January 20, 2020

Late Stage File Power Issues

Companies in the "late stages" of brand life invariably try to squeeze more value out of a customer file via loyalty initiatives ... they try to increase File Power in an effort to keep the business moving in a positive manner.

Here's a business I evaluated. The business is in "late stage brand life" ... meaning it is struggling in a manner that might be terminal.

End of 2019:
  • 474,430 12-Month Buyers.
  • Per-Customer Calculated File Power = 94.85.
  • Total File Power = 474,430 * 94.85 = 44,999,575.
  • Annual Demand = $56,573,998.
End of 2018:
  • 507,575 12-Month Buyers.
  • Per-Customer Calculated File Power = 88.60.
  • Total File Power = 507,575 * 88.60 = 44,969,986.
  • Annual Demand = $58,205,734.
End of 2017:
  • 523,977 12-Month Buyers.
  • Per-Customer Calculated File Power = 84.32.
  • Total File Power = 523,977 * 84.32 = 44,183,464.
  • Annual Demand = $57,936,264.
The customers who continue to buy from this business have better File Power, don't they?
  • 2019 = 94.85 per customer.
  • 2018 = 88.60 per customer.
  • 2017 = 84.32 per customer.
And yet, top-line volume is not increasing.
  • 2019 = $56.6 million.
  • 2018 = $58.2 million.
  • 2017 = $57.9 million.
Meanwhile, the customer file is shrinking.
  • 2019 = 474,430 12-month buyers.
  • 2018 = 507,575 12-month buyers.
  • 2017 = 523,977 12-month buyers.
This is a classic "late stage brand life" File Power issue. The brand is essentially dying, and Management is responding by squeezing as much volume out of customers as is humanly possible.

Across my project work, clients are capable of improving File Power. But clients struggle with Customer Acquisition and Merchandise Productivity. The result is a stronger customer file that doesn't yield sales gains.

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