Know Your Customer
by: John K Mitchell

How can you increase the profitability of your business and grow the value of your customers?

By really understanding your customer base - how many active customers you have, how many inactive, how many are lapsed, who are (or were) the most profitable, what is their average order value, what do they order and how many times a year do they order.

You may be a retailer who needs to decide who should receive information about a new product. Your customer information is contained in a database of previous exchanges with customers and the features associated with the customers, such as age, post code and details of their previous purchases. The data mining software used to interrogate the database would use this historical information to build a model of customer behavior that could be used to predict which customers would be likely to be interested in the new product. This then allows you to select a list of prospects so that the right customers receive the right offers.

There are many tools that allow you to drill down into your customer database and tell you all these things, as long as the data is up to date and accurate. Do you have lots of duplicate records (caused by customers signing up again each time they order or by using slightly different details each time). This is a common problem and will effectively make understanding your customers a difficult task. How do you know whether Mr Smith of Pembroke Road is the same person as Mr Smith of Pembrook Road for example? And what about Mrs J Jones and Mrs J E Jones, they live at the same address but are they the same person or maybe mother and daughter?

This is where the skills of database cleansing and deduplication come in. You need to be able to interrogate your database looking for possible matches and merge the sales records of the matching customers once you have determined which is the correct record. With a small database it it possible to do this yourself using Soundex rules etc, however with larger databases (I would suggest anything over a couple of thousand records) it would be worth looking at using a third party to do the work for you.

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