Segmentation Model of Customer Lifetime Value in Small and Medium Enterprise (SMEs) using K-Means Clustering and LRFM Model

‪Fitri Marisa · Zeratul Izzah Mohd Yusoh · Fachrudin Fachrudin · Tubagus Mohammad Akhriza

38 citations0/0 files storedInternational Journal of Integrated Engineering

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Customer churn and segmentation Customer Service Quality and Loyalty Data Mining and Machine Learning Applications

Abstract

In this decade, SM Es have experienced substantial growth.According to the results of research conducted by the Retail Research Center, this sector experienced a growth rate of 18.6% in Europe in 2015 and 16.7% in 2016.The increasing co mpetition in the SM Es demanded this effort to improve techniques and strategies to maintain customer satisfaction levels to continue to increase .[1].The SM Es sector has an important role in the country' s economy, especially Indonesia.They have proven their existence in the past few years.SM Es have a proportion of 99.99% of the total business actors in Indonesia or as many as 56.54 million units.Based on data achieved by SMEs, in 2013 the Abstract: The CLV model is a measure of customer profit fo r a co mpany that can be used to evaluate the future value of a customer.The CLV model is a measure of customer profit fo r a co mpany that can be used to evaluate the future value of a customer.This study aims to obtain Customer Lifetime Value (CLV) in each customer segment.Grouping uses the K-Means Clustering method based on the LRFM model (Length, Recency, Frequency, Monetary).The cluster formation process uses the Elbow Method and SSE with the best number of clusters = 2 clusters.CLV values are generated fro m the mu ltip lication of the results of normalizat ion of LRFM and the LFRM weight values are then summed, and carried out on each cluster that has been formed.The highest ranking among the 2 clusters is at the second cluster with the CLV value being far the h ighest from the other cluster average of 0.362.Based on LRFM matrix, this cluster has a high loyalty value with the symbol LRFM L ↑ R ↑ F ↑ M ↑ wh ich is a loyal customer (the best segment that has high customer loyalty value).Based on the LRFM symbol, the company can make a strategy to retain customers and acquire customers to become loyal customers with high profitability.

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2009Customer relationship management concepts and technologies 2017Perkembangan UMKM (USAha Mikro Kecil Dan Menengah) Di Indonesia 2009Cluster analysis using data mining approach to develop CRM methodology to assess the customer loyalty 2018RFM ranking – An effective approach to customer segmentation 2016Performance evaluation of different customer segmentation approaches based on RFM and demographics analysis 2011Segmenting customers in online stores based on factors that affect the customer’s intention to purchase 2014A Two-Phase Clustering Analysis for B2B Customer Segmentation

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