CUSTOMER ANALYTICS RETAIL PROJECT

Anirudh Rao Anusha Krishna Prasad Arcchit Mittal

Student Student Student
Singapore Management University Singapore Management University Singapore Management University
anirudhnr.2015@mitb.smu.edu.sg anirudhnr.2015@mitb.smu.edu.sg anirudhnr.2015@mitb.smu.edu.sg

Nandeep NV Premnath Prathiban Raviteja Kalidindi

Student Student Student
Singapore Management University Singapore Management University Singapore Management University
anirudhnr.2015@mitb.smu.edu.sg anirudhnr.2015@mitb.smu.edu.sg anirudhnr.2015@mitb.smu.edu.sg

ABSTRACT Transaction dataset captures 350,000

HE Ptd. Ltd. is a retail chain specialized in home
entertainment, game consoles and software, Hi-
Fi, MP3 players and telephony. In 2000, the
company implemented a customer relationship
management (CRM) system to capture
information of its customers and their transaction
records. The system is mainly served as a
database management system and its applications
are mainly confined to simple tubular reporting
of monthly and annual sales.
Recently, Mr. David Chou, the CEO of the
company had attended an industry seminar
organized by the MITB (SSA) programme of the
School of Information Systems, Singapore
Management University. At the seminar, Mr.
Chou learned that the data captured in the CRM
can provide actionable insights for the company
to gain competitive advantage by using
appropriate customer analytics techniques. The
analysts assigned to this project will provide an
analysis on the different insights that can be
achieved through data analytics. As analysts, we
transactional records occurred in the year 2001.
These datasets are in comma delimited text
format.
Table 1: Customers File Data Fields
This is one of the most important entity of this
retail dataset as this constitutes the characteristic
of each customer. Some of the attributes that
were associated with this dataset were ID, DOB,
Registration Date and Gender. As part of our
ETL logic we have made extracted few more
attributes like Age ( Derived from the DOB) and
the number of years the customer is as part of this
organization (Derived from the Registration
Date).
This data constitutes of totally 140,000 records of
customers.
Table 2: Customer Transactions Data Fields

will be applying customer analytics techniques

like RFM, MBA, Association Analysis and
product preference Analysis.

1. MASTER DATA PREPERATION

For the start, 4 datasets are provided for the POC

project. The Customer dataset consists of This data set comprises of OLTP (Online
approximately 140,000 customer records. The Transaction Processing Data), which is recorded
as part of the transaction made by the customers.
This data does not provide much valid
information as there are not in normalized form.
So these data should be combined with some
other data to provide valuable information. As
part of some of these data we can extract some
more hidden data which can be helpful.
Firstly we can find the day at which this
transaction was performed from the timestamp
attribute. This day can help us in the retail dataset
to find out the crowd distribution from the
perspective of the Day.
Secondly each transaction ID is associate with
one Customer, it also helps us to classify the
customer into categories based on their timing of
transaction. In this case we have categories as
follows:
9:00 a.m - 11:59 a.m - Morning Stars
12:00 Noon - 15:00 p.m - Afternoon Avengers
15:00 p.m - 18:00 p.m - Evening Evangeline's
This table constitutes of only ~60K customer
from the whole population of 140K customers.
So this help us to understand that there are some
80K customer who are dormant and are the
potential target. Many strategic decisions can be
made in order to make those customer active,
which in turn brings revenue to the organizations.
Table 3: Product Table Data Fields
This entity comprises the information about the
products and its characteristic like ID, category
and unit price. As these were descriptive data
there were no much transformation made.
Table 4: Customer Campaign Data Fields
This data consists of only 2 attributes, one is the
Card-ID and the campaign response. So the data
set lacks the richness of data but there is a high
potential that these dataset can be combined with
other datasets, which helps us to bring out some
of the hidden data insights.
2. FACT TABLE
In order to bring some insights from this retail
dataset, we need to make sure that the dataset
should be organized and more customer focused.
So some of the business intelligence concepts
like star schema was applied over the dataset.
The Star-Schema is defined as a schema where a
centralized fact table, containing factual data are
connected to the dimensional data, containing the
descriptive data and the table was also
aggregated from the customer perspective. After
implementing this fact table , each record in the
entity will comprises of detailed representation
of customers, who has made transaction.
As part of this process we have implemented the
following:
● Each record represents one single customer,
its demographics and purchasing patterns.
● We derived the age, gender and the Number
of years as customer from the Customer
table.
● In order to find their purchasing pattern , we
derived the following the transaction dataset
:
○ Payment Distribution - This will give us the
information about the number of times he
has used each mode of payment.
○ Favorite Day - This column provides the top
3 days from his visit.
○ Favorite Category - one of the important
column which can help the organization to
implement the strategy of upsell and cross
sell. This column help the organization to
tell his top 3 favorite category that he has
brought the most number of times, arranging
as per the count.
○ Classifier - As we have classified each
customer from the transaction level and
since that does not provide much valuable
information. We have aggregated customer
level and consider only the classifier
category which possess the largest value.
○ We also aggregated the total number of
items and the total monetary spent by each
customer.
3. RFM ANALYSIS
RFM analysis is a popular way of customer
segmentation technique which can help the
retailers to maximize the return on their
marketing investments. While planning for the
marketing spend or formulating a new promotion
the retail marketers need to be careful about how
they segment and target their customers.
Under the RFM analysis each customer is ranked
on three factors, namely Recency, Frequency and
Monetary value. It helps companies identify
customers that are more likely to respond to a
new offer.
3.1 Analysis Method for RFM Analysis
The RFM values had to be calculated based on
each customer as we have done our analysis on
the customer level.
For the recency we have taken the recent visit of
a customer from the Last date of the year
available in the given data of the transaction
table. We have taken 31st
December as the cut off data and we have
subtracted the transaction dates with it. After
getting the Days from the most recent purchases
we have divided this into 5 blocks and the least
days in which a customer has shopped will be the
most frequent buyers .i.e., the customers having
the least value will be our more frequent
customers and they are given the value 5 which
is followed by 5, 4,3,2,1.
For frequency we have taken the count of
individual unique customer ids and grouped
these based on number of transactions. The
customers which the highest number of
transactions counts will be given the 5th top most
ranking and the lowest will be given 1. The order
is given as 5, 4,3,2,1.
For frequency we have taken the count of
individual unique customer ids and grouped
these based on sum of sales or transactions. The
customers which the highest number of sales will
be given the 5th top most ranking and the lowest
will be given 1. The order is given as 5, 4,3,2,1.
The customers are based on 20% margins. The
top 20% customers will be our top customers.
For each customer we get 3 different values
ranging from 1-5 for each criteria based on RFM.
In our case once we get the scores we have given
more weightage to recency. That is for the reason
being the most recent customers are more likely
to buy again. We have multiplied the recent
column (Recency) by 3. We have given 3:2:1 for
the values on Recency: Frequency: Monetary.
The value of the monetary is minimized for 1.
 Once this is done we have created a spark matrix
with all 7 products as variables. Before this
aggregation the product level data was in a single
variable column. So we get 7 new columns
regarding the product transaction details.
For the final calculations of the MBA algorithm
and is run and confidence level is set at 70% and
lift is more than 1.

