## June 21, 2010

One easy way to understand this is to segment your customers by months since last purchase. Take all of your customers with at least one purchase as of May 1, and then measure repurchase activity during the month of May. Your table might look like this:

Recency = 1 Months, Repurchase Rate = 10.0%.
Recency = 2 Months, Repurchase Rate = 8.3%.
Recency = 3 Months, Repurchase Rate = 7.7%.
Recency = 4 Months, Repurchase Rate = 7.2%.
Recency = 5 Months, Repurchase Rate = 4.8%.
Recency = 6 Months, Repurchase Rate = 4.7%.
Recency = 7 Months, Repurchase Rate = 5.9%.
Recency = 8 Months, Repurchase Rate = 5.5%.
Recency = 9 Months, Repurchase Rate = 5.2%.
Recency = 10 Months, Repurchase Rate = 4.8%.
Recency = 11 Months, Repurchase Rate = 5.1%.
Recency = 12 Months, Repurchase Rate = 5.5%.
Recency = 13 Months, Repurchase Rate = 5.1%.
Recency = 14 Months, Repurchase Rate = 3.9%.
Recency = 15 Months, Repurchase Rate = 3.6%.
Recency = 16 Months, Repurchase Rate = 3.3%.

Look at the red rows, at months five and six. These are Holiday shoppers, and Holiday shoppers often do not repurchase at the same rates that do other customers. Here's a place to reduce marketing expense.

Look at the green rows, at months eleven through thirteen. These are Seasonal shoppers, they last purchased similar product about one year ago. These are customers that require increased marketing expense, because this is the time when you can "win back" the customer, as the vendor community likes to say. These customers are likely to buy comparable product one year later.

This is about as simple as segmentation gets, and yet, it's completely actionable and it makes intuitive sense.