108 Data Analysis
File: Data Analysis - Which customer segment to give discounts

Which customer segments to give discounts

The people you should be giving the best deals to are the people who it will change their behavior in the way you want.
Starbucks does not give discounts to their best customers. They give deals to the customers where the ROI is highest. They want to give deals to the people who are right on the brink of being loyal. They want to turn disloyal or infrequent customers into frequent customers. They don't want to turn frequest customers into frequent customers because frequent customers are already frequent customers.
- You don't just treat your highest revenue customers the best, you treat your customers for which the ROI of that expenditure is the highest. This is typically not the customers who buy the most from you.
- It is the middling customer, the mid-tier customer who you want to tip toward a high value customer who should get the discount.

To be successful at this strategy, the customers must first
(a) be segmented Data Analysis - Segments - RFM
(b) optionally, predict ROI for the action

1., Week 5, Eric Bradlow, Video 6: Applications of Analytics

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