customer metricsThe numbers of marketing and customer metrics that are floating around seem to sometimes inundate the marketing professional. In fact with competition at its highest, each consulting company tends to create a new metric (that is sometimes marketed as a black box) to impress potential clients. While there may be a large number of metrics, here are the top 7 metrics that we feel any business should track if they are interested in ensuring a good sustainable client base.

1. Customer Lifetime Revenue
Customer lifetime revenue is the total amount of revenue that a customer is likely to get in for the company. This metric was discussed in detail on our previous post.

2. Average Purchase Amount
The average purchase amount is the revenue that the business gets per purchase order. It is the revenue that the business gains per sale or per order. Knowing the average purchase amount for customers can help you segment them and service them accordingly. It can also be coupled with the conversion rate so that a business can forecast at the expected revenue for the next 3. year.

3. Purchase Frequency
Purchase frequency can be defined as the number of times that a customer makes a purchase in a given period of time. This is a metric that can be calculated for a week, a month, 6 months or a year depending on the specific category that is being studied. When you find that purchase frequency for certain subset of customers is lower, depending on the category that they are buying, can lead to strategic marketing initiatives for upsell/cross-sell.

4. Recency
This term refers to the amount of time that has lapsed since the last purchase. While there is a lot of emphasis on frequency of purchase and the number of times that a customer comes back, recency is the one metric that can actually help retailers to a large extent. When tracked, recency can help create targeted communication that is more effective due to the timeliness of the communication. While there are other aspects such as the content of the communication, offers, discounts and more that also impact customer behavior, the timing of the communication is paramount. Tracking campaigns across various companies has shown that when the first email is sent seconds after the customer signs up for an account, it is likely to have the highest open, click through and conversion rate as well.

5. Retention Rate
The customer retention rate is a metric that indicates the proportion of customers that have stayed with you for a while. The retention rate can be calculated annually, monthly or weekly. The periodicity depends on the purchase cycle and the frequency at which the purchases are generally made.

It is known that acquiring new customers 5 times costlier than retaining existing ones. This means that maintaining a high retention rate can save the company precious dollars every year. Working on the retention rate also ensures that there are less disgruntled customers leaving your company. This means that you will have a lesser amount of bad word of mouth.

6. Customer Engagement
Customer engagement is a step ahead of customer satisfaction. When a customer is engaged, he or she becomes a marketing manager for your product. The factors that need to be considered while computing customer engagement include product involvement, frequency of interaction, extent of referrals, purchase behavior, virility of information shared. There is no standard model for calculating customer engagement and most companies develop their own based on the category in question.

This metric can be used to target specific groups of customers in order to increase their involvement with the company. It can also be used to measure the effectiveness of various campaigns that have been targeted at increasing retention and customer engagement. Web based strategies to increase customer engagement can be created to target individual customers.

7. Share of Wallet
Share of wallet can be defined as a metric that tells you the proportion of dollars that the customer is spending on your brand. The calculation can be done at various levels and you can define the share of wallet on the base of specific variants of a category, the entire category or even monthly expenditure if the category merits it. Calculating share of wallet is especially important for categories where the customer operates from a basket of preferences. The metric allows marketers to understand the average number of competitors that it is dealing with along with the overall position that the brand has.

There you have it, our set of the top 7 customer metrics that every online retailer should track. What other metrics do you consider important?

Jose and I have been separated since we got back from Dallas at the beginning of December. Today was our first day at our new office (which is in the same building as our old office). We were talking product road map, go-to-market strategy, and our current clients; you know typical stuff, until he made me aware of an amazing feature set in Mineful.

How can that happen? How can the CEO of a company not know that we have implemented a very important and beneficial feature? I’ll tell you how.

We are working with a mobile app that directly sells a service. To work with us, we’ve had to add a few things (mainly on the API) so that they could use Mineful. They have a customer retention problem, but also need better ways to push customers down the sales funnel and they want to be smart about it.

Lifecycle email marketing is the solution they picked and Mineful is making it happen. Lifecycle email marketing simply sends different emails depending on the state of the account (or the stage/relationship the customer has with your app/business). With Mineful, they also add an unparalleled level of analytics that online retailers are using today.

Why is this such a big deal?
Because what I’m about to unleash here has so many possibilities that I probably don’t know half of them. In general, like someone said to me on the phone today “you guys have a drip marketing thing going on with some analytics in the back end right?”. Sure, good description, but this “drip marketing thing” just got a new audience: app developers. So app developers, software companies, social sites, and gaming sites, I invite you to contact us and beta test this new technology. It is also big for us because we will be our own client and start to eat our own dog food, yummy!

