February 03, 2021

Is It Worth It To Do Something?

Oh yes, it is worth it!

Here's our dataset from yesterday.


Let's pretend that you let the customer lapse to a recency of three months. Look at the table. What is the probability of the customer purchasing in the next year?

It's 16.9%.

Now, look down the "Freq = 2" column. If you convert the customer to a second purchase, what is the probability of the customer purchasing again in the next year?

It's 43.0%.

Does that look like a fair trade / upgrade?

Maybe!

We need to do some math, don't we?

Ok, let's pretend that you decide to become promotional. You decide to give these customers 30% off. For a month, you get a 50% increase in response. That's a big deal. But you have to give 30% away to make the magic happen.

Tomorrow, we'll see if the magic pays off.

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