Tuesday, 2 April 2013

Customer Analytics - Relative Price as Data Point

Relative Pricing in Customer Behaviour Analytics

We had some discussion on Price Sensitivity earlier. This was used for determining the Right Price of offer for that customer. However, the price sensitivity is more related to Demand Elasticity

Relative Price is the price of a product/service with respect to another product/service. The latter one is usually termed as the base product/service.

How to use Relative Price to understand Customer Behaviour

Relative price provides very much useful insight about the customer's behaviour. The following would be the typical values for Relative price

  • High
  • Medium
  • Low
The relative price is applied to each item based on a base item from that category. For example a segregating a customer based on the
different price preferences (Twinnings Tea might be a High valued one, while Tetley might be Medium priced; depending on the purchase behavior of each individual across category the following Relative Pricing Table is created)

Cust ID Category Premium High Medium Low
RF0000123 OVGT120980 0 6 16 0
RF0000227 OVGT120980 11 3 2 0
Relative Pricing Customer Table

)Looking at the above table, one could distinguish between the customers - (for a particular category) - the second customer mostly shops for Premium items, while the former is a bit conservative.

The above methodology can be used and the following can be used as Segmentation variables

  • No of High Value Items
  • No of Medium Value items
  • No of Low Value items

Please try this out and let us know the difference it brought to your segments

How to measure effectiveness of Switcher Campaigns in Retail 

Switcher campaigns are the one that disrupt brand loyalty and tease an otherwise loyal customer to switch over to the competitor. Tetley and Brooke Bond are competitors - what would be the impact of providing an offer on Brooke Bond tea for a Tetley fan.

dunnhumby's analysis on offers finds Switcher campaigns are always the worst performing. According to the reporthouseholds tend to buy more of their favorites, such as Coke products, or a new Coke product, if offered an incentive rather moving to Pepsi for example

1 comment:

  1. Relative Price can be used with high success in time series analysis


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