April 17, 2013

Weighting

I can't stress the importance of weighting transactions.  So many of the tactical mistakes we make come down to over-estimating the importance of prior customer activity.

Example:  Customer spent $100 via phone 5 years ago, spent $100 online thirty months ago, and spent $100 via a tablet today.

  • Best Practice Thinking:  This is an "omnichannel" customer, one that does everything, one that should be marketed to via old-school and modern techniques.
The reality is that the transaction from 5 years ago has almost no meaning.  In many of my projects, there's a natural progression, one that goes something like this:
  • 0-12 Months Ago --- Weight = 100%.
  • 13-24 Months Ago --- Weight = 50%.
  • 25-36 Months Ago --- Weight = 25%.
  • 37-48 Months Ago --- Weight = 15%.
  • 49+ Months Ago --- Weight = 10%.
Using this version of reality:
  • Tablet Transactions = $100 * 1.00 = $100.
  • Online Transaction = $100 * 0.25 = $25.
  • Phone Transaction = $100 * 0.10 = $10.
From a weighted perspective, this customer is 74% tablet-focused.  Your marketing strategy for a customer 74% tablet focused is very different than your marketing strategy for a customer that is 33% tablet focused.

Thoughts?