K-Means Customers Clustering by their RFMT and Score Satisfaction Analysis

Abstract

Businesses derive more revenue from building and maintaining long-term relationships with their customers. Therefore, it is essential to build refined strategies based on customer relationship management, with the purpose of increasing their turnover and profits while retaining their customers. In this context, customer segmentation, which is at the heart of marketing strategy, makes it possible to determine the answers to questions relating to the number of investments to be released, the marketing campaigns to be organized, and the development strategy to be implemented. This paper develops an extended RFMT (Recency, Frequency, Monetary, and Interpurchase Time) model, namely the RFMTS model, by introducing a new dimension as satisfaction ‘S’. The aim of this model is to analyze online consumer satisfaction over time and discern changes to implement customer segmentation. This article proposes an approach to a segmentation, by client clustering along the unsupervised machine learning method k-means based on data generated using the proposed RFMTS model, in order to improve the customer relationship and develop more effective personalized marketing strategies. The study shows that including satisfaction to the existing RFM model for customer clustering has a major impact and helps identify customers who are satisfied and those who are not, unlike previous attempts to develop new RFM models. By ignoring the “satisfaction” indicator, what went well and what didn't went well cannot be understood. Consequently, the business loses its unsatisfied, loyal, and profitable customers and either fails or relies only on the satisfied ones to continue making profits for an indefinite period of time.