How to Define “Frequency” Metric in B2B

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

If you’re not really clear on what you’re trying to accomplish, designing a successful customer retention program can be a bit of a struggle. Hey, maybe you just don’t know what to look for / what needs fixing / where to start? Gotcha, fellow Driller, the current value / potential value matrix is a great place to start – for you, and perhaps more importantly, your boss / the CFO. Ready to try on some focus? Let’s get to the Drillin’ …

Q:  I am totally getting into your book.  I am up through chapter 17 and have completed my RF Scoring.  My company [my day job] is a custom software company.  It was difficult for me to get my head around the units thing yet, so I just used the “M” as you put it.

A:  Thanks for the kind words, I’m glad it’s working for you!

Q:  In term of companies, we are probably like the B2B example you used in Chapter 8.  So, I could not get my head around the units deal yet because I have not studied the data enough to see if there is a progression.  I think I would need to look at it year to year; but should I stop now and do it first?

A:  Well, customer analysis always starts with an objective…what are you trying to look at / prove / do?  It’s hard to comment without knowing the business problem or issue you are facing…and without any information on how your business really works.  I can rarely find that out from looking at a web site…

“Units” would probably be the total number of “jobs” you have completed for a client.  It also could be the total number of hours the client has used, if that is more logical for the business.  It’s hard to tell without a bit more information.  The point of the “units” variable is to look at the Frequency of commitment, so use whatever makes sense for the business.

Q:  So, my question is, should I go back and do what you suggest in chapter 9 – setting up a look at Latency by customer to get the progression before I continue with Chapter 18.

A:  Oh my, I think I have failed you.  It seems like you are just searching for answers without having a question first, which would be my fault.  Or, are you just trying to build a “profile” of your customer base for further study?  What is your objective?

Let’s say you are trying to look at a basic  retention idea – the current value / potential value 2 x 2 matrix.  In other words, you have customers who are “best” and customers who are not, and you want to know, how are we doing on keeping the different types of customers active with us?  Have high value customers stopped doing business with us?  Are we growing low value customers?  How likely is it we can expect future business from these customers? More here.

So you take your clients and make sure you have 2 numbers available for each – total spend and last job date.  Put them in a spreadsheet with these numbers and sort by current value – total billing.  Then start looking at last job date – do you have high current value clients that have not completed a job lately (low future value)?  Why?  Should somebody call them and find out?  The longer it has been since the last job, the less likely it is they will be booking another.

Or, you might look at job Latency as you suggested, if you think that is more relevant.  For each client, how many weeks or months go by before they book their next job?  If the average for a particular client is 6 weeks, and they are now at 10 weeks since the last job, should somebody contact them and find out if there is work to be done?  Find out if something went wrong with the last job that needs attention or correction?

I hope the above has helped you frame the question you are trying to answer.  If you want to supply some more specifics I may be able to be more concrete with direction.  Is there a “problem” you are trying to solve, or are you just trying to create a “profile” of your customer base for further study?

Q:  Your book is the “bomb”!  And I am trying to get it.  Thanks for your help in advance.

A:  Glad to help.  You’re a customer now!


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