January 21, 2020

How File Power Changes at a Customer Level

Here is a simple "weighting" process from a recent project. The coefficients are created, they're smoothed and modeled, and the outcome is standardized.

Let's take a customer ... purchased via online nine months ago at an AOV of $100. Read across the Recency = 9 row, then read over to the "Adjusted Online Weight" value. That value is 0.375. That's the file power associated with a purchase in that channel nine months ago.

In other words, this customer possesses $100*0.375 = 37.5 points of File Power.

If the customer does not purchase, the customer slumps to Recency = 10. The Adjusted Weight changes to 0.357. The customer now possesses $100*0.357 = 35.7 points of File Power.

The customer is weaker now.

Let's say that the customer purchases via mobile the next month and spends $100. We now have two purchases, and each purchase possesses different file power weights.
  • Online Recency = 11 Months, weight = 0.341.
  • Mobile Recency = 1 Month, weight = 0.682.
Therefore, File Power changes ... $100*0.341 + $100*0.682 = 102.3 points of File Power.

Remember, File Power is predictive ... it tells us what the future potential of a customer is, and it tells us what the future potential of the business is.

Let's say that instead of the customer buying via mobile the customer buys via your call center. The weights are different, and correspondingly, File Power is different.

  • Online Recency = 11 Months, weight = 0.341.
  • Call Center Recency = 1 Month, weight = 1.000.
  • File Power = 100*0.341 + 100*1.000 = 134.1 points of File Power.
Do you see the difference?
  • Pushing the customer to mobile resulted in 102.3 points of File Power.
  • Pushing the customer to the call center resulted in 134.1 points of File Power.
This is the challenge that modern marketers face. In so many projects, you maximize File Power by pushing customers to established channels. File Power frequently suffers when customers are pushed into newer channels. 
  • Traditional Marketers see this and they dissuade new tactics.
  • Careless Marketers don't have the tools to observe this behavior, and they push too fast into newer tactics, harming customer-level File Power.
  • Smart Marketers balance both activities ... allowing customer to buy traditionally ... but then managing newer tactics appropriately. In this case, the Smart Marketer would try to generate 1.5 customers via newer tactics to offset the loss of File Power.

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