## July 20, 2020

### How Do I Compute A Comp Segment Metric?

This topic keeps coming up. In the next post I'll address criticisms of the methodology.

Here's how we calculate Comp Segment performance.
Identify all customers who bought exactly two (2) times between 6/1/2019 and 5/31/2020.
1. Within this audience and only this audience, calculate the average amount spent between 6/1/2020 and 6/30/2020. If you had ten customers and their spend was 0 / 0 / 100 / 0 / 0 / 0 / 0 / 0 / 0 / 0, then the average would be \$10.00.
2. Identify all customers who bought exactly two (2) times between 6/1/2018 and 5/31/2019.
3. Within this audience and only this audience, calculate the average amount spent between 6/1/2019 and 6/30/2019. If you had ten customers and their spend was 0 / 0 / 110 / 0 / 0 / 0 / 0 / 0 / 0 / 0, then the average would be \$11.00.
4. Calculation:  (Step 2 / Step 4) - 1. In our example, that would be (10 / 11) - 1 = -9%.
5. Repeat Steps 1/2/3/4/5 for at least 2-3 years.
Across a career spanning more than thirty years, this metric aligns most closely with "why" a business is succeeding/failing than anything else I've run across.

I'll run this metric in total, for new merchandise, for existing merchandise, for items selling above their historical average price, and for items selling below their historical average price. The metric allows me to identify "when" a business began to struggle, it tells me if new/existing items are causing the problem, it tells me if discounting is a problem, and it tells me how/when to drill down into the data for more details.

The definition of exactly two (2) purchases in the past year allows me to get as close as I can get to determining the impact of the merchandise being sold on company performance.

I also create a "Comp New/Reactivated Customer" metric.
1. Identify all customers who bought between 6/1/2020 and 6/30/2020.
2. Subtract all customers who bought the year prior to 6/1/2020 and 6/30/2020.
3. Identify all customers who bought between 6/1/2019 and 6/30/2019.
4. Subtract all customers who bought the year prior to 6/1/2019 and 6/30/2019.
5. Calculation:  (Step 2 / Step 4) - 1.
This metric allows me to see when new + reactivated customer strategies changed. This is the second-biggest issue I find across my client base.
• Comp Segment allows me to see what the merchandising/product people are doing.
• Comp New/Reactivated allows me to see what the marketing people are doing.
Within a short period of time, I have the metrics needed to understand why a business is not meeting expectations.