Index

• Proposed Methodology
• Consumer Behaviour Patterns (Data Analytics)
• Metrics Identification
• Business Case Implementation
• Way Forward
Proposed Methodology
Proposed Methodology

• Identify customer buying patterns

Increase • Find relevant and actionable patterns and identify
Average Action Item on each
Purchase Data Analytics
Frequenc
y

• Identify statistical indicators of Current

Performance
• Measure their values to evaluate present situation
• Estimate target values of the metrics based on
Increase Metrics goal
Retail
Revenue
From
Existing • Design implementation plan for the Action Items
Customers • Estimate performance on the metrics selected in
Increase Increase Step 1
• Evaluate Business Impact based on predicted costs
Repeat Average Business and gains due to estimated performance
Customer Bill Implementation
s Value
Consumer Behaviour Patterns
(Data Analytics)
Pattern 1 – Buying Needs are Similar for Similar
Demographics
• Leverage customer demographics and buying frequency
• Tables 1,2,3 give Average Latency (i.e. Average days between buys) for Spectacle Category, using Gender and Age as demographic segments. For each
segment, we have High-frequency buyers (Quartile 1), Low-frequency buyers (Quartile 4) and other buyers in the middle (Quartiles 2 and 3).
• Through this analysis, we know which customer falls in which Quartile for Spectacle category (from test data), based on buying pattern of his/her
type of people from the train data
• Now, we can try to push customers from one quartile into the next higher quartile since we know what is the buying pattern of the next higher
quartile. For eg. CustomerId 319291 is a 50-year old male customer with Average Spectacle buying period of 116 days. Thus he lies in Quartile 2 of
his demographic. (Quartile classification is based on max latency value in that Quartile-Tables 4,5,6). If we want to increase his buying frequency,
best way would be to push him to the next quartile of his own demographic i.e. Quartile 1 with Avg Buying Latency of 52 days and Max Latency of 64
days
• But, 116 days to 52 days is an improbable jump. So we have to gradually move him to upper quartile. Best way is following: As of now he is in lower
half of his own quartile (i.e. his Avg Spectacle Buying Period is higher than his quartile’s Average). So, we try to move him to an Average Buying
Period of (116 + 64)/2 = 90 days. 116 days is his current Avg Buying Period while 64 days is the max Avg Buying Period of the next higher Quartile
(Quartle 1)
• Thus, we should communicate with him via mail/SMS about his spectacle needs 90 days after his most recent buy. Depending on his next buy time,
he will be placed differently in his quartile and thus we will communicate with him a different period after his next spectacle buy. Hence, the system
will adjust dynamically to people’s changed behaviours.
• So, in general, we can use following rule: Check if a customer’s buying Latency is above Average or below Average in his/her own Quartile. (Above
Average means he/she takes longer to buy than people in his/her quartile on average.) For above Average customer, Communication interval =
(Customer’s Current Latency + Upper Quartile Max Latency)/2; For below Average customers, Communication Interval = (Customer’s Current Latency
+ Upper Quartile Avg Latency)/2 (Figure 1)
• Similar demographics analysis can be performed for other products
• This should Increase Average Purchase Frequency
Back
Back
Quartile 1 Average Quartile 2 Average Quartile 3 Average Quartile 4 Average

d2
d1

Quartile 1 Quartile 2 Quartile 3 Quartile 4

Customer 1 Buying Latency Customer 2 Buying Latency

Target Reduction in Latency = 0.5xd1 Target Reduction in Latency = 0.5xd2
Back

Figure 1
Pattern 2 – People buy Similar Products Together
• Pattern of people buying multiple products can be detected through data analytics
• This insight can be used to bundle products together.
• See Table 7. About 1500 customers from Training data bought both Spectacles and Frames. Out of these 1500
customers, biggest categories are customers who bought spectacles in the Price Ranges of Rs 2600-5200, Rs
5200-7800 and Rs 7800-10400.
• Thus, all Spectacle customers who fall in this Price Range must be targeted with Promotions of Frames too
• Reverse targeting data can also be easily obtained (Table 8)
• Similar bundles of other products can be created based on demand as is seen in Table 9
• Detailed bundling Price-Contribution data for each product bundle as in Table 7 can be easily obtained
• Then, for each Customer, which product information is to be promoted can be easily obtained
• This Bundling pattern will result in Increase in Average Bill Value
Back
Back
Pattern 3 – Placement of Warning Signs
• There is need to increase number of Repeat Customers i.e. Number of defectors need to be reduced
• Basic point is to identify a probable defector and take action before he/she actually defects
• To identify a probable defector, we need to identify whether his buying pattern differs from our Repeating
Customers
• See Table 10. For Spectacle Category, based on Train data, we can obtain Average Latency between 1 st and 2nd
Spectacle buy for different Age groups for different Average Spectacle Price. These are our Reference values.
• Now, suppose, we got a new customer, who is 45 years old and bought a spectacle in the price range of Rs 5333-
8000. Now, on Average, he/she should buy his 2nd spectacle after ~190 days. If the customer does not do so, then
he/she is a probable defector and we need to communicate with him/her about his spectacle needs. Possibly a
discount/promotion should help us to prevent the possible defection.
• Thus, we have placed a Warning Sign to warn us about possible defectors. This method is a well-known approach
for customer retention detailed by Jim Novo in his book ‘Drilling Down: Turning Customer Data into Profits with a
Spreadsheet’
• Similar method can be used for other product types-We can even refine the technique to prevent possible
defectors between 2nd and 3rd product purchase
• This will Increase Number of Repeat Customers
Back
Metrics Identification
Metrics Identification
Business Objective
Increase Repeat Customer Business by 50% for FY 15-16
• Repeat Customer: Customer who makes 2 or more transactions within the span of a financial year
• Mark as a Repeat Customer for 2014-15 any customer who also made a purchase in 2013-14
• Revenue from these customers = Repeat Customer Revenue in 2014 = RCR 2014 = Rs 22 crore (based on Train data of 40000 customers)
• Objective Metric = RCR2015 = (1.5 x RCR2014) = Rs 33 crore

