Customer Segmentation - Data Mining Techniques in CRM: Inside Customer Segmentation - page 222

Table 5.7 ( continued )

Handling by Retention Use of Launch of a

customer activities communication strategic

service channel product

Core value cus-
tomers

Last in the
''queue'' for
customer ser-
vice

Limited allo-
cation of
resources for
preventing
churn

Use the lowest
cost channel

Communicated
to all cus-
tomers
through the
lowest-cost
channel

Figure 5.9 Main priorities by value segments.

Monitoring the value segments is vital. It should be an ongoing process
integrated into the organization's procedures. Substantial upward or downward
movements across the value ''pyramid'' (Figure 5.10) merit special investigation.
Segment migrations can be monitored through simple reporting techniques
which compare the segment assignment of the customers over two distinct time
periods (Figure 5.11), for instance at present and a few months back. This
before-after type of analysis, also called cohort analysis, enables the organization
to assess the evolution of its customer base.
Customers with substantial upward movement seem to strengthen their
relationship with the organization. Finding their ''clones'' through predictive
modeling and identifying customers with similar profiles can reveal other customers
with growth potential.
At the other end, a decline in the pyramid suggests a relationship that is fading.
This decline can be considered as a signal of a ''leaving'' customer. In many cases,
for instance when there is not a specific event which signifies the termination of the
relationship with the customer, a churn event cannot be explicitly defined through
recorded data. In those cases, or as a way for being proactive, analysts can use a
substantial value decline to define attrition and develop a respective churn model.