Sometimes you think "people already know this stuff".
Sometimes you realize that Google Analytics give smart analysts almost no opportunity to ever even consider the concept. Thus, I need to write about it.
75% of my projects in the past three months have dealt with the concept of File Power.
File Power is a term used to represent the future potential of your customer file to generate sales and profit. There are two dimensions to File Power.
- Number of Customers.
- Quality of Customers.
In other words, you could have one customer who will spend $200 in the next year, or you could have two customers who will spend $100 each in the next year.
- File Power of Scenario #1 = 1 * $200 = $200.
- File Power of Scenario #2 = 2 * $100 = $200.
In each scenario, your File Power is $200. In the next year, you can expect your customer file to deliver $200 regardless of scenario.
In "the literature", almost all analytically-minded professionals focus on Scenario #1. They want customers with tremendous lifetime value. Marketers work hard to increase lifetime value.
Hint - you don't care about lifetime value. You care about File Power.
Of course, I'm exaggerating here. But the biggest thing we learned during the COVID-bump was that having a 50% increase in new customers caused A TON OF PROFIT to be generated. We learned that "Number of Customers" drives business success.
And here, in mid-2022, we're learning that we don't have enough customers (in many cases), causing profit to slump.
More on the topic in upcoming posts.
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