Sub-Objective 1
Increase Average Purchase Frequency
• Returning Customer = Customer who has purchased more than once in the last 3 years
• Latency of Returning Customer, i = (Time Difference between 1 st and Last Purchase/Number of Purchases) = L RC,i days/purchase
• Metric Under Consideration =Average LRC,i for all customers = LRC = SUM(LRC,i)/Number of Returning Customers
• Target is to minimize this parameter

Sub-Objective 2
Increase Average Bill Value
• Average Bill Value should be high per customer i.e. we should be able to gain value out of each customer acquired and retained
• Metric Under Consideration = Total Revenue in 2014/Total Number of Customers in 2014 = R 2014/N2014
• Current Value = ABV2014 = Rs 10729 per customer
• Target is to increase this value i.e. increase R2015/N2015

Sub-Objective 3
Increase Repeat Customers
• One-off customers should return to store
• Metric Under Consideration = Number of Repeat Customers in 2014/Total Number of Customers in 2014 = RC 2014/N2014
• Current Value = RC2014% = 29.54% (based on Train data)
• Target is to increase this value i.e increase RC2015%
 Business Case
Implementation
Business Case Implementation
Pattern 1
• Data Analytics gives time to target different customers for different products
• Send 2 SMSes and Email per customer within a span of 5 days around the time suggested by the analysis
• Cost = 2*(15+8) paise = 46 paise = Rs 0.46/customer
• Take Average campaign response = 6% on average (higher than normal because we are doing targeted
promotion)
• Difference between 2 quartiles ~ 80 days on average (Table 1). Say, because of demographic targeting, we reduce
Latency of a customer by about 30% of a quartile difference ~ 24 days. With around 4200 Repeat spectacle
buyers per year, we reduce Avg Buy Period between consecutive Spectacle buy for ~0.06*4200 = 252 spectacle
customers by 24 days. Avg Latency for Spectacle Category ~ 167 days (based on Train Data). So, through this
method, there will be increase in sales of spectacles by ~91 spectacles ((360/143 – 360/167)*252) ~ 91) per year
• Similar analysis can be done for other categories
Business Case Implementation
Pattern 2
• Data Analytics tells us which bundles of products go well together
• Send 2 SMSes and Email per customer within a span of 5 days around the time suggested by the analysis +
Train in-store staff to suggest products as given by the analysis
• Cost = 2*(15+8) paise = 46 paise = Rs 0.46/customer
• Take Average campaign response = 6% on average (higher than normal because we are doing targeted
promotion)
• Take Spectacle-Frame bundled customers = 1577 for 3 years = 526 per year (based on Table 9). Total Spectacle
customers = 24542 for 3 years = 8181 per year (based on train data). Total Frame customers = 1891 per year. So
non-bundled Frame customers = 1891-526=1365.
• Gain in Frames sale due to bundling = 0.06*1365 ~ 82 per year i.e. we can sell 82 more Frames per year due to
bundling
• Similar analysis can be done in detail for different identified bundles
Business Case Implementation
Pattern 3
• Data Analytics tells us which bundles of products go well together
• Send 2 SMSes and Email per customer within a span of 5 days around the time suggested by the analysis +
Train in-store staff to suggest products as given by the analysis
• Cost = 2*(15+8) paise = 46 paise = Rs 0.46/customer
• Take Average campaign response = 6% on average (higher than normal because we are doing targeted
promotion)
• 70% customers are Non-Repeating on Average over all product types (based on Train Data) i.e. ~9300 customers
per year do not return
• So, Increase in Repeat Customers = 0.06 * 9300 ~ 550 more repeating customers per year
Way Forward
Way Forward
• Analysis here takes a limited example of products (Spectacles and Frames) and demographics (Age and Gender)
• But principle of analysis still holds with multiple products and complex demographics
• A very simple script/automation mechanism can be generated given some time for Research and further analysis
• All the given analysis was done using combination of Excel and SQL queries on Microsoft Access
• Once all the products are taken into consideration, the Target Values for the Parameters chosen in Slide 16
(Metrics) for the upcoming year can be easily calculated
• A focused emphasis on meeting those target numbers can then be driven throughout the company
• A Business Impact Assessment of this strategy considering all Titan Products and Consumer behavior along the
described Patterns for each Product can be carried out
• In Summary:
- Acting on Pattern 1 should increase Average Purchasing Frequency
- Acting on Pattern 2 should increase Average Bill Value
- Acting on Pattern 3 should increase Number of Repeat Customers
Thank You