Category Archives: Lab Store

Context Parameters for Best Use of Recency Metric

Analytics Education, Customer Experience, DataBase Marketing, Driller Q & A, Lab Store

Jim answers questions from fellow Drillers

Topic Overview

Hi again folks, Jim Novo here.

Time to take a look at some basic strategy framework ideas in a customer retention program. You have to know where you are first before you can decide what actions to take, and this initial analysis will prompt ideas for action. Trust me, finding out specifically what is happening in an actionable way is the most critical step to the design and execution of a customer retention program. Not doing this is why so many of the programs fail. Ready, Driller? Let’s do it.

Q:  I’m reading some of your information you have on your web site, regarding Recency / Frequency.  I’m curious about the statement that Recency is the number one most powerful predictor of future behavior – if you did some thing recently you’re more likely to do it again.  

A:  Yes.  Funny thing about web sites, it’s hard to control what sequence people read things in.  From the questions below, I believe I have failed to introduce you to the Recency metric in the right context.  Shame on me!

Q:  With regards to purchases, how is this so?  I can think of numerous instances where this might not be true.  In fact, I would guess that price of purchase would be a more likely indicator of whether or not someone would purchase again.  If I’m running Best Buy, and someone comes and buys a washer / dryer, I would not expect they’d be buying another one anytime soon.  Ditto furniture, cars, travel bookings, etc.

A:  Two important “context” issues surrounding Recency.  First, Recency is a “relative” metric, it doesn’t exist by itself, but “relative” to other data points.  In the case of customers, Recency and the “likelihood” is a relative comparison of two customers, two customer segments, or a customer versus the average customer, for example.  So for a washer / dryer purchase, looking at the customer in question, Recency answers the question, “how likely is this person to purchase relative to another customer”.  It’s a scoring system, a ranking of likelihoods to (in this case) buy, or visit, or download, or whatever.

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Free / Pay Web Site Optimization

Analytical Culture, Customer Experience, DataBase Marketing, Digital Analytics, Driller Q & A, Lab Store, Marketing thru Operations, Measuring Engagement,

Jim answers questions from fellow Drillers

Topic Overview

Hi again folks, Jim Novo here.

How do we make money on a content site? Free? Pay? Some combination of both? There’s been a lot of guessing and testing by the big media guys on how to work this, but how do the the small segments / little guys make this work, what can be measured to help? What about newer platforms like Substack, how do you measure optimization? On with the Drillin’ …

Jim’s Note: If you don’t know what Recency and Frequency are they are explained here, and RFM is covered here.  “Intensity” is Views per Session, in this case a “proxy” for visitor value.

Q: Hi Jim,

Should we use:

RFI – Recency, Frequency, Intensity
RFM – Recency, Frequency, and Monetary
or
RF – Recency, Frequency

to measure visitor value, and what should these terms ideally mean?  Total Sessions, Total page views, etc.  Also, when you measure Frequency, do you only include the Frequency during a specific period of time (i.e. one month, or one week), or do you include total lifetime activity per user?

A: On the advertising side of the business, I think the page views/session stat is probably the best to use.  The reality of the ad-based business is it doesn’t matter if they come back, you are selling impressions, not people.  I don’t think you have to overcomplicate it with formulas like RF or RFM, because you are primarily dealing with audiences, not individuals.  RF and RFM are about predicting if individuals will come back.

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When Do Former Best Customers Become a Lost Cause?

Analytical Culture, Analytics Education, DataBase Marketing, Driller Q & A, Lab Store, Marketing thru Operations, Measuring Engagement

Jim answers questions from fellow Drillers

Topic Overview

Hi again folks, Jim Novo here.

This time, a Real World question from a practitioner who wants to prove to management they have to spend less to make more money. Spend less to make more? How could that be, and what kind of person would want to go down this road? A real world Driller, of course …

Q: I’m a “long time listener, first time caller,” and a big fan of your site and your approach to data-driven marketing.  I also have two copies of your book – one was not enough.

A: Well, thanks for your kind words. I love the talk radio reference, that is so funny.  Never though about it like that, but makes perfect sense!  Glad to know I’m actually helping people with the book too.

Q: I have a question relating to some work I am doing now with our best customers that other users of your site may have.

I work for a medium sized DTC company selling skincare products (high margin) via space ads, direct mail, and online. Our best customer “Gold Club” has about 8000 members at the moment, although members are being promoted and demoted all the time.  

According to my initial analysis, if a member does not purchase a product for more than 60 days, the chances are that they are defecting. I would like to attempt to bring them back with an offer, and leave those that don’t reply for at least 6 months for a deeply discounted “kickstart” offer (although the logistics of sending out very small mailings are a pain.) 

A: This is a common and logical approach, particularly for “renewable products.”  You don’t say what the product is, but if it is “typical” skincare product, it has a sales cycle very tightly tied to product use.  In this case, Latency usually makes more sense to use than Recency as the primary trigger for a campaign.

Continue reading When Do Former Best Customers Become a Lost Cause? →