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Mining the Treasure Trove of Retail Analytics

Written by Peter Devereaux | Nov 1, 2013 5:00:00 AM


(# of one-time customers) / (total # of customers) = Churn Rate

By identifying churned customers, or customers who are about to churn, merchants can take steps to win them back. For example, merchants can segment customer groups and email promotions to encourage purchases. Moreover, merchants who notice their churn rates increasing over time can take steps to improve customer loyalty for their digital businesses, whether it be through more personal marketing strategies or implementing more rewarding loyalty programs.

Loyalty X Factor

Perhaps the most intriguing data gem that can be derived from analytics is the Loyalty X Factor, a mathematic value that represents a specific metric or combination of metrics that correlate with, and influence, higher spending levels and lifetime value.

Essentially, the Loyalty X Factor identifies the degree of customer loyalty and what behaviors or channels influence that loyalty. Although there are many ways merchants can use analytics to compute customer loyalty, MarketLive's Burke believes that the most straightforward way to discover a customer's level of devotion is by quantifying their RFM pattern (recency, frequency, monetary):

(# purchases over past 12 months) X (total sales) /(months since last purchase) = Loyalty X Factor

To calculate a more robust Loyalty X Factor, Burke says merchants can weight additional events with RFM, such as the number of product categories purchased from, the number of items purchased in an order, or non-purchase metrics like page-views, cross-channel interactions, marketing and social activity. By weighting and scoring these types of events, merchants can build loyalty scores for their audiences that can help with marketing initiatives. For instance, a merchant could send a free shipping promotion to all customers within a certain score range in an effort to further influence conversions, increasing their lifetime value as a customer over time.

Digging the Data

Digging deep into data is the only way to maximize revenue and improve the performance of your digital store. All of these metrics tell a story about your digital enterprise, which is why merchants must know what data to look for and how to use it.