Category Archives: Marketing thru Operations

LTV Not Just About Sales & Marketing Data: Check Service Problem Outcomes

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.

Often we spend a lot of time talking about analyzing “customer data”, and the implication is we are looking at marketing or sales related information. That may be true for companies just beginning to use customer data; this data often is the easiest to understand and access. But true data-driven organizations have analysts who reach across the silos for data, looking for customer service or operational customer data that can impact the current and potential value of the customer. We have one such example from a Driller today.

Sound good? Then let’s do some Drillin’!


Q:  I work as a management consultant, currently working in a project where my client (Oil & Gas company) is trying to calculate and implement Lifetime Value into one of their businesses.  One of their business units (Industrial Lubricants) sells different kinds of lubricants and services to corporate customers such as Ford, Toyota, BMW, etc.  They have already done some customer profitability analysis and they are currently trying to calculate Lifetime Value.

A:  That’s a pretty interesting place to find a concern for analyzing LTV…

Q:  My questions:

1. What’s the best way to forecast future cash flows in a B2B scenario where models such as RFM are not relevant (Recency and Frequency do not really apply given that their customers have been with them for ages and are often in long-term contracts).  How can I project customer profit over time and how can I estimate the “lifetime” of individual customers?

A:  Well, it’s not that Recency and Frequency don’t apply, they probably apply in a different way.  In most businesses driven by contracts, service is the issue.  So you need to look for Recency and Frequency of “problems”, whatever that might mean in the industry.  I imagine “logistics” is an issue for these businesses – on time delivery, quality, “ease of use” (which could cover many factory / service issues), packaging, and so forth. This can take a lot of research, particularly if there are no “systems” capturing this kind of data. But usually, even in very old line companies, there is some place where this data resides. You just have to find it and get access to it.

Often in an environment like this it is easier to work backwards – first, identify defectors, then look for service issues or changes in behavior that imply service issues – declining order size / Frequency, expanding order Latency (weeks between orders) and so forth.

Continue reading LTV Not Just About Sales & Marketing Data: Check Service Problem Outcomes

Creating Effective Retention Campaigns

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.

Have you ever offered a $100 off coupon to a new retail customer? I have. And guess what? There was no response, even though the average order size across all customers was $38!

So how is this kind of situation possible? Some products attract customers that are only interested in that product, and they are not going to buy again – period. Knowing this, the question for you: is this the kind of product you want to constantly feature / promote?

Guess that depends on the Drillin’, eh? Let’s get to it …


Creating Effective Retention Campaigns

Q:  Hi Jim,

Love your newsletters.  Do you have a tip jar I can use to donate to the cause?

A:  Hmmm…maybe I ought to start one…nah.  It all works out in the end!

Q:  Take a look at this chart I did of cumulative customer purchase Recency (actual numbers changed but the relationships are same): See below for explanation **

** Jim’s Note: How to read the chart:

“In the past 3 months, (“3” on horizontal axis), 30% of our customers have made a purchase (“30%” on vertical axis).  In the past 7 months, almost 40% of our customers have made a purchase.  Because the last category is “last purchase 36 months ago or longer”, the chart includes all customers – 100%.  

Since each customer can have only 1 “most Recent” purchase, each customer is on the chart only once.  Therefore, if 40% of customers have made a purchase in the past 7 months, 60% have not made a purchase.

Q:  What does this pattern (the % of total by group) tell one generally about the attrition in the business model?  It’s interesting, I’ve never looked at this kind of diagram before.  For our business (wine retailer with “club” option), I generally consider anyone with a transaction in the past 12 months to still be a customer.

Continue reading Creating Effective Retention Campaigns

Customer Retention in a High Churn Business Model

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.

Yea, sometimes customer retention is a very tough gig; some businesses are simply not likely to encourage repeat purchase. But you can still try, right? Or perhaps focus your efforts on where the real power to affect customer value is for this type of business – acquisition and onboarding.

Let’s Drill Down …


Q:  I bought your book a few months ago and I thought it was great.

A:  Thanks for your support and kind words!

Q:  I did what I could using your book, but my mind is going in circles and I need help. Unfortunately I can’t pay big bucks and am hoping that the “case” will be of enough interest to allow you to help me out at less than you could charge to bigger companies.

A:  Perhaps! For example, I am always open to interesting projects if I can use them to publish a case study (names changed to protect the innocent)… most large companies do not want customer retention data revealed and it is tough to get case studies out there…

Q:  What I do: My company sells prepaid calling cards on the web.  I have been working at the company for 2 years and 4 months now.  Consumers purchase the service to place international calls at reduced rates from their landlines and cell phones.  They have no obligation to re-purchase.  They can buy any increment between $10 to $100 at a time. They can recharge their accounts at any time.

A:  Yes…

Q:  What I’ve found so far:

They seem fall into two main groups ­ those that buy only once, and those that buy more than once, but then each of these sub-groups has lots of sub-segments and it is confusing.  Some last a week, others last 2.4 years.

A:  This is typical…

Q:  My goals: 

Continue reading Customer Retention in a High Churn Business Model