July 11, 2022

File Power

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.

  1. Number of Customers.
  2. 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.
  1. File Power of Scenario #1 = 1 * $200 = $200.
  2. 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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