Figure 1: Code for RFM Analysis

4. MARKET BASKET ANALYSIS

The MBA Analysis provides insights on the

customer purchase pattern for various products.
Through this analysis, we can achieve a product
mix of which products are being purchased the
most and provide recommendations as to which
product can be bundled and sold to customers.
Figure 2: MBA Analysis using R

4.1 Analysis Method for MBA Analysis

For the calculation of the MBA analysis we have
created a spark matrix.
We have joined the table of product details with
transactions details. We have mapped the
customer details with the transaction details and
giving a binary value 0 and 1. So there will be
binary values for 7 respective categories.
Sub category is not taken into consideration as
we have no data regarding what kind of sub
category is being purchased as it is numerical.
We tried to create a customer basket based on
week and month and that didn’t provide us any
desired inferences so finally we have taken the
basket value for entire year and tried to infer the
customer behavior for an entire year. In this case
the basket constitutes of products bought by the
customer n the entire year.
5. CUSTOMER CAMPAIGN
Campaign management is a series of marketing
tactics and programs that are all designed to
achieve a specific business goal. There are
different ways to define and achieve goals and
objectives in a campaign.
 Increase sales Revenue.
 Acquire new customers.
 Increase customer retention.
 Enhance up-sell/cross-sell opportunities.
These majorly consist of enhancing pipeline on
open opportunities, tracking customer interest,
promotions on websites (e.g., free trials, demo
center), tracking search engine marketing, and
awareness events that drive PR and brand
awareness for the company and pricing
promotions on current customers.
5.1 Campaign Analysis
The campaign dataset had two variables – Card
id and the Campaign response. The Card id gave
the information about the customer ID related
one particular unique customer and the
Campaign response gave the response of a
customer on the particular campaign with “T”
being responded and “F” being not responded.
The campaign was targeted for 5957 customers
which caters to about 10% of the unique
customer id’s that has been mapped to the
customer table.
Figure 3: Customer Response
Campaign Response
Responded
5%
Responded
Not Not Responded
Responded
95%
The dataset did not have any other information
and it was not possible to infer into any results
without any additional information. So the
dataset was mapped to the main Master table that
had all the information and was also at a
customer level. The mapping of this customer
master table to the campaign file was done in R
software. The end mapped file was placed in
excel of the slicing and dicing of the numbers and
to arrive at inferences. Once the campaign file
was mapped to the master table, we were able to
gain actionable insights from the responses of the
customers The ID’s were tracked at a customer
level. After the mapping we got information
about the customer’s demographic information
including individual sales and visits.
Figure 4: Campaign Analysis using R
A total of 325 customers had responded to the
campaign which corresponds to about 6% of the
total targeted customers. Profiling these
customers helped us to know what group of
customers are buying in the campaigns, their age
group and gender classification also helped us in
tracking the right members for targeting such
campaigns in the future.
6. PRODUCT PREFERENCE ANALYSIS
The overall product preference analysis is
implemented to determine the overall preference
of top 2 products, cumulative revenue generated,
preferred date and timing based on gender and
their respective age group.
6.1 Analysis for Product Preference
First, separate sheet is created for male and
female customers from master table using filter
option in excel.
The age group on up to 30 years, for male is
segregated separately for total revenue, top 2
preference, day and timing with simple IF
function in excel. After the data is segregated, a
PIVOT table is used to determine the 5
parameters for age range.
The same is repeated for age group of 30-40
years, 40-50 years,50-60 years, 60-70 years,70-
80 years and 90 years for both Male and Female
category.
After the values are determined, an interactive
word tree map is coded with the concept of parent
node as starting node and child nodes as
branching node. For e.g.: the Prod preference is
the parent node for Male, Female node and Male,
female node is the parent node for age groups and
the process goes on till the graph reaches the leaf
node if the 5 parameters in this case.
