|
Client: This new e-commerce start-up was a B2B buying consortium. It provided its members with convenient ordering, volume pricing and direct delivery of a wide selection of goods commonly used in business. |
Challenges: The company's revenues and customer base were growing rapidly but profits were not rising as quickly as expected. As a start-up venture, it was imperative that they discover the cause of the problem and fix it – fast!
Solution: Fortunately, the client had an excellent data warehouse that maintained complete customer data and transaction data. First, Management Analytics Group worked with their IT department to assure the privacy and security of the data we needed. Then we applied our proprietary ABT (Advocate-Buyer-Tryer) segmentation analysis to classify customers in terms relevant to their unique business model. Finally, we developed a predictive model of their customer segments based upon their customers' actual behavior. We used this to predict the future behavior of each customer segment.
Result #1: Management Analytics Group solved the mystery of the profit stagnation problem. Our RFM-A analysis revealed that for far too many customers, the average order was below that which the company could profitably fulfill. We discovered that as customers in certain segments did more business with the company, these customers increased the frequency of their small (and unprofitable) orders rather than place larger (and more profitable) orders. These customer segments remained unprofitable even though volumes were increasing. Ironically, these were the same segments that the client was pursuing the most aggressively – which is why profits were stagnant while revenues were increasing.
Result #2: Management Analytics Group also discovered how to boost profits quickly. We discovered that the client's “best” (most profitable) customers purchased at least three kinds of products and had three or more contacts doing business with the company. Management Analytics Group also discovered that there were a significant number of existing customers who might easily become “best customers” if they could be encouraged to have more contacts and buy more types of products. Our recommendation was to focus sales and marketing efforts upon encouraging multiple customer contacts and cross-category sales among these selected customers rather than continuing to focus exclusively upon acquiring completely new customers.
Questions? Just ask! [Back to Client Success Stories] [Top] |