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of ''Family shoppers,'' mainly consisting of young married people with a baby. As
babies grow into children, the purchase baskets change once again. Grocery and
home products can still be found in the family's basket but the baby products are
replaced by toys, books, movies/music/games; that is, leisure time products, but for
the children this time, not for the parents. This purchasing profile characterized
the segment of ''Family shoppers with children,'' a group mainly composed of
middle-aged married customers. The last cluster included customers with low
total purchases, mainly for home, food, and pharmacy products. It was labeled as
''Older families/retired'' since it turned out to mostly contain older people with no
dependents.
Once the product-based segments had been revealed and their differentiating
characteristics recognized, it was time for the marketers at the retailer to act on
them and use them to customize the loyalty program's offerings. From that point
on, customers were presented with rewards, offers, and incentives that matched
their specific profile. The reward type was determined by the identified customer
profile, but its value depended on the RFM segment of the customer.
Finally, the enterprise also decided to differentiate its communication strat-
egy, according to the identified customer typologies. An initiative in this direction
included the replacement of general interest brochures and newsletters with spe-
cialized but more detailed ones which better addressed the specific requirements
of each revealed segment.
SUMMARY
In this chapter we presented a segmentation example from the retail industry. The
retailer's loyalty program made possible the tracking of each customer's purchases
over time. Purchase data of the last sixmonths weremined, revealing the purchasing
preferences of the customers and enabling their product-based segmentation. A
clustering model revealed six segments, clearly differentiated in terms of their
consuming preferences. The purchasing patterns identified also reflected the
different family lifecycle stages of the customers, their differentiated needs,
wants, and priorities. Moreover, this allowed the marketers of the organization
to customize their loyalty program's offers and rewards and the communication
strategies of the enterprise, according to the distinct profile of each segment.
Customers were also segmented according to their purchase recency, fre-
quency, and money. This RFM segmentation was also taken into account in
prioritizing the customer handling according to the importance of each customer.