Intelligent value-based customer segmentation method for campaign management: A case study of automobile retailer

Authors:
Chu Chai Henry Chan
Affiliations:
E-Business Research Laboratory, Department of Industrial Engineering and Management, Chaoyang University of Technology, No. 168, Jifong East Road, Wufong Township, Taichung County, Taiwan, ROC
Venue:
Expert Systems with Applications: An International Journal
Year:
2008

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Abstract

Most marketers have difficulty in identifying the right customers to engage in successful campaigns. So far, customer segmentation is a popular method that is used for selecting appropriate customers for a launch campaign. Unfortunately, the link between customer segmentation and marketing campaign is missing. Another problem is that database marketers generally use different models to conduct customer segmentation and customer targeting. This study presents a novel approach that combines customer targeting and customer segmentation for campaign strategies. This investigation identifies customer behavior using a recency, frequency and monetary (RFM) model and then uses a customer life time value (LTV) model to evaluate proposed segmented customers. Additionally, this work proposes using generic algorithm (GA) to select more appropriate customers for each campaign strategy. To demonstrate the efficiency of the proposed method, this work performs an empirical study of a Nissan automobile retailer to segment over 4000 customers. The experimental results demonstrate that the proposed method can more effectively target valuable customers than random selection.