The Role of Shopping Mission in Retail Customer Segmentation

Abstract: In retailing, it is important to understand customer behavior and determine customer value. A useful tool to achieve such goals is the cluster analysis of transaction data. Typically, a customer segmentation is based on the recency, frequency and monetary value of shopping or the structure of purchased products. We take a different approach and base our segmentation on the shopping mission - a reason why a customer visits the shop. Shopping missions include focused purchases of specific product categories and general purchases of various sizes. In an application to a Czech drugstore chain, we show that the proposed segmentation brings unique information about customers and should be used alongside the traditional methods.