Using Latency to Improve Customer Retention
Using Latency to Improve Customer Retention
Latency is simply the average amount of time between customer transactions. You’ll typically find the Latency between the 1st and 2nd purchase to be different from the 2nd & 3rd purchase, the 3rd & 4th purchase and so on.
For example, if you own a retail business and find that the average time between the 1st and 2nd purchase for all your customers is 3 weeks, anyone taking longer than 3 weeks to make their 2nd purchase is deviating from the average customer behavior.
If you send a promotional communication to customers that have just crossed over this "2nd purchase latency" period, you have a very good chance of tipping these customers into making that all important 2nd purchase. This is a smart way of building a customer retention strategy.
Of course, not everyone will respond to a latency-based promo, but that's simply the nature of direct marketing. The smart thing about using latency is that it helps you deliver your message to the right customer at the right time.
Start Measuring Your Customer Latencies
So, what’s the best way to start promoting to your customers based on Latency?
To keep things simple, begin by calculating the average time between the 1st & 2nd purchase of all your customers together. The, calculate the Latency between the 2nd & 3rd purchase and so on. Here's an example of what a latency table might look like.
Transaction & Latencies
1st & 2nd purchase - 30 days
2nd & 3rd purchase - 20 days
3rd & 4th purchase - 15 days
4th & 5th purchase - 90 days
5th & 6th purchase - 150 days
The first thing you may notice is that you have a lot of customers that purchase from you once and then never buy again. You may also find out that you don’t have a lot of customers that have purchased from you more than 3 times. That is good information to know as well. You certainly can't design an effective customer retention strategy if you don't know the latency characteristics of your customers.
Looking at the above table, we can say that any customer that passes the average number of days for a particular transaction, and does not make a purchase, is deviating from the average customer behavior. Sending them a promotion right after a particular latency period passes is smart marketing. It’s sending the right promotion to the right customer at the right time.
Latency Patterns
Another interesting thing you have noticed from the above latency table is that the latency decreased for each purchase up to the 4th purchase and then it drastically increased after that. If this is what my customer purchase latency table looked like, and assuming I had a lot of customers that only purchased once, I would have 3 questions to resolve.
1. Why does the latency take a drastic increase after the 4th purchase?
2. What can I do to reduce the latency between the 4th and 5th purchase?
3. How can I reduce the number of customers that just make a single purchase and then never come back?
Had I not created a latency table, I might have never even thought of the above questions. Now, having knowledge of my latency data, I might create a welcome package for new customers with an incentive to make a 2nd purchase.
I would also look at ways I might decrease the latency between the 4th and 5th purchase. Perhaps a larger incentive communicated at day 25 or 30.
Another advantage to using Latency data in your marketing program is that it will tell you the best time to communicate with your customers. Do you send the same marketing communication piece to all your customers regardless of where they are in the purchase cycle? Using Latency, you only promote to the customers that pass their Latency periods, allowing you to only spend when you need to.
I recommend you take a little time to monitor your customer purchase latencies. It's the smartest and most effective way to reduce your spending while increasing your profits and customer retention.
Using Latency to Improve Customer Retention - To learn more about this author, visit Corte Swearingen's Website.
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If you record the date of every customer transaction in your database, you can use the power of Latency to help improve your customer retention.
Latency is simply the average amount of time between customer transactions. You’ll typically find the Latency between the 1st and 2nd purchase to be different from the 2nd & 3rd purchase, the 3rd & 4th purchase and so on.
For example, if you own a retail business and find that the average time between the 1st and 2nd purchase for all your customers is 3 weeks, anyone taking longer than 3 weeks to make their 2nd purchase is deviating from the average customer behavior.
If you send a promotional communication to customers that have just crossed over this "2nd purchase latency" period, you have a very good chance of tipping these customers into making that all important 2nd purchase. This is a smart way of building a customer retention strategy.
Of course, not everyone will respond to a latency-based promo, but that's simply the nature of direct marketing. The smart thing about using latency is that it helps you deliver your message to the right customer at the right time.
Start Measuring Your Customer Latencies
So, what’s the best way to start promoting to your customers based on Latency?
To keep things simple, begin by calculating the average time between the 1st & 2nd purchase of all your customers together. The, calculate the Latency between the 2nd & 3rd purchase and so on. Here's an example of what a latency table might look like.
Transaction & Latencies
1st & 2nd purchase - 30 days
2nd & 3rd purchase - 20 days
3rd & 4th purchase - 15 days
4th & 5th purchase - 90 days
5th & 6th purchase - 150 days
The first thing you may notice is that you have a lot of customers that purchase from you once and then never buy again. You may also find out that you don’t have a lot of customers that have purchased from you more than 3 times. That is good information to know as well. You certainly can't design an effective customer retention strategy if you don't know the latency characteristics of your customers.
Looking at the above table, we can say that any customer that passes the average number of days for a particular transaction, and does not make a purchase, is deviating from the average customer behavior. Sending them a promotion right after a particular latency period passes is smart marketing. It’s sending the right promotion to the right customer at the right time.
Latency Patterns
Another interesting thing you have noticed from the above latency table is that the latency decreased for each purchase up to the 4th purchase and then it drastically increased after that. If this is what my customer purchase latency table looked like, and assuming I had a lot of customers that only purchased once, I would have 3 questions to resolve.
1. Why does the latency take a drastic increase after the 4th purchase?
2. What can I do to reduce the latency between the 4th and 5th purchase?
3. How can I reduce the number of customers that just make a single purchase and then never come back?
Had I not created a latency table, I might have never even thought of the above questions. Now, having knowledge of my latency data, I might create a welcome package for new customers with an incentive to make a 2nd purchase.
I would also look at ways I might decrease the latency between the 4th and 5th purchase. Perhaps a larger incentive communicated at day 25 or 30.
Another advantage to using Latency data in your marketing program is that it will tell you the best time to communicate with your customers. Do you send the same marketing communication piece to all your customers regardless of where they are in the purchase cycle? Using Latency, you only promote to the customers that pass their Latency periods, allowing you to only spend when you need to.
I recommend you take a little time to monitor your customer purchase latencies. It's the smartest and most effective way to reduce your spending while increasing your profits and customer retention.
Using Latency to Improve Customer Retention - To learn more about this author, visit Corte Swearingen's Website.
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George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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