Data Mining in Customer Acquisition

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Managing the customer lifecycle is the last activities in primary stage of CRM value chain. This activities involves customer acquisition, customer retention and customer development. However, why the companies needs to focus to customer acquisition when the cost involved in customer acquisition is high rather than customer retention?

We know that even the most customer-centric company like amazon.com can't assure its customer to be royalty to them forever. The existing customer may switch to competitors, they don't need that products/services anymore, or even die. So, there is time where the customer are losing its value and need to be replaced by acquiring new customer.

Acquiring new customer does not always means get a totally new customer from the competitors or new to the company. New customer can be an existing customer that is new to the category when they found a new category of solution for their existing need. Like Amazon's customer, currently their customer may only buy book from Amazon. But when amazon offer new product called Kindle which is an e-book reader, the current customer may switch to buying Kindle instead of book.

When a company acquiring new customers, it is not simply targeting all the new customer with all the promotion tools and methods. The first thing that the company do is to estimate the customer lifetime value to find whether it worth to acquire. Finding the prospects customer to target on is important since not all customer segments are giving the same value to the company. After having prospect customer in hand, the company may needs to choose the appropriate approaches to get to the customer.

Data mining can often help in finding the customer that gives the highest value to the company and using appropriate promotional tools to get to the customer. As the amount of data increases, the process of choosing relevant demographic would be troublesome without data mining techniques.

Data mining helps the company in...
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