July 17, 2022

Three Levels of File Power

You obtain good outcomes via three different aspects of File Power.
  1. Number of Customers.
  2. Quality of Customers.
  3. Profitability of Customers.

In other words, you could have 1 customers spending $200 or 2 customers spending $100 ... either way you have the same general amount of File Power.

Then you have Profitability of Customers.

Customers aren't created equal. And marketers love to mess with customers. When you offer customers 40% off to purchase, you increase the Number of customers, you increase the Quality of customers, and you significantly impair the Profitability of customers. Marketers seldom measure Profitability, so they really don't care whether they've harmed profit or not as long as customers respond to promotions.

We, however, care about profitability.

My favorite story goes back to 1999 at Eddie Bauer. For six months, we didn't offer promotions to a randomly selected group of customers. At the end of six months, the non-promotional customer segment spent the exact same amount as the promotional customer segment.
  1. Number of Customers purchasing was equal.
  2. Quality of Customers purchasing was equal.
  3. Profitability of Customers in the promotional segment was much, much worse.

File Power matters.

Measure Number / Quality / Profitability. Then act accordingly.

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