March 22, 2011

Forecast Forensics + Digital Profiles: Impact Of Loyalty

Let's say that, somehow, you find a magical formula that allows you to increase loyalty for just one year, by 10%.

What impact does that effort have?

Well, you get $1.9 million in demand in the year where the improvement happens.

But you also cause more customers to purchase, and those customers act like "compound interest".

In year two, demand is $0.8 million greater.

In year three, demand is $0.6 million greater.

In year four, demand is $0.3 million greater.

In year five, demand is $0.2 million greater.

So you get $1.9 million from a one year, 10% increase in loyalty ... and you get $1.9 million in years two through five ... compound interest!

Now, if you have some magic formula for improving customer loyalty, well, you'd already be implementing the strategy, right?  I mean, you wouldn't hold that in your pocket so that you could use it three years from now!!

But if you stumble across something, rest assured that you get the short-term benefit of the strategy, and you get a "compound interest" effect as well.

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