Every company has different events of customer interaction. For a mobile app they could be: sign up, confirm email, test run the application, do more things in the app, purchase, purchase some more, provide feedback, etc. You have to treat customers differently depending on the stage that they’re at. For example, you could use this to:

  • - send them a welcome email after sign up
  • - tell them to share something after x number of pictures have been uploaded
  • - send a teaser after x days of inactivity
  • - send a stronger offer after 2x days of inactivity
  • - after a purchase, send a short survey
  • - reward customer after a certain number of purchases or total $ spent

The possibilities are endless.

Actually, this article written by Paul Stamatiou founder of Picplum explains it much better than I can. At Mineful we’ve also added a few more analytics to these rules like predictions of churn so you can take action before it is too late. We also help you A/B test the hell out of every email that is sent at every stage in the customer lifecycle.

What about online retailers?
This is very useful as well because you can send other events that can trigger messages. Now we use your shopping cart data which includes customer and purchase information. With this addition, you can add any other type of data and mix it up with the shopping cart. For example, certain number of logins without purchase, product review onsite, service issues by a customer with more than 20 purchases, and more.

The real lesson learned here is that when you surround yourself with smart people like Jose, amazing things like this happen. Oh and don’t make a video tutorial because it is going to be outdated very quickly.

What Sears needs to do to compete

sears logo An iconic brand in the retail arena, Sears has been observing a drop in retail sales in a large number of stores that it has. Towards the end of year 2011, it announced the closing of 120 locations that saw a drop in sales by 5.2% in the 8 weeks ending on Dec 25th. This is after closing 171 stores in the US since 2005 when Sears and Kmart merged. The retail chain has been seeing 18 quarters of reducing sales.

Sears obviously needs to take a hard look at their retail strategy and make some pertinent and hard changes. According to this article, the belief is that the new retail strategy needs to marry in store tactics with the latest technology to be able to get the maximum benefit. If the new management that took over when Kmart and Sears were merged feels that they have been providing good service, then one only has to look at a video taken by a retail blogger. The mystery customer went to various departments trying out products without meeting any store personnel. He passed various employees that did not even acknowledge the customers presence, let alone greet him. There were hardly any customers present in the store as well. It therefore did not come as a surprise that all products were marked at 50 to 60 percent discount.

Store Maintenance
Retail marketing experts state that a retail outlet needs to spend at least $8 per square foot per year to ensure adequate maintenance of the floor. It is estimated that in comparison Sears spends about $1.9 per square foot per year. There is obviously no doubt that with this kind of spend, the Sear stores are likely to lack luster and even cleanliness. It has been noted that many of the Sears stores are dingy and dark. Increasing store spend to the recommended amount and ensuring aspects such as proper LED lighting, point of purchase displays, can help customers feel better about the shopping experience. Go to Sears in Plaza las Americas in Puerto Rico, now that is a nice store!

Innovative Sales Staff
Sears staff is in no sight and when you find one, they’re not really helpful. The need therefore is to first bring back the basics in and then build on them to create sales staff that is engaging. Sales personnel to greet everyone who enters the store, trained sales people who take interest in customers by assessing their needs and customer service as a priority for sales people are essential. Instead of asking “How may I help you?” how about saying “Now that’s a lawnmower that will have your neighbors talking”.

Mobile, social, one step ahead
Retail brands are leaving no stone unturned to connect with their shopper using wireless connectivity, smart phones and social media too. Getting mobile number details from loyalty program members and using them as an entry point for contests and sweepstakes can help integrate platforms. Social networking platforms such as Twitter and Facebook need to be used extensively. Local updates can also be posted using Google Places so that relevant news can be supplied to customers. Being afraid of what the customer will say on these social platforms is not going to help. Accepting feedback positively and managing the issue can help turn over a new leaf.

Product Research
Retail is all about having the right product, at the right place and the right time and at the right price. Sears CEO Mr. D’Ambrosio recognizes this which is why now sales staff and other employees will be carrying iPads to record many customer interactions and feedback given. They’ll also invest in online portals and make sure all feedback gets centralized and understood in order to make better decisions regarding product selection.

Business Intelligence
In retail when there are numerous categories, thousands of brands and millions of sku’s, there is a huge need to use business intelligence software to understand the manner in which the customer is swinging. BI products can look at trends in sales across various regions, stores, customer demographic profiles, seasons and external information related to the category and arrive at how the market will move. With Mineful for example, they can analyze large amounts of customer data and offset emails and triggers to make sure to interact with customers with the right offering and at the right time.

Using these in store and technology innovations can help Sears get back on track. The decline has continued for too long and unless it pulls up its sleeves to get the house in order, it may never recover.

