How Do-It-Yourself Customer Modeling / High ROI Marketing is Done

(Site Map)

This site and the book “start simple” and work towards more complexity.  As you scroll down this page, the topics get more complex.  You can teach yourself easy to implement yet powerful customer profiling and predictive models, step by step, using the articles (and examples) listed here.  Visitors familiar with this topic and the Drilling Down site may want to take a look at the Advanced Article list towards the bottom of this page.

If you’re brand new to the study of Customer Behavior / Predictive Modeling…

Did you come here from a page you thought was interesting, but still want to know what’s in it for you?  A backgrounder on the Drilling Down method can be found here (the home page).  If you have your bearings, you should read one or more of the following articles as an introduction to behavioral modeling:

For a very “nuts and bolts” overview of customer modeling and topics on this site, see What Can I Do with Behavioral Modeling?

Those coming from a retailing perspective should read Three Steps to High ROI Customer Marketing, which covers promotional models.

For those with an analytical CRM orientation, see CRM and the Customer LifeCycle.

You might also look over past issues of the Monthly Newsletter, a no-nonsense “here’s how you do it” response to e-mail I get from customers and visitors to the site.  Or get the first 9 Chapters of the book free on the downloads page.

Customer Marketing Models

If you’ve got the general idea and you want to see some modeling in action…

This is the simplest of all the predictive models for tracking future or potential customer value.  It uses Frequency to assess value and Recency to determine the likelihood of this value actually making it to your bottom line:

Measuring Customer Loyalty 
(Recent Repeater model)

A slightly more complex version of this model for tracking the ROI of CRM can be found here:
ROI for B2C CRM Implementations

If you are ready for some more advanced (but still quite simple to understand and  implement) Predictive Modeling…

Here is another very simple behavior model, which is effective and very easy to implement.  The foundation is measuring Latency – the time between two customer events, like between first purchase and second purchase, or between installation and first trouble call.  This type of model can be more effective that the previous two in service businesses, those that have a regular billing cycle, and those selling durable goods or with long sales cycles.  This article is set up as a tutorial with an example of how to use Latency to drive High ROI Customer Marketing campaigns in addition to predicting potential customer value:

Making Money with the Customer LifeCycle: Trip Wire Marketing

When you are ready to see how a slightly more complex model translates into a “real world” situation (and you have a few minutes), I put together a tutorial outlining a simple model for comparing the potential value of customers generated by different ads, products, and areas of a site.  The core idea: looking at acquisition cost is half the story. During the tutorial, you will see how “bad” customers can turn into “good” ones, how you can track this effect, and why you don’t need to calculate LifeTime Value to do it.

You can use this model to maximize the long-term ROI of marketing campaigns.  It also demonstrates how High ROI Customer Marketing concepts like Customer LifeCycles and Lifetime Value are linked, and how ROI is calculated using these concepts.  If you have always wanted to know how all this database marketing stuff fits together, you finally get the chance right here!  This tutorial takes about 10 minutes and covers 5 pages:

Recency Predicts Future Value

The following are more complex models for special purposes and more detailed versions of articles in the tutorials; they may be of interest to visitors who want to “Drill Down” (couldn’t resist) more deeply into behavioral profiling.

Customer Response, Retention and Valuation Concepts (RFM model)

Projecting ROI with Pre-CRM Testing

Recency- Optimizing Response and Discounts

Managing Customer Retention with E-Mail

Advanced Versions of Tutorial Articles

Customer Lifecycles

Calculating LifeTime Value (LTV)

Calculating Return on Investment (ROI)

If you’ve had some experience using 
Customer Behavior Modeling (or are the curious sort – you know who you are)…

This section is where I post all articles introducing new ideas to subscribers of the newsletter who “get” what I’m talking about, and addressing trends in the e-mail questions coming in from the site.  Note:  Some terms used in the articles below may be unfamiliar to you; they are usually linked to an article describing them.

Defection Rejection Series

Six Sigma Marketing

Recency: The Web Retailing Example

Case Study: Non-Profit Scores 192% Increase in ROI using RFM Model

Latency: The B2B Software Example

Latency: The Hair Salon Example 

RFM versus Predictive Modeling

Lifetime Value, I’d Like to Introduce You to the CFO

Extending the Customer LifeCycle

High ROI Latency Promotion

Making Money with the Customer LifeCycle: Latency Profiles

Customer Retention and Modeling in the High Ticket / Durable Goods Business

Behavioral and LifeCycle Modeling in the Utility / Telecom / Insurance Business

Making Money with the Customer LifeCycle: Customer Latency

Making Money with the Customer LifeCycle: Trip Wire Marketing

Save Money Marketing to One-Time Buyers

Use Recency Metrics to Make More Money on Your Promotions

Micro versus Macro Analytical Approach to CRM

“Pre-CRM” Testing Techniques –  Determining Potential for Marketing ROI Before You Buy

How To Measure Future Customer Value and Manage it with High ROI E-mail

Tracking the Potential Profitability of B2C CRM Implementations

Measuring Customer Retention in Online Retailing

Real Campaign ROI Links to LTV (Lifetime Value)

Get the book at

Find Out Specifically What is in the Book

Learn Customer Marketing Concepts and Metrics (site article list)

Download the first 9 chapters of the Drilling Down book: PDF