Category Archives: Digital 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’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.

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.

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