Top 5 Changes in e-Commerce in 2011

The speed at which technology and eCommerce are changing makes it hard to keep track. But if you have to stay with the times, change we must. The Coremetrics retail data from IBM tells us that online sales were up 16.4 percent on Christmas day this year. Some of the most significant changes that 2011 has seen in eCommerce are:

1. mCommerce
Mobile commerce has been around for a while. But mobile commerce seems to have exploded in 2011. During the Thanksgiving holidays, the proportion of online sessions that were initiated from a mobile device was 18.3 percent of the total online sessions. This is an increase of 117.8 percent. Out of these sessions that started via mobile devices, 14.4 percent completed the sale. Some of the mobile commerce statistics are astounding:

  • a. On Cyber Monday about 10.3 percent people accessed a retailer site via a mobile device.
  • b. The use of mobile devices to find a store is as high as 65 percent.
  • c. Accenture has released a report that estimates that 79 percent of smartphone users downloaded mobile coupons as they walk to the store.
  • d. Mobile retail apps have been downloaded by 43 percent of those who use mobile devices for shopping.
  • e. Lightspeed Research states that 56 percent people believe that a mobile can enhance a shopping experience.
  • f. More than 13 million people access retail content on their phone and more than 8 million of these visit mobile commerce sites.
  • g. Juniper Research has estimated that the mobile commerce market will reach $12 billion by 2014.

2. Social commerce
A large number of marketers have realized the importance of being on social platforms. Among the various things that social networks are used for, seeking opinions about a future purchase from friends is common. There is active discussion on statuses posted to find out if anyone has had any experience with a specific product before making a purchase. Social networks therefore have become a standard feature of the buying process. These may be used to get suggestion for review, to get feedback, to find places to buy or any other information that one of your many friends may have. More than half the people say that they are more likely to make a brand purchase that was recommended by a friend.

One in thirteen people on Earth are on Facebook and when someone likes a brand Facebook page, they get access to brand updates. More than half the people who like a brand page say that they are more likely to recommend the brand to a friend. More than a quarter of fans read news and updates related to brands and 34 percent interact with their brands on Facebook too. Luxury brands like Burberry, Ralph Lauren and more are also making an appearance on social platforms.

Starbucks used the social platform to launch a new line of luxury coffee and create talkability about the brand. Uniqlo actually brought social networking on to their site by asking consumers which feature they would want on the site rather than putting up a standard ‘Under Construction’ message.

Many more innovative options are being discovered by brand marketers. One great idea is to create a mobile application allows people to write reviews about the product that they have just experienced, earning points or rewards in the bargain.

3. Retailer sale policy
The number of US retailers offering free shipping has been increasing. It is estimated that 9 out of 10 retailers were offering free shipping during the holiday season. Around Thanksgiving, 64 percent of the online orders had free shipping in 2011 in comparison to the 55 percent last year, However, this ‘perk’ has become hygiene as people tend to drop out when they realize that free shipping is not part of the deal during check out. The bonus now seems to be ‘free shipping on returns’ as well.

‘Returns at no cost’ is another trend that seems to have caught on. One of the most significant reasons for not purchasing items such as shoes and dresses online was apprehension with regards to size. This has been overcome by busy professionals ordering for 2 sizes and then retaining the size that fits best.

4. Increasing importance of video
Another trend is the use of video in order to entice customers or to deliver product information. This is a trend that is also being aided by mobile shopping since watching a video is far easier than reading content or product descriptions in small print. According to Internet Retailer those who watched a video on the product pages of Stacks and Stacks were 144 percent more likely to add the product to the shopping cart. This trend was apparent in 2010 too when Internet Retailer reported that the chances of a buy were higher by 85 percent when visitors watched a video. Zappos, an online retail company that uses product videos for some products on its site saw a 6 to 30 percent increase for the products that had a video. The computer company Dell feels that service calls were reduced by 5 percent due to video. The same drop was 14 percent for Virgin mobile. Another website saw a 44 percent increase in online conversions.

5. Email marketing
For many years email marketing has now been blamed as one of the least efficient of online marketing tactics. The reasons have been spamming and relegation to the trash folder. However, email marketing has made an appearance again in the new avatar. It is not only about lead generation but about the manner in which you use the lead. Responsys Inc states that email marketing was up 16 percent in 2011 as compared to 2010. However, the fact still remains that for efficiency, the email messages have to be designed well and need to be relevant for the target audience.

Presenting the New Mineful

If there is one thing I love, it’s getting inside a brand new car. The scent, the lights, the gadgets, and of course turning the engine on for the first time. It’s exhilarating!

analytical engine

With our newly release, I hope that it will bring you just as much delight as taking the new car for a spin. I’m very excited to welcome you to the new Mineful. Go ahead, turn it on. Let us know how it feels.

