Churn in Retail

What is Customer Churn?

Churn in retail business is defined as the migration of customers from one brand to another.

Why monitor churn rate?

With multiple competitors in the same business domain, retail businesses must re-engage existing customers and keep them from churning.

That been said, how do we go ahead with managing churn!

Firstly we need to identify churners

To identify a churner, retailers need to be able to interpret complex signals customers are sending through POS transactions.

• Point-of-sale (POS) transaction data allows a retailer to closely monitor the shopping behavior of their customer over a certain time period. Analysis of POS data also enables retailers to plan their re-stocking strategy so that customers would not look for the same products elsewhere. Otherwise, with so much competition going on, a retailer can easily lose customers.

Customer Segmentation

In Customer Segmentation, customers are divided into groups or segments according to their buying patterns, which helps to improve the marketing strategy. These attributes can be recency, age, income group, frequency,  household size, monetary, etc. Customer segmentation can be achieved by combining demographic and behavioral (transactional) attributes.

An RFM (recency, frequency, and monetary) analysis can also help a  retailer to segment their customer based on their recency, frequency, and monetary values and target each segment of customers with tailored and bespoke business strategies.

RFM (Recency, Frequency & Monetary) Analysis is another widely used technique to segment customers into specific groups based on their recency (how recently they used your products), frequency (how frequently they buy your products), and monetary values (how much they spend on your products). In RFM Analysis, a score is assigned to each customer based on recency frequency and monetary values. This score helps businesses to decide which group of customers are more loyal/valuable to their businesses. By keeping RFM analysis in mind, various business strategies can be developed to improve customer retention and churn rate.

For example, customers with good RFM scores may be offered special discounts to encourage their engagement with the brand. On the other hand, customers with low RFM scores can be offered coupons/vouchers of short validity to influence their buying behavior. RFM analysis also plays a vital role in user personalization.

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