This is done by evaluating probabilities. Let's keep things simple, looking at just the twelve month file.
Say we have 100,000 customers who purchased during 2007. In 2008, 50% of these customers purchased again, spending $300 each.
- Sales = 100,000 * 0.50 * $300 = $15,000,000.
Often, 70% of the benefit of a program is in the retention rate ... while 30% is in spend per repurchaser. Your mileage may vary, but this is sort of an average that you can use to track performance.
Here's what you can expect.
- Sales = 100,000 * (0.50 * 1.07) * ($300 * 1.03) = $165.
The impact of the 3,500 customers are multiplied out over the course of five years, yielding a "truer" level of impact on the business.
As an example, download this three-channel spreadsheet, a spreadsheet I generate for the majority of my Multichannel Forensics clients. You'll get to see the long-term impact of short-term changes in strategy.