After coding the interactive graph the overall
values are imputed in JSON format.
Figure 5: D3.js code for Product Preference Graph
Figure 6: Product Preference Graph
7. INFERENCES AND CONCLUSIONS
7.1 Master Table
a. The highest sold was MP3 Players in the
retail chain. 2001 was the year when Apple
came up with its first iPod.
b. Most of the purchases was done through
Credit cards.
c. 40% of the people prefer credit 32%- DC
28% cash considered their first preference.
d. Mp3 and Hardware are the first preferred
products.
e. Hardware and Software is the second and
third preferred product.
f. 60% of the customer base are of the age
group from 30 -50 who provide 65% of total
sales.
g. 30% of the customer has spent 3 years with
us. Which is off age 20 to 40 comprising
h. Both male and female provide us equal
revenue.
i. Most of the customers shopped on Mondays.
7.2 RFM & MBA Analysis
a. The customers have been ranked based on
deciles. The Unique customers have been
deciled in 10 equal parts and the inferences
have been shared on these segmentations.
b. The total unique customer of 59,400 when we
take the top 5000 customers based on RFM
(decile 1 based on RFM) more that 50% of
the top decile customers have bought mp3
players.
c. The MP3 players re the most sold category
and the most sought out category.
d. Equal number of males and females have
bought mp3 players with 13,011 count in the
top 1 decile of the RFM score.
e. From the MBA analysis we could infer that
customers who bought hardware and
software people tend to buy MP3 players.
f. Customers who bought Telephony and
hardware also bought software.
g. Customers who bought hardware
individually also bought software.
7.3 Campaign Analysis
a. The year 2001 belonged to the MP3 players.
Several new players emerged into the
market and there was a huge spike in the
sales of MP3 players. People got familiar to
the MP3 players in the same year. From the
data driven through our analysis we could
find that the most sold item in the campaign
was the MP3 players and so can be attributed
by assumption that the campaign was
targeted on MP3 players.
b. The 325 customers were ranked and
segmented into deciles to infer some
actionable insights. When deciles we could
infer that the top ranking 30 customers
(decile 1) bought around 845 MP3 players
and the top 2 decile customers bought 442
MP3 players. Contributing to around 73% of
the total sales of MP3 players.
c. The top decile who bought the MP3 players
happen to be around the age group of 25-50
who can be named as the working group and
also has the right money to buy MP3 players
as they were expensive when they were
initially sold.
d. The top Decile made a purchase of
$220,000.
e. Most of the purchases during the campaign
happened during the evening time when
compared to morning and noon. From this it
can also be inferred that the campaign
targeted most on the working group who fall
between the age group of 25-50.
f. Most of the shopping happened on
Saturdays when compared to other days.
g. Most of the purchases were made through
Debit cards. This may be on a reason that the
retail company had some tie ups with
various debit card companies and offers
related to purchases made from these cards.
8. RECOMMENDATIONS
a. As 60% of the sales transactions happened
through credit cards the company can partner
with some more credit card companies and
boost its customer engagement.
b. From a study conducted on consumer
shopping behavior it is said that people
usually shop on Mondays and even from our
analysis we infer the same. So the retail chain
can target customers more on Mondays.
c. The company should send out offers and
campaigns on the low selling products like
gaming consoles and Hifi.
d. 30% of the customers have bought only one
category, so the retail chain should
concentrate on these customers and try
upselling and cross selling other products
based on their purchase pattern.
e. Since evenings are little less engaged the
retail chain should try engaging the
customers at evenings by giving attractive
offers.
f. 2001 was the year when MP3 was getting
popular and most sold. So the company
should continue target most of it sales on
MP3 players.
9. REFERNECES
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[2] Ding, W. and Marchionini, G. 1997. A Study on Video
Browsing Strategies. Technical Report. University of
Maryland at College Park.
[3] Fröhlich, B. and Plate, J. 2000. The cubic mouse: a new
device for three-dimensional input. In Proceedings of the
SIGCHI Conference on Human Factors in Computing
Systems (The Hague, The Netherlands, April 01 - 06,
2000). CHI '00. ACM, New York, NY, 526-531. DOI=
http://doi.acm.org/10.1145/332040.332491.