Profiling technique optimises shops' CRM

Increasing numbers of UK retailers are adopting a new customer profiling technique which is designed to allow them to exploit...

Increasing numbers of UK retailers are adopting a new customer profiling technique which is designed to allow them to exploit their large CRM investments in a more effective way.

Analyst firm Forrester Research recently said many European firms are unhappy with their CRM investments because they do not segment their customer data properly.

The purchase behaviour profiling (PBP) technique, which is already being used by Sainsburys and Co-op, segments data by transaction rather than simply by customer demographics.

This means retailers can analyse customer behaviour without the need for a loyalty card scheme, giving them meaningful insights into buying patterns, said datawarehousing specialist Teradata, which developed PBP.

"Retailers have made massive investments in loyalty card schemes but they do not use the data properly," said Mikael Bisgaard-Bohr, retail industry director at Teradata. "Segmenting data by demographics is fine for financial services firms, but it does not work for retailers. With PBP you can break down types of customer behaviour into more meaningful segments."

For example, the biggest spenders do not necessarily correlate to the best customers. "Sometimes, customers spend a lot in one go on discounted goods, which is not necessarily good for the bottom line," Bisgaard-Bohr said. "By scoring each basket into a particular segment, the retailer can do much more sophisticated statistical analysis.

"By using PBP, you can split the shoppers into those that buy extras, such as drinks and sweet food, and those that do not, creating opportunities for cross-merchandising."

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