Journal of Advances in Information Systems and Technology
Vol. 6 No. 1 (2024): April

Customer Lifetime Value Clustering Using K-Means Algorithm with Length Recency Frequency Monetary Model to Enhance Customer Relationship Management

Chairun Nisak (Semarang State University)
Endang Sugiharti (Unknown)



Article Info

Publish Date
23 Aug 2024

Abstract

The current era of business growth is fraught with challenges and competition due to rapid technological advancements, rapid market growth, and globalization. This research discusses customer management strategies to enhance Customer Relationship Management (CRM) at PT Digibook Sarana Promosi Indonesia, a company in the digital printing industry. With the emergence of numerous competitors in this challenging business growth era, the k-means algorithm and Length, Recency, Frequency, Monetary (LRFM) model are employed for customer clustering. The results identify two main customer groups. The first group falls into the category of almost lost or uncertain lost customers with the symbol L↓R↑F↓M↓, exhibiting low Customer Lifetime Value (CLV), suggesting a "let go" strategy to focus on more valuable customers. The second group comprises high-value loyal customers with the symbol L↑R↓F↑M↑, demonstrating high CLV, recommending an "enforced" strategy to maintain customer loyalty through loyalty programs. This research indicates that the optimal number of clusters is 2, validated using the ClValid method, with the best values on connectivity, Dunn index, and silhouette.

Copyrights © 2024






Journal Info

Abbrev

jaist

Publisher

Subject

Library & Information Science

Description

Journal of Advances in Information Systems and Technology (JAIST) is a peer-reviewed open-access journal. The journal invites scientists and engineers throughout the world to exchange and disseminate theoretical and practice-oriented topics of advances in information systems and technology which ...