An RFM and CLV analysis for customer retention and customer relationship management of a logistics firm

Abstract

To retain a customer in a logistics industry is difficult as it highly depends on the customer relationship management (CRM) and the quality of the service delivered. The existing customers are to be retained for longer period of time for maximum profit contribution. Hence, it is important to perform a data analysis on the CRM data to identify the right segment of customers who are to be retained to maximise profit. This study segments the customers depending on the parameters recency, frequency, and the monetary value, known as RFM analysis. Customer lifetime value estimation is done on segments obtained using the RFM Analysis to identify the profit contribution of each of the segments. The analysis carried out aids the management to adopt decisions on marketing strategies based on the RFM scores and CLV of each segment. Company can also take decisions on budget spending in retaining the right customers.