Jim answers questions from fellow Drillers
Topic Overview
Hi again folks, Jim Novo here.
How do you handle the measurement of “likely to purchase” when there’s a built in cycle of purchase as a “member”, like in a book club or other auto-delivery scheme? And what if a member quits membership but keeps buying, what does that mean for predicting future buyer behavior? Oh, the complexity of it all! Let’s do the Drillin’ …
Q: I just ordered the book too, so I am eager to learn more about SIMPLE ways to implement RFM-based strategies.
A: Well, thank you for ordering! I hope it fulfills your expectations.
Q: In the continuity club (Jim’s Note: flower of the month, book of the month, beer of the month) club business though, a little of the RFM process looks tricky because everyone has a certain Frequency built-in, because of the “repeat” nature of clubs. Also, we’re starting to see a phenomenon where customers that drop out of our club continue to order from us.
A: This is quite normal, depending on how the club is set up and whether or not you make it “easy” for people to continue. In some clubs, you are either in or not (books, CD’s, credit cards). Most catalog-type clubs (pay a fee in exchange for ongoing discounts / added services) see continuation beyond club membership. It’s a volume-based thing and a “rational” decision by the consumer – if you need to buy a lot of stuff, joining the club makes sense, because the discount pays for the membership.
In your case, it might be more attached to education, for example – you join the club to educate yourself about the products, then quit when you can “do it on your own.” Or, you get lots of product to experience the variety, and settle into a specific usage pattern. This is the Customer LifeCycle at work. If you can recognize these patterns, you can use them to predict what customers are likely to do next. If you can predict behavior, you can create very high ROI customer marketing programs.
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