Customer portfolio analysis using the SOM

In order to compete for profitable customers, companies are looking to add value using Customer Relationship Management (CRM). One subset of CRM is customer segmentation, which is the process of dividing customers into groups based upon common features or needs. Segmentation methods can be used for customer portfolio analysis (CPA), the process of analyzing the profitability of customers. This study was made for a case organization, who wanted to identify their profitable and unprofitable customers, in order to gain knowledge on how to develop their marketing strategies. Data about the customers were gathered from the case organization’s own database. The Self-Organizing Map (SOM) was used to divide the customers into segments, which were then analyzed in light of product sales information.