A Case Study on Customer

Classification
Naleep Kumar Gupta
9546415032
Problem :Business wants to classify the customer into different
categories and their profile

A business encounter different type of customer and their behavior also impact the
profitability having more customers is good for cash flow, but there will be always
some customer whose act hinder the business growth, sometimes they do
purposefully other times its comes in their nature.
By classifying such customer we can avoid expense on these type of customer as well
as having a loyal customer is better than acquiring a new customer.
Customer segment: For our Problem, we are classifying the
customer into three categories.

Loyal Customer
Customer which can be converted to Loyal Customer
Bad Customer
Loyal Customer:

This Group Included the customer which are not returning the item frequently until
there is some problem from the business end as well some human error on the
customer end.
They respect our time and quickly upload the item in allotted time frame except for
some extraordinary conditions.
They are more frequent and their total order is more or less contact to an extent.
Customer Which can be Converted
to Loyal:

These are the customer who is not so frequent compared to the loyal base but have
the same characteristic as loyal base i.e. no False return, noService time Violation, but
since they are not so frequent we are keeping them as prone to Loyal Category as a
business need Consistent cash flow into the system with some predicting power.
Bad Customer:

These are the customer who is doing False Return and Service Time Violation more
Frequently.
Analysis:

To Categories the Customer we are using three Normalized Data i.e.

Percent_FalseReturn, Percent_ServiceTimeViolation and ChangeInNumberofOrder.
Assumption: If the data is not available for a particular customer we are treating them
as ideal in particular segment.
 To have a cutoff we are using the mean and Standard deviation of these data with confidence interval
of 2 sigma to categories the behavior of a customer in an individual segment, We are not using 3
sigma as number of data point for study is low so 3 sigma will skip many bad Customer opposites to
our main objective.
We started from categorizing the bad Customer which is doing False return greater than Percent
Return avg+2*sigma(let say crit1) a business face. we could have gone to return percentage due to a
business mistake but we more focusing onthecustomerbehaviorso our base can't be the business
error only but should a combination of both on the case by case basis also business and customer
error as equally probable, so if customerpercentage returned is more than crit1 and false return
percentage was greater than genuine return, then the customer is Bad Customer.
after deducting these customer base we are left with Loyal and prone to the Loyal base and focused
on the nature in their number of orders if the number of order is decreasedwe label them as prone to
a loyal customer and rest are the Loyal customer.
Common Characteristic of the customer is shown in plots below.
Conclusion

Based on Above criteria we found that current dataset have about 48 customer which
we can categories as Bad Customer.
There are about 130 customer which can be converted to Loyal Base.
Rest 222 Customer are Loyal Customer.