Customer Retention is a Data Science: WalletShare Analytics
Customer Retention looks very different depending on the marketplace in which you find yourself, but the same data elements persist across industries and can be harnessed to transform your sales history into a superpower of data and actionable insights.
We previously explored a data-driven approach focused on a customer’s RFM (Recency, Frequency, and Monetary spend) behavior. Today, we will walk through another method of evaluating sales history to identify targeted sales opportunities within your existing portfolio.
WalletShare Analytics quantifies behavior in aggregate to create a baseline against which to apply specific customer activity so that outliers — aka opportunities — can be identified.
Step 1: Segment the Customer Base
Customer segmentation enables an organization to:
- better understand its customers
- customize targeted marketing efforts
- tailor product or service offerings
Many organizations already have an existing customer segmentation method. Within healthcare, this often looks like acute care, long-term care, primary care, surgery centers, etc. Within retail, an example could be rural, suburban, and urban.
Step 2: Determine the Product Category Profile
Create a product category profile for each segment based on a meaningful time horizon. It may be important to consider a full calendar year for seasonal businesses. For less seasonal businesses, ninety days may suffice.
The result is the distribution of activity for that particular segment across product categories. For example, historical sales activity may suggest that surgery centers typically spend 25% on disposables.
Step 3: Quantify the Gap
For each customer in the originating segment, evaluate the customer-specific product category distribution against the aggregate product category distribution to identify the opportunity.
Instances where spend is more than expected may or may not warrant additional attention; the focus is typically on those product categories where a customer is spending significantly less than other like customers. For example, a surgery center spending only 5% on disposables is likely to purchase them elsewhere.
To prioritize the opportunities, quantify the gap by multiplying the difference in the distribution by the customer’s total spend. This will allow the sales team to target those customers whose gap provides the largest opportunity. For example, a 10k customer spending 5% on disposables presents a lesser opportunity than a 1.5M customer currently spending 10% on disposables.
Step 4: Take Action
Transform this opportunity list into meaningful action by distributing it to the teams capable of addressing these opportunities effectively.
- Good: Send targeted lists to the sales team.
- Better: Load customer/product-specific leads into CRM as opportunities or tasks assigned to the appropriate sales team member.
- Best: Embed in an application or CRM interface that allows the sales team to disposition the opportunities for ongoing analysis.
Step 5: Monitor and Adapt
Re-running the WalletShare Analysis at regular intervals will enable an organization to quantify the adoption and ROI of the analytics themselves. By monitoring the spend within the targeted categories, a clear correlation can be made between the initial output, the sales team reaction (if captured), and the customer response.
By applying data-driven analytics such as WalletShare (or RFM), organizations can leverage their existing data as a superpower to segment their customers, create a baseline, quantify opportunities, provide targeted leads to their sales team, and measure the results.
ProfitOptics has ideated, solutioned, designed, built, implemented, and maintained these types of targeted solutions for our own customers for 15 years, and we’d love to talk to you about what is possible.
