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Chapter 14 Data Mining Throughout the Customer Life Cycle

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). Review….

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Chapter 14 Data Mining Throughout the Customer Life Cycle

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  1. Chapter 14Data Mining Throughout the Customer Life Cycle

  2. 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)

  3. 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

  4. Customers… • Customers are critical to success • Customers are elusive • Customer relationships are fluid/dynamic • Customer definitions are different • Customer management differences • Focus on quality • Focus on service • Focus on convenience • Focus on price • Etc…

  5. Data Mining… • Compliments customer strategies, not replace them • Customer interaction channels – mail, phone, face-to-face, web, advertising, etc. Data Mining

  6. Levels of Customer Relationships • Customers are not all created equal • Some customers are more valuable than others

  7. Levels of Customer Relationships – Mass Intimacy • Companies that serve a “mass” market usually have 100k, or millions of customers • Examples: • 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 Exercise: Others like this?

  8. Levels of Customer Relationships – Deep Intimacy • 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?

  9. 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 • Indirect relationships • Intermediaries (brokers) mediate the relationship (food brokers, stock brokers, travel agents, independent insurance agents, etc.) Exercise: Can you identify any like this? Exercise: Others like this?

  10. Business: size or maturity of the business Customer Life Cycles

  11. Customer Life Stages • Customers are dynamic, not static • Various Life Stages • No control over customer life stages Business: size or maturity of the business

  12. Customer Life Cycle • Five Major “Life” Phases • Prospects • Responders • New Customers • Established Customers • Former Customers

  13. 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 Event-Based vs Subscription Customer Relationships

  14. Typical Customer Experience

  15. Business Processes • Organized around the Cust. Life Cycle

  16. 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

  17. 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…

  18. Business Processes - Activation • Activation steps (generalization) • The Sale (Leads) • The Order • The Subscription • The Paid Subscription

  19. 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)

  20. Business Processes - Retention • Survival Analysis (Ch. 12) • Churn Analysis Forcasting Engine

  21. Business Processes - Winback • Understand why customers leave • Bring back valuable customers • Incentives • Product promotions • Pricing promotions • Utilize “save” teams to focus on this

  22. Customer Relationship Management & Data Mining Examples • IBM Presentation • Chapter 14 - Example 1 • Student Presentation • Chapter 14 - Example 2

  23. End of Chapter 14

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