September 19, 2019

How Does A Shifting Customer File Impact The Future?

For the company we're studying, here we see what customers spent, on average, by price band over the past five years.

Notice that customers are leaking out of lower price point bands as the company expands volume among items >= $20.

On average, customers are spending at least $3 less this year than last year, and nearly $6 less than four years prior.

Does this mix impact future value? We can take our equations from yesterday and find out.

Using the 2019 equation, we score 2019 customers and 2018 customers to measure the impact of file mix ... take the 2019 column in the first table and multiply it by the 2019 column in the second table, and add the constant.
  • 2019 Customers are worth $50.02 in 2020 based on 2019 file mix.
  • The file mix for 2018 customers yielded $52.28 in 2020 value.
In other words, the current file mix delivers 4% less value next year. This brand shifted customers out of lower price point bands, and the activity is causing the file to be 4% weaker than it would have otherwise been.

You'd probably want to know this if you were planning what 2020 will look like, right?

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