Tuscan Lifestyle

Background

Tuscan Lifestyle a catalog and retail business provide household items to its vast database of customers. The    marketing approach of the company had been primarily product-focused. Like most catalog businesses Tuscan has been losing customers after 1 year of purchases. Tuscan Lifestyle is seeking cost-effective ways to find new prospective customers and retain a loyal customer base.

To help guide the future marketing plans, Joan Beckman, Marketing director at Tuscan Lifestyle is using 5 years of key information from the customer database to predict the future customer life time value. From the list of customers that were extracted, Joan noticed that the average initial purchase was $58. Joan decided to segment the customer base to customer with initial purchase of less than $50 and greater than $50. Using this segmentation Joan was eager to predict if the customers initial purchase amount would be indicative of their future lifetime values and eventually determine appropriate marketing strategies to retain these customer groups.  

Based on the extracted customer data and Life Time Customer calculations here are the findings.

Customers who have initial orders < $50

From the calculations provided we notice that customers with initial purchase of less than $50 generate losses for Tuscan Lifestyles. The company loses around $13 per customer over the 5 year period. It can also be noticed that the retention rate and the average number of orders drastically drops from the second year onwards. By analysing this data we could conclude that customers who purchase below $50 are just trying out the services and are very unlikely to repurchase over the period of years.

Customers who have initial orders > $50

Based on the calculations performed it is noticeable that Tuscan lifestyle will make a profit of $58 per customer over the period of 5 years. From Exhibit 2 in the case study we also observe that the number of multiple orders in a year is relatively high. This could be indicative that these target group of customers have higher chances of repurchase. We also notice that in year1 and year2 the average number of orders and retention rate are the highest. Tuscan lifestyle could implement a strategy wherein for the first two years they mail 8 catalog’s to these customer group per year and then decrease the number to around 5-4 catalog’s per year. This will help Tuscan Lifestyle reduce on the mailing costs and still maintain relatively high response rates from their customers.