2 min read

Revenue increase from existing customers

Snap shot of customer segmentation

Recently, while increasing the revenue of a pharmacy store from the existing customers, I used last 2 years of sales data to do retail customer segmentation . After the segmentation, I planned to propose a positioning strategy for different categories of customers.

One of the methods which are well-established for retail customer segmentation is called RFM analysis. The analysis needs each transaction detail in the retail shop namely

  • Invoice number

  • Invoice date

  • Customer-id

  • The amount spent by the customer

The output of the analysis for each customer is

  • Details of average spending in each transaction

  • The number of visits

  • Frequency of visits

  • Ranking in comparison to other customers

Based on the above analysis, it becomes fairly simple to segment the retail customers as high value to low value on a scale of 1-5.

The retail customer segmentation analysis is automated in many high-end CRM tools. So, during billing time, the customer category is reflected on the screen to the cashier, which drives him or her to the proper method to engage the customer.

Usually, the targeting strategy followed is-

  • loyal customers do not need much focus

  • customers on the fence need to be involved with schemes

  • low-value customers do not need much focus.

For small businesses affording high-end CRM tools is not possible. Hence they should get the retail customer segmentation using an RFM study conducted a few times a year for their transactions.

As a result present study, the pharmacy owner knows his customers better and his offering to each customer also changed. We have seen positive results in revenue growth after the analysis outcomes were implemented.

In case you are into a retail business or your friends are into a retail business, I would recommend you to get retail customer segmentation using RFM analysis conducted so that you start giving focused value to your customers which in turn will help in enhancing your revenue from existing customers.

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