A dynamic customer segmentation approach by combining LRFMS and multivariate time series clustering

Abstract

To successfully market to automotive parts customers in the Industrial Internet era, parts agents need to perform effective customer analysis and management. Dynamic customer segmentation is an effective analytical tool that helps parts agents identify different customer groups. RFM model and time series clustering algorithms are commonly used analytical methods in dynamic customer segmentation. The original RFM model suffers from the problems of R index randomness and ignoring customers’ perceived value. For most existing studies on dynamic customer segmentation, time series clustering techniques largely focus on univariate clustering, with less research on multivariate clustering. To solve the above problems, this paper proposes a dynamic customer segmentation approach by combining LRFMS and multivariate time series clustering. Firstly, this method represents each customer behavior as a time series sequence of the Length, Recency, Frequency, Monetary and Satisfaction variables. And then, we apply a multi-dimensional time series clustering algorithm based on three distance measurement methods called DTW-D, SBD, and CID to carry out customer segmentation. Finally, an empirical study and comparative analyses are conducted using customer transaction data of parts agents to verify the effectiveness of the approach. Additionally, a detailed analysis of different customer groups is made, and corresponding marketing suggestions are provided.