Category Archives: Web Analytics

Choosing Customer Retention Metrics for the Supplements Business

Analytical Culture, Customer Experience, DataBase Marketing, Digital Analytics, Digital Analytics, Marketing / Tech Interface, Marketing thru Operations, Measuring Engagement

Jim answers questions from fellow Drillers

Topic Overview

Hi again folks, Jim Novo here.

Today we’ve got a bit of confusion between RFM and Customer Lifecycles, but that’s a situation we’ve been dealing with for 30 years so not really an issue. Sure, it can be confusing. Reality is, these two ideas are related in some ways but not remotely the same in other ways. Plus, each is very good at accomplishing the job it was designed to do – as long as the user understands the problem to be solved and the specific purpose / output of each approach.

So, you want to understand these ideas better? OK, get ready for the Drillin’ …

Today’s question is from a fellow Driller who understands customer retention really well but just can’t decide on the best metrics to measure retention in the supplements business. Should he use Customer Retention Rate? Customer Churn Rate? Hurdle Rate? Ahh, to make the right choice here the gory details will need to be visited – so let’s get to the Drillin’ !

Q: Hi Jim,

I am here choosing all the metrics I will use in the coming days to evaluate the health of my business and learn a little bit more about it. I will begin analyzing some basic metrics and then (just after being completely comfortable with the “basic metrics”) I will do some more sophisticated analyses like LTV and RF Grids. (Jim’s Note: RF Grids are advanced customer LifeCycle tracking tools described in my book).

Now I am trying to decide which is the best metric to measure my site’s ability to retain customers. There are three metrics that come to my mind. Customer Retention Rate, Customer Churn Rate and Hurdle Rate.

Customer Retention Rate would be the easiest to measure but the least precise. I could be doing a great job retaining customers but if I am attracting a lot of new customers this metric could give the wrong impression that we are doing more poorly than the last time we measured.

Customer Churn Rate is very easy to calculate when you have a “subscription model business.” If the customer cancels the contract it means a defection. But in my case there is no contract. We sell products. If the customer does not purchase in 30 days it doesn’t mean necessarily that he defected.

The Hurdle Rate based on Recency (45 days for purchase seems to be a good number for the products we sell- natural supplements, based in Brazil) seems to be the best metric I can choose to measure our ability to retain customers over time.

What metric do you think I should be using to measure our ability to retain customers?

A: I think you are one of the smartest IT guys on the subject of database marketing, that does not do database marketing for a living, I have ever met (?) ! Where did you learn this stuff? Did you read a book or something? ;)

Your analysis is absolutely correct on every point, and the approach is on target. If you start simple and work towards more complexity, you will learn more about your customers. And assuming most of your products are roughly a 30 day supply, 45 days is an excellent cut-off for a Hurdle Rate analysis. Simply track the percentage of customers who have made a purchase in the past 45 days over time, perhaps monthly to start. If the percentage is rising, you are getting better at retaining customers. If it is falling, you should be looking for reasons why this is so.

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ROI of Branding

Analytics Education, Customer Experience, DataBase Marketing, Digital Analytics, Measuring Engagement, Web Analytics, ,

Jim answers questions from fellow Drillers

Topic Overview

Hi again folks, Jim Novo here.

Today we’ve got a bit of confusion between RFM and Customer Lifecycles, but that’s a situation we’ve been dealing with for 30 years so not really an issue. Sure, it can be confusing. Reality is, these two ideas are related in some ways but not remotely the same in other ways. Plus, each is very good at accomplishing the job it was designed to do – as long as the user understands the problem to be solved and the specific purpose / output of each approach.

So, you want to understand these ideas better? OK, get ready for the Drillin’ …

Speaking of questions, you folks are starting to toss in some real zingers. We’ve moved on from the “How do I calculate Lifetime Value” type of stuff to some real mind benders, and this month’s featured question is a heck of an example. Speaking of questions, I always hide the identities of any organizations or people involved, so don’t be afraid to send them on in. Help yourself, and help others as well!

Branding is a much misunderstood topic and it’s beat to death in the forums and trades. I pretty much run in the other direction when it comes up, because I’m a numbers kind of guy and the branders out there never seem to have any numbers to back up their position. That said, there are ways to numerically quantify the value of branding….

____________________________________

Q. Jim, I send a monthly corporate custom-published magazine (content mix of product and broader lifestyle interests) via email to my house e-mail list – how do I measure ROI on what is a purely brand loyalty vehicle?

A: Thanks for sending in such an easy question – Geesh Louise, doesn’t anybody have easy ones any more? I assume you believe over the longer run, those receiving the magazine will either convert to customers, increase their level of business with you, or bring business to you through referrals.

If you have new business “source tracking” in place (where did the business come from?), it should be fairly easy to determine if the business came from someone who is receiving the magazine, or from someone not on the magazine list. Assuming you are also able to track where the non-magazine business comes from, you can look at expenses versus business generated and find out if the magazine is at least as efficient as other ways of generating business.

Hot links to product offers would be a perfect way to do this, and you can test varying offers by Recency to maximize the profit of different customer segments. Under this scenario, the magazine is not only branding, but selling merchandise. So you don’t have to worry about the “ROI of Branding,” the ROI comes from sales and you can easily quantify the ROI using merchandise profit versus the cost of the magazine.

Continue reading ROI of Branding →


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Marketing Funnel Not Dead, Using Funnel Model for Attribution Is

DataBase Marketing, Web Analytics

It’s become fashionable to declare the “Marketing Funnel Model” dead.

For example, here is a post worth reading on this topic by Rok Hrastnik.  There are some very good points in this post on why using a funnel to attribute media value is really a troubled idea.  I was flagged on this post because it has a quote from me that seems to support Rok’s thesis about the death of the funnel model and the related idea, “Direct Response Measurement is a Wet Dream”.   The quote is from a comment I made on a post by Avinash where we were discussing the value of sequential attribution models:

There are simply limits on what can be “proven” given various constraints, and that’s where experience and a certain amount of gut feel based on knowledge of customer kick in.  If you can’t measure it properly, just say so. So much damage has been done in this area by creating false confidence, especially around the value of sequential attribution models where people sit around and assign gut values to the steps.  Acting on faulty models is worse than having no information at all.

But none of this means the Funnel Model is dead, or that Direct Response Measurement overall is a Wet Dream.  What’s (hopefully) dead is  people using the funnel model inappropriately for tasks it was never designed for, in this case multi-step attribution of media value to goal achievement.  On the other hand, if this specific funnel use case is what Rok was coming after, I agree, because it didn’t make any sense to use a funnel model for this idea in the first place.

Let’s unpack these ideas

Funnel thinking is based on a relatively reliable model of human behavior, AIDA.  This model from human psychology does not specify tools, channels, or media.  It simply says that there is a path to purchase most humans follow.  That is:

A – Attention: (Awareness): attract the attention of the customer
I – Interest:  (Intent) promote advantages and benefits
D – Desire: convince customers the product will satisfy their needs
A – Action: lead customers towards taking action / purchace

Example:  I’m Aware of tons of products I would never buy.  There are lots of products I think are Interesting but I have no Desire for.  There’s a short list of products I Desire but have not Acted on.  The list of products in my head worthy of purchase consideration gets smaller and smaller at each stage of the AIDA model.  This is the funnel.

The AIDA funnel has not changed and it’s not dead.

It’s a model of human behavior, not media consumption.

Continue reading Marketing Funnel Not Dead, Using Funnel Model for Attribution Is →

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