So, what’s new?

e-commerce data
More ways to connect your data
We’ve added the ability to upload data from two e-commerce platforms, Shopify and Yahoo. By leveraging the API these platforms provide, now you can start analyzing your store’s data in minutes. 70% of an analyst’s work is uploading and cleansing the data, we do it for you. For those online retailers not using Shopify or Yahoo, you can push data using our REST API.

Email Triggers
It’s automatic! Create rules to trigger different messages based on customer lifecycle and behavior. For example, send a survey 7 days after a purchase. Trigger an offer 30 days after an initial purchase, trigger a stronger offer if there hasn’t been a purchase in 90 days. Send a reward to clients who pass a certain threshold of total purchases. Combine them: send an email when one of your most important customers rates your service poorly or their likelihood of attrition is above a certain number. The possibilities are endless…

Lifetime Value Dashboard
Keep track of your customer metrics and see how they change over time. In real-time, track customer lifetime value, retention rates, average purchase, purchase frequency, number of customers saved, and overall satisfaction. If Mineful works, this dashboard will reflect it. You can also see email response metrics and compare templates to optimize your email offerings and content.

More Help
You’ll find a new redesign of our help pages focused on instantly helping you make the most out of Mineful. From start to end, you will find everything you need to put the foot on the pedal without having to log in.

Coming Soon…
This new edition of Mineful is just the foundation and there’s plenty to do. Next will come the important pieces that will make Mineful the most powerful analytical tool on the web.

Things to look for are more connectors like Volusion and Magento. More metrics in the lifetime value dashboard and the ability to segment those metrics by customer attribute.

We’ve now laid the groundwork to allow you to take action on your data — but this is only the beginning.

It’s going to be a wild ride, and we’re glad to have you with us.

Jaime Brugueras
CEO and Co-Founder

customer lifetimeCustomer lifetime revenue is the total amount of revenue that a customer is likely to get in for the company.

The computation of the customer lifetime revenue is relatively easy:

Customer lifetime revenue = average purchase amount x purchase frequency in a year x number of years customer is expected to stay

or in exponential form with a yearly discount rate

CLR = Total Revenue per client * (r/(1+d))

where r is the retention rate and d is the discount rate.

It is also important to keep in mind that if your product has serviced the customer well, there is a likely chance that the estimated volume of purchase per cycle and therefore the estimated average amount per purchase occasion increases over time. However, this is something that also depends on the category in question. The number of sanitary pads that a woman purchases in a month is not likely to increase just because she is satisfied with the product. However, the share of wallet on some multi brand categories is likely to increase over time with higher levels of customer satisfaction.

Customer Lifetime Value
Simply put, customer lifetime value of a customer can be defined as the value of the customer to the business. This pertains to the total value that the customer can bring to your business across a specific period of time. Factors that need to be taken into account to calculate the lifetime value of a customer include the amount of money being spent on the customer for acquisition and retention. In addition to that there is also the aspect of the referral value of a satisfied customer in terms of good word of mouth. The lifetime value of a customer therefore needs to be a summation of the profit that she or she is likely to bring to the business and the referral value too.

Computing the lifetime value of customer is not easy. It needs to take various aspects into consideration.
Estimated customer lifetime value – (Customer lifetime revenue – customer lifetime cost) + expected number of referrals x expected value of the referred customers)

Some businesses however do not like to add in the referral value of a customer in the overall computation since it can bring in duplication over a period of time. Therefore the calculation is limited to:

Estimated customer lifetime value – Customer lifetime revenue – customer lifetime cost

The customer lifetime cost can be calculated by looking at the profit per sale and the number of times purchase has been made.
Knowing the customer lifetime value helps in assessing the amount of money that you should be spending on certain segments of customers in order to retain them. It helps in ensuring that the return on investment of specific customers is high and in accordance with the kind of returns that the company is looking at.

A company can use the values of lifetime value by categorizing people into various groups based on the level of lifetime value – high medium and low. These people can be profiled based on their categorizations and once you know the specific types of people in each group, the company shall be in a better position to spend the marketing budget in the right direction. This data can also be used to plan invites to high profile events and loyalty programs.

Customer Lifetime Value or CLV is one of the best ways in which the objectives of the company can be defined for the year. Defining the company objective based on CLV can help in ensuring that the future of the company is also being taken into account and that the marketing strategies being developed are not merely short term and tactical.

Efforts of the sales force can also be defined in keeping with the customer lifetime value so that you can be sure that you are keeping the high value customers happy and content.

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