Shaheed Zulfiqar Ali Bhutto Institute of Science and Technology, Islamabad Campus

Faculty of Computing and Engineering Sciences

ONLINE RETAIL (Customer Segmentation)

Introduction
Companies need to understand the customers’ data better in all aspects. Detecting similarities
and differences among customers, predicting their behaviors, proposing better options and
opportunities to customers became very important for customer-company engagement.
Segmenting the customers according to their data became vital in this context. RFM (recency,
frequency and monetary) values have been used for many years to identify which customers
valuable for the company, which customers need promotional activities, etc. We have used
RFM based clustering to group customers into segments.

Problem Statement Objectives

The main objective of business domain is to maximize profit margin.
• Classify customers into groups base on their shopping
With multiple competitors in the same business its really important
patters to better understand customers for developing a
to re-engage existing customers. For every personification of marketing campaign around retailers.
customer company need to lunch separate business strategy.
Transaction analysis reveals what, where and how much a customer
• Performing market basket analysis to identify products that
customers want to purchase.
bought, and with this information, retailers can develop a marketing
campaign around purchasing habits and patterns. • Forecasting Total Sale for next few months.

Purpose and targeted audience Results and Discussions

Main objective of the project was classification of customers into
groups based on their shopping patters from online retail store.
These groups would be helpful in building business strategies and
targeting specific profile of customer.
Our targeted audience is set of people who selling online
(eCommerce industry like Daraz, Amazon, Ebay and AliExpress) as
well as offline retails who are most interested to see what they are
selling and whom they are selling.

Proposed Model
About Data: This Online Retail II data set contains all the
transactions occurring for a UK-based and registered, non-store
online retail between 01/12/2009 and 09/12/2011.The company
mainly sells unique all-occasion gift-ware. Many customers of the
company are wholesalers.
The main purpose of this analysis is to help the business better
understand its customers and therefore conduct customer-centric
marketing more effectively. On the basis of the Recency, Frequency,
and Monetary model, customers of the business have been
segmented into various meaningful groups using the k-means
clustering algorithm and market basket analysis; characteristics of
the consumers in each segment have been clearly identified.
RFM (recency, frequency, monetary) analysis is a marketing
technique used to determine quantitatively which customers
are the best ones by examining how recently a customer has
purchased (recency), how often they purchase (frequency), and
how much the customer spends (monetary).
Customers were then classified into bronze, sliver, gold and
platinum customers.
Conclusion
Platinum customers are the best customers who
recently purchase and spend more than customers.
Gold customers are recently purchase and spend high
amount. Silver customers spent the least among all, but
purchased recently and do so often. Bronze customers
who spend a lot but it’s a long time since last
transection; just like they churn who these are most
difficult to engage.

Osama Qadeer (22101106)- Fall 2022 MSDS (Stat & Math)