ONLINE GROCERY STORECUSTOMER

ANALYSISWenyi Liang, Xinyu Liu, Natasha Smith, Pinfeng Zhao, Yang Zhao, Qimengyu Zhou

AGENDAMethodology

Customer GroupsCustomer Profiles

METHODOLOGY 1

METHODOLOGY

★ Behavior-based data★ We removed customers with only one order

Factor Analysis Cluster Analysis ProfilingIdentify Key

Variables

METHODOLOGYFactor

Analysis Cluster Analysis ProfilingIdentify Key Variables

Overall Spending Variables● Average total number of items per order● Average spend per order● Tenure● Incentive amount● Recency● Frequency

Spending Variables by CategoryPercentage of items by category per customer

● Household + Home Goods● Health & Beauty● Beverage● Pet● Baby● Fresh food

(produce + meat + seafood + deli)

● Grocery● Frozen● Dairy● Alcohol● Flowers

METHODOLOGYFactor

Analysis Cluster Analysis ProfilingIdentify Key Variables

Behavioral indicators:1. Stock-Up Shopper2. Focus on Home3. Frequent Loyalist4. Non-Perishables and Dairy

CUSTOMER GROUPS 2

CUSTOMER GROUPS

Loyal Shoppers One-Time Shoppers

Stock-up Shoppers

Fresh-Focused Shoppers

Quick Bargain Shoppers

Variety Shoppers

CUSTOMER PROFILES 3

PROFILE OVERVIEWS

1. Loyal ShoppersThe most loyal, frequent customers with the highest average spend, highest average item count and longest relationship.

4. One-Time ShoppersCustomers who have made only one purchase and have no identifiable purchasing patterns yet.

3. Stock-Up ShoppersOccasional shoppers stocking up on a lot of non-perishable items and avoiding fresh items.

2. Fresh-Focused ShoppersActive shoppers with higher income who prefer fresh foods and flowers and who avoid non-perishable products.

5. Quick Bargain ShoppersInfrequent, price-sensitive shoppers who mainly shop for dinner, buying a lot of fresh products and grocery items.

6. Variety ShoppersShoppers who buy a variety of items, but shop at a lower frequency and more recently started using the store.

LOYAL SHOPPERS PROFILE◉22% of the total population, 68% of the total revenue◉They spend the largest amount and purchase the largest number of items

on average for each order, but they do not need incentive to purchase.◉These highly frequent customers have longstanding relationships with the

store.

Average Spend per

Order

Average Items per

OrderIncentive Frequency Tenure Fresh

Purchases Beverage

Household + Home Goods

Purchases

$182.32Highest

62.9Highest

0Lowest

21.2Highest

342.6Highest

16.98% 1.7%Lowest

4.7%

LOYAL SHOPPERS MARKETING RECOMMENDATIONS

◉Develop a referral campaign to generate word-of-mouth promotions from the most loyal customers.

◉ The Loyal Shoppers are very satisfied with the store and thus are most likely to recommend it to their family and friends. Providing them with a shareable discount code would incentivize them to generate positive and powerful word of mouth recommendations. This is the most effective way to bring in new customers.

FRESH-FOCUSED SHOPPERS PROFILE◉ Relatively younger shoppers with a higher household income who shop

frequently and visited the store recently.◉ These fresh-focused shoppers spend lower-than-average amounts and purchase

fewer items than most other customers.◉ They prefer fresh foods, flowers and health & beauty products, but avoid

household items, home goods, beverages and frozen foods.

Average Spend per

OrderIncome Frequency Incentive Fresh

Purchases Flowers Beverage

Household + Home Goods

Purchases

$131Low 8.9 9.5

High-0.01 29.1%

Highest0.4% 1.7%

Lowest1.9%Lowest

FRESH-FOCUSED SHOPPERS MARKETING RECOMMENDATIONS

◉Provide these customers with more information about products, including nutrition facts and recipes, in order to increase their average spend per order from $131 (the second lowest) to $150.

◉Encourage them to buy products outside of the fresh departments. Use e-newsletters and pop-up advertisements to educate them of the full range of items carried in the store, especially household goods, beverages and non-perishable products.

