Unlocking high-value football fans: unsupervised machine learning for customer segmentation and lifetime value

Abstract

IntroductionIn the modern competitive landscape of football, clubs are increasingly leveraging data-driven decision-making to strengthen their commercial positions, particularly against rival clubs. The strategic allocation of resources to attract and retain profitable fans who exhibit long-term loyalty is crucial for advancing a club's marketing efforts. While the Recency, Frequency, and Monetary (RFM) customer segmentation technique has seen widespread application in various industries for predicting customer behavior, its adoption within the football industry remains underexplored. This study aims to address this gap by introducing an adjusted RFM approach, enhanced with the Analytic Hierarchy Process (AHP) and unsupervised machine learning, to effectively segment football fans based on Customer Lifetime Value (CLV).MethodsThis research employs a novel weighted RFM method where the significance of each RFM component is quantified using the AHP method. The study utilizes a dataset comprising 500,591 anonymized merchandising transactions from Amsterdamsche Football Club Ajax (AFC Ajax). The derived weights for the RFM variables are 0.409 for Monetary, 0.343 for Frequency, and 0.248 for Recency. These weights are then integrated into a clustering framework using unsupervised machine learning algorithms to segment fans based on their weighted RFM values. The simple weighted sum approach is subsequently applied to estimate the CLV ranking for each fan, enabling the identification of distinct fan segments.ResultsThe analysis reveals eight distinct fan clusters, each characterized by unique behaviors and value contributions: The Golden Fans (clusters 1 and 2) exhibit the most favourable scores across the recency, frequency, and monetary metrics, making them relatively the most valuable. They are critical to the club's profitability and should be rewarded through loyalty programs and exclusive services. The Promising segment (cluster 3) shows potential to ascend to Golden Fan status with increased spending. Targeted marketing campaigns and incentives can stimulate this transition. The Needs Attention segment (cluster 4) are formerly loyal fans whose engagement has diminished. Re-engagement strategies are vital to prevent further churn. The New Fans segment (clusters 5 and 6) are fans who have recently transacted and show potential for growth with proper engagement and personalized offerings. Lastly, the Churned/Low Value segment (clusters 7 and 8) are fans who relatively contribute the least and may require price incentives to potentially re-engage, though they hold relatively lower priority compared to other segments.DiscussionThe findings validate the proposed method's utility through its application to AFC Ajax's Customer Relationship Management (CRM) data and provides a robust framework for fan segmentation in the football industry. The approach offers actionable insights that can significantly enhance marketing strategies by identifying and prioritizing high-value segments based on the club's preferences and requirements. By maintaining the loyalty of Golden Fans and nurturing the Promising segment, football clubs can achieve substantial gains in profitability and fan engagement. Additionally, the study underscores the necessity of re-engaging formerly loyal fans and fostering new fans' growth to enable long-term commercial success. This methodology not only aims to bridge a research gap, but also equips marketing practitioners with data-driven tools for effective and efficient customer segmentation in the football industry.