October 25, 2020

Compound Interest

There's the geeky math behind lifetime value ... data-centric folks argue about the "best" way to measure long-term value, but those arguments are largely irrelevant. Measure what happens after you acquire a cohort of customers.

When you acquire a cohort of customers, the cohort pays you back. Their payments are a form of compound interest.

As you head into Christmas, make sure you know why business is up (if it is up, as it is for so many of you). There are several things that could be happening, and it is possible that all of the things are happening at the same time.

  1. You might be getting more new customers than expected because of COVID.
  2. You might be getting existing customers to spend more than expected because of COVID.
  3. You might be generating Compound Interest from COVID-newbies from Mar/Apr/May.
  4. You might have merchandise productivity independent of (1) (2) (3).
  5. You might have marketing strength independent of (1) (2) (3) (4).
Undoubtedly you've parsed these issues and know the answers. You know the Compound Interest generated by all of your COVID-newbies, and your CFO appreciates the gains being generated.

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