The RXA Case Study series seeks to illustrate the types of challenges our clients face, as well as the paths we take to meet their needs. Here’s an example of how we’re helping one company attract potential repeat customers.
XYZ Inc. (anonymized at the request of our client) is a popular product manufacturing company. Within the greater scope of trying to identify how customers interacted with their diverse product line, XYZ Inc. also wanted to better understand their target audience. The end goal was to segment and label their customers based on purchasing habits so that our client could more effectively cater to their customers’ needs.
Problems with Customer Segmentation
Our initial plan was to compute an RFM (recency, frequency, and monetary value) segmentation on their customer data. This would have allowed our client to customize and prioritize outreach strategies more accurately. However, our initial exploratory analysis showed that 80% of online customers only made a single purchase (at the time of the analysis). Since purchase frequency is one of RFM segmentation’s three dimensions, this data composition would have skewed our results and limited insights.
We addressed this issue by first grouping customers into either one-time buyers or repeat customers. The RFM segmentation could then be carried out on the repeat customers, providing XYZ Inc. with insights into their more engaged customer base.
The more interesting part of the puzzle was analyzing the remaining 80% of customers. We wanted to know: after a single purchase, was it possible to differentiate customers that would remain as one-time buyers versus those that would continue to purchase?
We analyzed the differences between subsequent purchases of repeat customers, and identified key characteristics that could track when a repeat customer would stop making purchases. This information was then cross-referenced with the one-time buyers, enabling us to segment them based on their propensity to make a second purchase. This information helped XYZ Inc. direct outreach efforts and improve sales.
While the project is still ongoing, we helped XYZ Inc. better understand their repeat customers as well as identify prospective repeat customers.