September 22, 2021

Wins Above Replacement

In baseball you have a team of 26 players (30 in September) who all contribute to varying degrees of success.

Maybe your team is on pace to win 99 games. A team of strictly "replacement players" (i.e. players who don't cost anything or are being called up from AAA) is expected to win maybe 52 games. Therefore your team generated 47 "Wins Above Replacement". Each player, based on their contribution (i.e. statistics) is mathematically assigned how many wins they contributed over the course of the season.

Just look at the WAR column for the Milwaukee Brewers (click here) for an example. Or in the unlikely event that the Brewers aren't your favorite team, click here to see the WAR column for the Boston Red Sox.

E-commerce isn't any different. You might have a half-million twelve-month buyers. And whereas WAR is a backward-looking metric in baseball, PAR (profit above replacement customer) can be viewed as a forward-looking metric.

PAR.

Profit Above a Replacement Customer.

When you are actively trying to embrace Customer Development, you want to know how much each customer is worth ... what is their Profit Above a Replacement Customer?

What is a Replacement Customer?

It's the point where you need to replace the customer with a new customer. It's the point where the customer is no longer responsive enough to generate sufficient profit to push your business forward.

More on this topic next week.

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