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Tuscon Lifestyles

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Submitted By mcgurie880
Words 565
Pages 3
Definition of Problem:
Tuscan Lifestyles is a fairly new upscale mail order catalogue that sells cookware, tableware, linens, and decorative home accessories in a design that replicates the Tuscany region of Italy. Due to the intense competition in the mail order catalogue industry, the catalogue’s newest marketing director, Joan Beckman, has set out to use the companies database of consumer information to increase the effectiveness and efficiency of future marketing expenditures. In particular, Joan wants to determine if a customer’s initial purchase amount is a good indicator of their future orders and their overall value as a customer. Since Tuscan Lifestyles is a high-class catalogue, the company markets its catalogue to smart middle-class suburban females, aged 30-45, have a ‘cosmopolitan’ outlook on life, and prefer expensive Italian designs. To increase the company’s competitiveness, Joan hopes that by analyzing the dollar amount of a customer’s initial purchase it will reduce the catalogue’s marketing costs by identifying and retaining their loyal customers.

Recommendation:
The dollar value of a customer’s initial purchase is a good prediction of their overall value as a customer. The lifetime value of customers who initially spent more than $50 are more loyal to the company, which can be seen through their retention rate, and has been steadily increasing during these past five years. On the other hand, customers whose initial purchase was less than $50 are much harder to retain and are not as profitable, which can be seen in year 5’s gross profit. Since there is a difference between these two groups, Joan should spend more time trying to increase the per customer profits of the customers whose initial purchase was more than $50. For example, she can introduce a referral reward system, which shows the companies appreciation to their loyal customers

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