Preparing for New Competition in the Retail Industry

Preparing for New Competition in the Retail Industry

Goran Klepac (Raiffeisen Bank Austria, Croatia)
DOI: 10.4018/978-1-60566-906-9.ch013
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Abstract

A business case presents a retail company facing new competitors and consequently preparing a customer retention strategy. The business environment in which the company was operating prior to the arrival of new competitors can be described as a stable market. Bearing in mind the plans and marketing activities of a competitor retail chain and making use of the data mining methods a system is being devised for the purpose of preventing or at least buffering the churn trend. Development of an early warning indicator system based on data mining methods is also being described as a support to the management in early detection of both market opportunities and threats. Research in data mining could also be concentrated on applying existing data mining techniques to find the best solution regarding practical business problems in the public or private sector. Knowledge regarding how some business cases were solved using data mining techniques could contribute in a better understanding of the nature or data mining nature and help solve specific business issues.
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Background

There are numerous case studies regarding how to recognise and reduce churn in retail business (Berry 2000, Berry 2003, Giudici 2003). Data mining methods which could be of use for this purpose could be logistic regression (Larose, 2005; Larose, 2006), survival models Berry (2003), Neural networks Alexander (1995), and self-organizing maps by Kohonen (2001).

If we review case studies for churn recognition (Berry 2000, Berry 2003, Giudici 2003, Namid 2004) there are numerous different solutions regarding business environment, market conditions, industry, dominant customer segments etc. Sometimes the source of data or data organization has an influence on the final data mining solution Agosta (2000). The business case presented in this chapter gives a potential solution of a business case related to wholesale and retail business in the situation where incoming competitors enter into a relatively peaceful market environment. In such a case, the following temporal market chapter provides a solution applied in practice which demonstrates good results after implementation.

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