Download Chapter 14 - Data Miners Inc

Chapter 14
Data Mining Throughout the
Customer Life Cycle
So Far…
• Business Context for Data Mining (Ch 1-4)
• Technical Aspects of DM (Ch 5-13)
• Now…Applying DM Techniques in
business (Ch 14-18)
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Review…
• Business uses data mining to help it
realize additional value from its most
important asset – the customer!
• DM algorithms (software) and
methodology are needed for successful
use
• Focus in this course now more on
business data and the systems
environment necessary to exploit DM
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Customers…
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Customers are critical to success
Customers are elusive
Customer relationships are fluid/dynamic
Customer definitions are different
Customer management differences
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Focus on quality
Focus on service
Focus on convenience
Focus on price
Etc…
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Data Mining…
• Compliments customer strategies, not
replace them
• Customer interaction channels – mail,
phone, face-to-face, web, advertising, etc.
Data
Mining
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Levels of Customer Relationships
• Customers are not all created equal
• Some customers are more valuable
than others
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Levels of Customer Relationships –
Mass Intimacy
• Companies that serve a “mass” market usually have
100k, or millions of customers
– Examples:
Exercise: Others like this?
• No dedicated staff to support individual customers
(would require “armies”)
• Customer interactions occur via:
– Staff – mostly phone, chat, face-to-face (retail)
– Automated systems (web, phone, etc.)
– Staff & Automated systems
• Privacy issues surface with mass intimacy
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Levels of Customer Relationships –
Deep Intimacy
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B2B – business to business
Usually large corporations (not always the case)
Dedicated resources (account managers…)
“One-off” (customized) products and services
– Example – branding triumvirate
• McDonalds, Coca-Cola, Disney
• Hundreds of employees working together
• Data mining very useful to further exploit these
business relationships
Exercise: Others like this?
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Levels of Customer Relationships –
In-Between & Indirect Intimacy
• In-Between relationships
– Perhaps the most challenging
• Not big enough to warrant account team(s)
• But big enough to require customized products or
services Exercise: Can you identify any like this?
• Indirect relationships
– Intermediaries (brokers) mediate the
relationship (food brokers, stock brokers,
travel agents, independent insurance agents,
etc.) Exercise: Others like this?
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Customer Life Cycles
Business: size or maturity of the business
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Customer Life Stages
• Customers are dynamic, not static
• Various Life Stages
• No control over customer life stages
Business: size or maturity of the business
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Customer Life Cycle
• Five Major “Life” Phases
•Prospects
•Responders
•New Customers
•Established Customers
•Former Customers
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Event-Based vs Subscription
Customer Relationships
• Event-Based
– Examples
• Payphone call
• Prepaid phone card
• Prepaid mobile phone
– One-time
commitments
– May or may not return
– Advertising tends to
reach this audience
• Subscription
– Examples
• Choose LngDist carrier
• Mobile phone w/no
contract
• Mobile phone
w/contract
– Continuous service &
billing cycle
– Opportunity for future
cash flow
– Start/Stop events
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Typical Customer Experience
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Business Processes
• Organized around the Cust. Life Cycle
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Business Processes - Acquisition
• Acquisition is the process of attracting
prospects & turning them into customers
• Who are the prospects?
– Geographic expansion
– Product, service, pricing changes
– Competition changes
• Data Mining helps ID prospects
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Business Processes - Activation
• Filling out registration form (simple)
• Include credit check, reference checks,
transcripts, notary service, etc. (more
involved)
• Include physical exams (most involved)
• Next slide…
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Business Processes - Activation
• Activation steps
(generalization)
– The Sale (Leads)
– The Order
– The Subscription
– The Paid Subscription
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Business Processes –
Relationship Management
• Goal: Increase customer’s value to us
– Up-Selling – premium products & services
– Cross-Selling – other products & services
– Usage Stimulation – come back for more!!!
• Be careful with this
• Web-based communication (spam)
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Business Processes - Retention
• Survival Analysis (Ch. 12)
• Churn Analysis
Forcasting Engine
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Business Processes - Winback
• Understand why customers leave
• Bring back valuable customers
– Incentives
– Product promotions
– Pricing promotions
• Utilize “save” teams to focus on this
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Customer Relationship Management
& Data Mining Examples
• IBM Presentation
• Chapter 14 - Example 1
• Student Presentation
• Chapter 14 - Example 2
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End of Chapter 14
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