The probably most generic of all questions for companies is: how to best and most profitably classify customers into category A (most valuable), B and C?
In this context many companies often just consider the size of their customers (by their respective turnover or number of employees) or at least by its own turnover generated with this customer. Both is easy to determine – but may be quite inappropriate. If the company rather considers the margin – potentially even including the expected future margin – whilst considering many factors, this is less trivial, however, it is also much more suitable.
[Data mining] can help a lot in this challenge. On the one hand a company may use such a data mining software to determine – on the basis of existing data – different customer patterns. These, in turn, may each have distinct driver attributes. This is much more revealing than the usual averaging analysis with conventional statistics programs. Companies are not really interested in knowing that the average age (B2C) or year of existence (B2B) of its customers is e.g. 30 years, but rather what exactly characterises the younger customers in cluster 1, in contrast to those in cluster 2; both may have entirely different key driver attributes – starting from the mostly bought products, via the sales channel (point of sale), to the most successful ad campaign. On the basis of this knowledge one can already trigger a lot of optimisations.
The calculated forecast quality may be even more important for the resource allocation within your sales department. Data mining can forecast on the basis of the analysis of past data whether a potential customer will become with great probability an A, B or C customer. This, in turn, is crucial if a company wants to make focused and efficient use of its sales force.