schedules can be adjusted in
response to updated forecasts at short notice. Customer analytics allows retail companies
to evaluate workers by comparing daily sales to daily traffic in a store.  The use of
customer analytics data affecting the management of retail workers in a phenomenon
known as refractive surveillance. The model of refractive surveillance describes how the
collection of information on one group can affect and allow for the control of an entirely
different group.

Criticisms of use
As retail technologies become more data driven, use of customer analytics use has raised
criticisms specifically in how they affect the retail worker. Data driven staffing algorithms
can lead to irregular working schedules because they can change on short notice to adapt
to predicted traffic. Data driven assessment of sales can also be misleading as daily traffic
counters do not accurately distinguish between customers and staff and cannot accurately
account for workers’ breaks.[4]

Finance
Banks, insurance companies and pension funds make use of customer analytics in
understanding customer lifetime value, identifying below-zero customers which are
estimated to be around 30% of customer base, increasing cross-sales, managing
customer attrition as well as migrating customers to lower cost channels in a targeted
manner.
Community
 Municipalities utilize customer analytics in an effort to lure retailers to their cities. Using
psychographic variables, communities can be segmented based on attributes like
personality, values, interests, and lifestyle. Using this information, communities can
approach retailers that match their community’s profile.
Customer relationship management
Analytical Customer Relationship Management, commonly abbreviated as CRM, enables
measurement of and prediction from customer data to provide a 360° view of the client.

Predicting customer behavior

Forecasting buying habits and lifestyle preferences is a process of data mining and analysis. This
information consists of many aspects like credit card purchases, magazine subscriptions, loyalty card
membership, surveys, and voter registration. Using these categories, consumer profiles can be created for
any organization’s most profitable customers. When many of these potential customers are aggregated in a
single area it indicates a fertile location for the business to situate. Using a drive time analysis, it is also
possible to predict how far a given customer will drive to a particular location. Combining these sources of
information, a dollar value can be placed on each household within a trade area detailing the likelihood that
household will be worth to a company. Through customer analytics, companies can make decisions based
on facts and objective data.

Data mining

There are two types of categories of data mining. Predictive models use previous customer interactions to
predict future events while segmentation techniques are used to place customers with similar behaviors and
attributes into distinct groups. This grouping can help marketers to optimize their campaign management
and targeting processes.

Retail uses

In retail, companies can keep detailed records of every transaction made allowing them to better understand
customer behavior in store. Data mining can be practically applied through performing basket analysis,
sales forecasting, database marketing, and merchandising planning and allocation. Basket analysis can
show what items are commonly bought together. Sales forecasting shows time based patterns that can
predict when a customer is most likely to buy a specific kind of item. Database marketing uses customer
profile for effective promotions. Merchandising planning and allocation uses data to allow retailers to
examine store patterns in locations that are demographically similar to improve planning and allocation as
well as create store layouts. [5]

See also
Buyer decision processes
Business analytics
Customer interaction tracker
Customer intelligence
Data warehouse
Psychographics
Market research
Mattersight Corporation
Customer privacy
 Customer data management

References
1. Kioumarsi et al., 2009
2. "The futre of retail supply chains" (https://www.mckinsey.com/~/media/mckinsey/dotcom/clie
nt_service/retail/articles/future_of_retail_supply_chains.ashx). www.mckinsey.com.
Retrieved 22 November 2018.
3. Bain & Co.
4. Levy, Barocas, Karen, Solon (2018). "Refractive Surveillance: Monitoring Customers to
Manage Workers". International Journal of Communication. 12: 2–10.
5. Rygielski, Chris; Wang, Jyun-Cheng; Yen, David C. (2002-11-01). "Data mining techniques
for customer relationship management". Technology in Society. 24 (4): 483–502.
doi:10.1016/S0160-791X(02)00038-6 (https://doi.org/10.1016%2FS0160-791X%2802%290
0038-6). ISSN 0160-791X (https://www.worldcat.org/issn/0160-791X). S2CID 16056151 (htt
ps://api.semanticscholar.org/CorpusID:16056151).

Further reading
Kioumarsi, H., Khorshidi, K.J., Yahaya, Z.S., Van Cutsem, I., Zarafat, M., Rahman, W.A.
(2009). Customer Satisfaction: The Case of Fresh Meat Eating Quality Preferences and the
USDA Yield Grade Standard. Int’l Journal of Arts & Sciences (IJAS) Conference.

External links
Wharton Customer Analytics Initiative (http://wcai.wharton.upenn.edu)

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