March 27, 2017

File Power

Dig deep into Google Analytics, and you'll find very little about the important concept known as "File Power".

What is "File Power"?

File Power is the amount of future profit to be generated in the next twelve months from customers who purchased within the past twelve months.

Now, there's no right/wrong way to measure File Power. But there are key tenants that one should follow.
  1. Model the probability of a customer purchasing again in the future.
  2. Model how much a customer is likely to spend if the customer purchases again in the future.
  3. Model gross margin generated by future transactions.
  4. Model future ad cost and operational expenses.
In many ways, "File Power" is lifetime value extended to the entire twelve-month buyer file. Lifetime Value is used for advertising/targeting purposes ... File Power is used to communicate to Management whether existing strategies are leading to future success.

Let the topic sink in today ... we'll pick the subject back up tomorrow, ok?