723-0008-1B

Case Study

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Leveraging Analytics at Victory Farms (B):
Customer Segmentation

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02/2023-6801
This case study was written by Christian Jaubert, INSEAD MBA 22D, Clément Moreau, INSEAD MBA
22J and intern at Victory Farms, Anton Ovchinnikov, Visiting Professor of Decision Sciences at INSEAD
and Distinguished Professor of Management Analytics at Smith School of Business at Queen’s
University in Canada, and Spyros Zoumpoulis, Assistant Professor of Decision Sciences at INSEAD.
Part B must not be used without the case: “Leveraging Analytics at Victory Farms (A): Background”.
The authors acknowledge the support of Frank Odiwuor, Operations Manager, Nche Wadike, Chief
Technology and Operations Officer, Lucia Ehimika, Data Analytics and Innovation Director, and Hob
Du, Chief of Staff, all at Victory Farms, and of Juan Clavier, INSEAD MBA 22D.
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As the largest tilapia producer in Kenya, Victory Farms wanted to develop analytics-driven
tools that would allow to deliver better value to their different customer types. To understand
their purchasing patterns, Frank Odiwuor, Operations Manager, wanted to undertake a
customer segmentation analysis using transaction data; recall Exhibit 14 of the (A) case.

His goal was to segment customers into clusters that Victory Farms could target with

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differentiated promotional actions. This would boost customer loyalty, engagement and
retention. From his analytics background, Frank knew that aggregate characteristics of
spending and purchasing behavior (in the timeframe of the data available) would provide an
initial basis for the first cut at segmenting customers.

Additional insights could be obtained by considering the dynamics of customer purchasing

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behavior as it evolved over time. For example, a customer who used to spend a lot, but
recently dropped spending should be treated differently from a customer who typically spent
less but then increased their business with Victory Farms, even if the two customers have

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the same average spend per month.

To achieve such a dynamic segmentation, Frank hoped to utilize the RFM (recency,
frequency, monetary value) framework. Focusing on a time interval of, for example, three
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months, RFM could be used to construct time-series features that at a given point would
capture when the customer’s last purchase was (recency), how many times the customer
purchased over that interval (frequency), and the total amount spent (monetary value).
Clearly, the RFM feature values of a given customer could change over time. Frank hoped
that the RFM-based time-series features engineered from the available data on customer
spending would allow him to refine the segmentation further.

Franks planned to address the following questions:

1. Using “static” (non-RFM) features only, what segments can the customer base be
split into? What is the appropriate number of segments? How can they best be
described/profiled?
2. How would the answers to the aforementioned questions change with the addition of
the RFM time-series features? What segments could be constructed, how many
segments can be identified, and how can they best be described?
3. In both cases, how could the identified segments inform Victory Farms’ sales and
marketing strategy? For each segment, what specific actions might Victory Farms
take to increase the value of customer relationships?

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