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