November 15, 2010

Hillstrom's 2011 Almanac ... Sample #1

Here's a sample tidbit/observation from the new book, available soon:

May 3

If you want to measure the incremental value that Facebook delivers to your business, give regression analysis a try.
Pull purchase data for all customers who placed at least one order in the past twelve months ending March 31.  Here are the variables.
  • Recency, Months Since Last Purchase.
  • Number of Orders, Past 12 Months.
  • Number of Orders, 13+ Months Ago.
  • Number of Channels Purchased From.
  • Number of Merchandise Divisions Purchased From.
  • 1 if Customer is a Facebook Fan, 0 Otherwise.
Pull demand spent by customers in this audience during April.  Run a Regression Analysis.
  • April Demand is the Dependent Variable.
  • The Variables above are Independent Variables.
Look at the coefficient for being a Facebook Fan.
  • If is isn't significant, then being a Fan results in no incremental value.
  • If the coefficient is negative, then being a Facebook fan hurt the business.
  • If the coefficient is positive, then multiply the value of the coefficient by the number of customers who are a Facebook Fan.  This multiplication yields the incremental dollar value provided by Facebook. 
    • Example:  Coefficient = $0.50.  Customers = 1,000.  Incremental Value = $0.50 * 1,000 = $500.