STOCK-UP SHOPPERS PROFILE◉ The stock-up shoppers spend large amounts and purchase lots of items on each

trip, but only shop occasionally.◉ They are buying home-related goods, non-perishables and dairy items at

higher rates but are buying fresh items at below average rates.◉ While these customers have a relatively long relationship with the store, they

appear to only be using it for certain shopping occasions.

Average Spend per

Order

Average Items per

OrderFrequency Grocery

PurchasesFresh

PurchasesDairy

PurchasesFrozen

Purchases

Household + Home Goods

Purchases

$160.67High

54.3High

4.52 20.6%High

12.3% 8.3% 7.8% 6.3%

STOCK-UP SHOPPERS MARKETING RECOMMENDATIONS

◉Develop creative, discounted bundles of related household goods and fresh foods to increase the sales of fresh items.

◉ Emphasize the quality and freshness of the store’s fresh products to educate and reassure customers. If these customers recognize the store as a place to buy fresh items, they will have more purchase occasions with the store.

◉ Fresh food has higher margins, so driving more fresh food purchases can increase the overall revenue from these customers.

ONE-TIME SHOPPERS PROFILE◉These customers have only made one purchase, so we cannot accurately

determine their purchasing preferences or patterns. ◉ On their only visit, they spent an average of $133.50, which is less than other

customer segments, but they bought a similar number of items.◉These customers may be experimenting with online grocery shopping or

they may prefer another online store.

Average Spend per

Order

Average Items per

OrderFrequency Incentive Grocery

PurchasesFresh

PurchasesDairy

PurchasesFrozen

Purchases

$133.49Low

47.9 1Lowest

-4.2Highest

19.3% 19.9% 9.4% 6.1%

ONE-TIME SHOPPERS MARKETING RECOMMENDATIONS

◉These customers should be sent general coupons through email to encourage them to return to the site and make another purchase.

◉ Their purchase patterns are not yet known, so targeted coupons won’t work.◉The store will add a new page on the website that automatically detects

the visitor’s purchase frequency. If it detects a one-time customer, a “Welcome Back” page will reappear with incentives for them to redeem.

◉ This segment had the highest average incentive amount.◉A small increase in return users could have a large impact on revenue.

◉ This segment makes up 31% of the total customer base.

THANK YOU!

QUESTIONS?

APPENDIX 4

FACTOR ANALYSIS RESULTSFactor 1 Factor 2 Factor 3 Factor 4

Average Item Count per Order 0.94152 -0.08564 0.15684 0.05423

Average Total Spend per Order 0.91943 0.05235 0.17837 0.03358

% of Items Purchased - Household + Home Goods -0.0495 0.72454 0.06649 -0.14369

% of Items Purchased - HABA -0.10344 0.60673 0.0707 -0.02797

% of Items Purchased - Beverage -0.02397 0.38985 -0.02847 -0.01213

% of Items Purchased - Pet 0.05709 0.32152 0.00402 -0.06803

% of Items Purchased - Baby 0.00655 0.23754 0.05558 -0.02467

Frequency (Visits in last year) -0.02894 0.06826 0.91329 -0.04127

Tenure 0.16345 0.15723 0.48256 0.08636

Average Incentive 0.04621 0.00019 0.08977 -0.02129

Recency 0.02289 0.02925 -0.63477 0.07016

% of Items Purchased - Fresh Deli + Meat + Seafood + Produce -0.22157 -0.65704 0.03366 -0.35032

% of Items Purchased - Grocery -0.06513 -0.0689 0.01643 0.69267

% of Items Purchased - Frozen -0.09391 0.09759 -0.05539 0.6182

% of Items Purchased - Dairy -0.31208 -0.27656 0.12365 0.39656

% of Items Purchased - Alcohol -0.05044 0.0637 -0.00637 -0.17164

% of Items Purchased - Flowers -0.06095 0.00234 0.07744 -0.27086

CLUSTER ANALYSIS RESULTS

Cluster

All1 (Stock-Up Shoppers)

2 (Quick Bargain Shoppers)

3 (Fresh-Focused Shoppers)

4 (Variety Shoppers) 5 (Loyal Shoppers)

