What percent of customers responded from catalog

Assignment Help Marketing Management

Reference no: EM13746729

Tuscan Lifestyles: Targeting Customers with RFM Analysis

Part I: Preliminary and Decile Analysis

1. What percent of customers responded (i.e. bought anything) from this catalog?

2.5% of the customers bought from this last catalog.

Analyze → Descriptive Statistics → Frequencies

Bought from last catalog
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	no	94180	97.5	97.5	97.5
	yes	2371	2.5	2.5	100.0
	Total	96551	100.0	100.0

2. Of those who bought, what was the average dollars ordered from this catalog? The average dollars ordered from this catalog was $104.24 per buying customer.

Analyze → Reports → Case Summaries

Case Summaries
Dollars ordered from last catalog
Bought from last catalog	N	Mean
no	94180	.00
yes	2371	104.24
Total	96551	2.56

3. Create decile variables for recency, frequency and monetary.

Transform → Rank Cases

4. Create a bar chart showing the response rate to this catalog by recencydecile.

Data → Aggregate

Graph → Legacy Dialogs → Bar

635_image 4.png

5. Create a bar chart showing the response rate to this catalog by frequency decile.

Data → Aggregate
Graph → Legacy Dialogs → Bar

2044_image 5.png

6. Create a bar chart showing the response rate to this catalog by monetary decile.

Data → Aggregate

Graph → Legacy Dialogs → Bar

968_image 6.png

7. Using only those customers who placed an order from this catalog, create bar charts showing the average dollars ordered from this catalog by recency, frequency andmonetarydeciles.

Data → Select Cases

Graph → Legacy Dialogs → Bar

1892_image 7.png

8. What do the above bar charts reveal about the likelihood of response and the size of the order across the different recency, frequency, and monetary deciles?

Part II: RFM Classification

9. Generate a report showing the number of customers, the number of buyers, and the response rate for each RFM cell (using the sequential n-tiles approach as recorded in the RFM_SEQ variable).

Analyze → Reports → Case Summaries

Case Summaries
Bought from last catalog
RFM (sequential ntiles)	N	Sum	Mean
111	796	69	.09
112	796	55	.07
113	798	51	.06
114	796	50	.06
115	796	48	.06
121	798	30	.04
122	795	30	.04
123	796	32	.04
124	797	36	.05
125	799	34	.04
131	786	20	.03
132	788	29	.04
133	781	29	.04
134	784	23	.03
135	789	32	.04
141	634	14	.02
142	615	19	.03
143	653	19	.03
144	633	17	.03
145	634	19	.03
151	806	20	.02
152	934	27	.03
153	751	21	.03
154	937	28	.03
155	808	19	.02
211	789	36	.05
212	792	43	.05
213	787	42	.05
214	790	47	.06
215	789	27	.03
221	724	20	.03
222	731	29	.04
223	725	32	.04
224	715	26	.04
225	729	39	.05
231	471	16	.03
232	475	5	.01
233	471	6	.01
234	468	12	.03
235	468	11	.02
241	719	19	.03
242	720	12	.02
243	716	13	.02
244	724	13	.02
245	722	19	.03
251	1152	15	.01
252	1114	27	.02
253	1210	26	.02
254	1159	20	.02
255	1144	15	.01
311	805	28	.03
312	807	27	.03
313	806	29	.04
314	807	27	.03
315	801	17	.02
321	747	14	.02
322	745	19	.03
323	750	20	.03
324	740	13	.02
325	753	16	.02
331	766	15	.02
332	768	15	.02
333	772	14	.02
334	746	15	.02
335	806	17	.02
351	1522	22	.01
352	1564	15	.01
353	1678	30	.02
354	1343	16	.01
355	1564	25	.02
411	885	27	.03
412	886	25	.03
413	885	24	.03
414	883	17	.02
415	882	16	.02
421	412	9	.02
422	413	4	.01
423	412	8	.02
424	425	10	.02
425	407	7	.02
431	826	9	.01
432	836	14	.02
433	794	16	.02
434	857	14	.02
435	833	21	.03
441	1838	29	.02
442	1884	29	.02
443	1490	13	.01
444	1903	20	.01
445	1719	25	.01
511	875	17	.02
512	877	24	.03
513	874	21	.02
514	877	13	.01
515	874	20	.02
521	476	8	.02
522	478	8	.02
523	478	14	.03
524	473	10	.02
525	478	4	.01
531	805	13	.02
532	813	12	.01
533	814	19	.02
534	791	13	.02
535	810	12	.01
541	1672	12	.01
542	1710	24	.01
543	1599	16	.01
544	1738	19	.01
545	1675	20	.01
Total	96551	2371	.02

