Customer Segmentation & Economic Cohorts Segmentation

Part 1

The tables in the attached excel is a database extract that shows a cross-tabulation of frequent-flier mileage categories (high, med, low) by Age-category (younger, older).   A travel offer was made to 5000 people in the analytic sample

Table 1 shows the counts of the 5000 people in the analytic sample.

• Table 2 shows the counts as a percentage of the 5000 people in the analytic sample
• Table 3 shows the number of orders placed for the travel offer.
• Table 4 shows the response rate for the travel offer
• Question:

1.Create a new table showing indexes of observed response rates, relative to the overall rate. Then based on the index table you created, create 3 segments labeled as follows (if nec., refer to textbook chapter 7, and slides from week 3, for a refresher on Indexes)

2.Segments: Yes (index >= 120), Maybe (index between 100-120), No (index <=100)

3.If the entire customer file is 100,000 customers, how many customers are there in each of the “Yes”, “Maybe”, and “No” categories?

4.What might be the observed response rate for the “Yes” segment that you want to market to?

5.Past marketing efforts (before this new segmentation) showed an overall response rate of 5.24%. If new offers are to be sent and targeted to the “Yes” segment, what is the expected response rate for the “Yes” segment?  And what is the response rate index?

6. How many orders to the travel offer would you expect?

Part 2

Economic Cohorts (EC) is a product that assigns every US household into one of 71 different segments. Review the EC “product poster” and answer

What database variables might have been used to create the segments?

• What percentage of total households are in “your” segment?
• Pick any two different segments and think of how product targeting and messaging would differ for each segment.