Our Most Profitable Customers example essay topic

From Exhibit 2 of the case we see that the majority of purchases for this category are made in years 1 and 2. Tuscan may be able to increase per customer profits in this category by maintaining the same mailing frequency (8 catalogs per year) for the first 2 years and then decreasing the frequency (to say 4 per year) in subsequent years thereby decreasing the mailing costs while still maintaining relatively the same response rate from customers. Also we see from exhibit 2 that the number of multiple sales in a year is relatively high which seems to indicate that these may be loyal customers. A referral reward system may be used to incentivize these customers to try and rope in more customers.

Customers Whose Initial Purchase is $50: From the table in Q 1 we see that even after a 5-year period, customers in this category still do not produce a profit for Tuscan. We see from Exhibit 1 of the case that from year 2 onwards the response rate of customers in this category falls rapidly. Also noted is the fact that the number of buyers who purchase only 1 item compared to the other category. This seems to indicate that customers in this category are only trying out the catalog service as a fad or one time thing and do not see any incentive to re-order.

A gift card or a rewards system may provide enough incentive for repeat customers. Q 4) The 5-year time period does not provide a large enough data sample to provide an accurate picture of consumer behavior. It only provides information about the average consumer or a very broad segment of consumers which is not very helpful if we want to target our marketing efforts at say our most profitable customers. It would be much more useful if we had data for customer responses for say every period in which a catalog was mailed. Q 5) Since the company is essentially marketing household items targeted at a women of a certain profile, it may be useful to have data on the number of consumers who are home owners, consumers who have recently purchased a new home, number of consumers that are house-wives, number of consumers that are repeat customers etc. Basically we are looking for information that would enable us to take the entire customer base and divide it into segments which can then be analyzed using cost / profitability and resource allocation considerations so that marketing efforts are more efficient.

Q 6) The time of purchase would provide valuable information. If customers made most of their purchases during the holiday season, marketing efforts could be focused on this part of the year instead of wasting effort on sending catalogs throughout the year. Data that provides a period by period history of purchases would provide a better picture of buying patterns. This can also indicate the level of dormancy of a customer or customer segment.

Also, product data may prove useful. If most of the customers are interested in only a certain product or product category, the catalog itself may be modified for.