Part III: Profitability Analysis

Now, compare the profitability of two scenarios:
• mailing to all 96,551 customers
• mailing only to those customers in RFM cells (using the sequential n-tiles approach) with a response rate that is equal to or greater than the breakeven response rate

10. Use the following costs to determine:
(a) the gross profit in dollars,
(b) the gross profit as a % of gross sales, and
(c) the return on marketing expenditures (gross profit/cost to mail catalogs) as a result of mailing the catalog to all 96,551 customers:
Cost to produce and mail catalog = $1
COGS and variable costs on orders = 50% (of sales revenues)

11. What is the breakeven response rate?
Breakeven response rate = cost to mail catalog / net profit of the average sale
$1 / ($104.24 * 50%) = 1 / 52.12 = 0.0192

12. Compute the following items. You can do these (1) by hand (not recommended), (2) in Excel (using the results from question 9 above) or (3) you can create an aggregate SPSS dataset. If you want SPSS to do the bulk of the calculations, follow the instructions in Exhibit 3 - and then you can use analyze ... reports... case summaries for the final computations:

• Determine which RFM segments (using the sequential n-tiles approach) have response rates exceeding the breakeven rate.
• Determine the number of customers belonging to these profitable segments.
• Determine the number of buyers belonging to these profitable segments.
• Finally, what would the

(a) the gross profit in dollars,
(b) the gross profit as a % of gross sales, and
(c) the return on marketing expenditures (gross profit/cost to mail catalogs) have been as a result of mailing the catalog only to those customers in the RFM cells with response rates exceeding the breakeven? That is, rather than mailing to all 96,551 customers - what would the profitability of the mailing have been if mailed to the subset of customers in ‘profitable' segments?

	Mass Mailing	Targeted RFM Mailing
Number of Customers	96511	96511
Number Mailed	96511	53083
% of Customers mailed	100.0%	55.0%
Number of Buyers	2371	1769
Response Rate	2.46%	3.33%

Gross Revenues	$ 247,160	$ 184,401
COGS	$ 123,580	$ 92,200
Mailing	$ 96,551	$ 53,083
Gross Profit (a)	$ 27,029	$ 39,117
Gross Profit/Sales (b)	10.9%	21.2%
Return on Marketing Expenditures (c)	28.0%	73.7%

13. Examine the first 20 or so observations in the database.

What do you notice about theRFM1 and RFM2 values?

Reference no: EM13746729

Questions Cloud

Write an essay on turkish governments treatment of us people : Write an essay on Turkish governments treatment of the American people durng the first years of the 20th century. the Armenian genocide is said to have inspired Adolph Hitlers policies.

Write a book responce of the living with art by getlein mark : Write a book resposce about 100 word of Getlein, Mark. Living with Art, 9th Ed., New York: McGraw-Hill, 2010.

What motivated the producers of all the individual products : What motivated the producers of all the individual products in the store to make them and offer them for sale?

Mapping the process of innovation : What can they learn from the adopting innovation and how can this be used to maintain a competitive edge?

What percent of customers responded from catalog : Preliminary and Decile Analysis: What percent of customers responded (i.e. bought anything) from this catalog

How did world war ii alter the status of african americans : How did World War II alter the status of African Americans and how did World War II affect the status of black workers in America?

Describe the historical event the truman doctrine : describe the historical event the Truman Doctrine. Analyze the historical and contemporary causes of the event. Analyze different historical interpretations of the event.

Effective communication norms in a business setting : Explain effective communication norms in a business setting. Describe the role of interpersonal communication both as a manager and as an employee. What specific techniques have you used to overcome barriers to communication? Be sure to specify you..

Theory of the firm and market structures : Subject matter includes production and cost theory, theory of the firm, market structures, game theory, and externalities and factor market analysis. This is a core theory course, which is highly theoretical and provides the foundation for analyzi..

User Account

All Pages