N 9,870 5,626 5,327 7,798 13,228 41,849

Factor 1 Mean 0.1609 -0.485 -0.339 -0.0262 0.2382 0

Factor 2 Mean 0.8958 -0.6222 -1.05 -0.2838 0.1864 0

Factor 3 Mean -0.664 -0.5328 0.2068 -0.7595 1.0865 0

Factor 4 Mean 0.3464 1.0507 -0.5633 -1.0099 0.1169 0

MEANS TABLE

Stock-Up ShoppersQuick Bargain

ShoppersFresh-Focused

Shoppers Variety Shoppers Loyal ShoppersOne-Time Shopperss

Total RevenueAverage Spend per OrderAverage Item Count per OrderLength of RelationshipFrequencyAverage Incentive AmountRecencyHousehold IncomeAgePercent of Items - AlcoholPercent of Items - BabyPercent of Items - DairyPercent of Items - FreshPercent of Items - FlowersPercent of Items - FrozenPercent of Items - BeveragePercent of Items - GroceryPercent of Items - Health & BeautyPercent of Items - Household + Home GoodsPercent of Items - Pet

713.1773500160.674570254.2621676

256.69868294.5172239-0.2041135

130.54184408.6811822

49.45074720.000983392

0.00201730.08324870.1234150

0.0000698800.07795150.04000490.20571320.02441390.06349790.0166437

502.4844880119.154673143.6853303

227.75666554.2140064-0.4459563

115.86686818.4786298

44.64944650.0005895240.000332610

0.12799660.1922696

0.0000311240.09269960.02090780.25316070.00589380.01875050.0054003

1252.49131.983719148.8347869

266.03022349.4507227-0.016895145.55359498.9111044

44.86179280.0011134

0.0004259120.10486670.2907680

0.0004837640.04168250.01691320.17067540.00598360.01912340.0036022

554.8742044136.488371249.8664643

211.37689154.0034624-0.2609515

119.23441918.8054988

48.09693880.0023856

0.0008102970.07183520.2288060

0.0005142620.03498220.02815440.13558700.01031990.03400780.0093762

3694.45182.318209662.8557204

342.606894521.1775023

020.59245548.9398224

50.66453330.00104700.00157110.09448290.1698016

0.0002392910.06234220.03117050.19456590.01697040.04746310.0121174

133.4949761133.494976147.9407249

186.60852311.0000000-4.1864999

186.60852318.7095617

46.34411890.00155830.00129590.09395620.1988225

0.0003732710.06088930.02835730.19262350.01309230.03858310.0091376

QUICK BARGAIN SHOPPERS PROFILE◉The quick bargain shopper spends the least amount, purchases the

fewest number of items and shops infrequently.◉They are price-sensitive, with a comparatively high average incentive

amount.◉This shopper buys frozen food, grocery and dairy.

Average Spend per

Order

Average Items per

OrderFrequency Incentive Grocery

PurchasesFresh

PurchasesDairy

PurchasesFrozen

Purchases

$119.15Lowest

43.68Lowest

4.21 -0.45High

25.3%Highest

19.2% 12.8%Highest

9.3%Highest

QUICK BARGAIN SHOPPERS MARKETING RECOMMENDATIONS

◉Develop a marketing campaign providing tasty, everyday recipes. Offer recipes that bundle fresh ingredients with grocery items to increase total trip spend.

◉Send out coupons in the late afternoon when these shoppers are thinking about going to the store for dinner.

◉ Quick bargain shoppers are price-sensitive, and coupons work as a reminders to increase their shopping frequency and item count.

VARIETY SHOPPERS PROFILE◉These customers buy a variety of items without a focus on particular

categories, and they shop less frequently. They make a small part of total revenue and buy an average number of items.

◉ They buy the lowest amount of dairy and grocery items, but buy large amounts of fresh items.

◉ They have a relatively short relationship with the store.

Total Revenue

Average Spend per

Order

Average Items per

OrderRecency Frequency Grocery

PurchasesDairy

PurchasesFresh

Purchases

$554.87 $136.49 49.9 119.23 4 13.6%Lowest

7.2%Lowest

22.9%High

VARIETY SHOPPERS MARKETING RECOMMENDATIONS

◉The store should send these variety shoppers e-mail reminders to encourage more frequent visits and maintain the relationship.

◉These shoppers should receive general coupons, such as a $5 discount on a purchase of $100 or more.

◉ This segment does not display a strong preference for category or food type from its buying behavior, so targeted coupons may not work as well.