LoyaltyBuildersDataDictionaryofCalculatedMetricsonEachCustomerPredictiveCustomerIntelligenceforMoreEffectiveMarketing
DocumentVersion1.2©2015LoyaltyBuilders,Inc.Confidential.Allrightsreserved.www.loyaltybuilders.com
Simple,automated,cloud-basedpredictiveanalyticsservicesenablingmarketerstoeffectivelytargetcustomersbasedonloyalty,value,risk,orproductpropensity,anddeliverthespecific1:1productrecommendationstoeachcustomerthatwillliftrevenue.
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DataDictionaryofCalculatedMetricsPredictiveLoyaltyMetricsforEachCustomer:Metric Type Range Explanation ExampleUsesLoyaltySegment*
Text–7values
Loyalist,Nurturer,Underperformer,Fader,WinBack,1&2Buyer,Inactive
AsegmentationofanentirecustomerpopulationbasedoncustomerValueRankandRiskScore.Eachcustomerisassigned1of7designations.
Seedescriptionbelow.*LoyaltySegmentisacombinationofLoyaltyScoreandRiskScore.
LoyaltyScore
Numeric(0.0000)
0-100(eachcustomerforceranked)
Aproprietarymeasureofpotentiallifetimevalueofeachcustomerbasedontimingofpurchases,spendingtrends,itemspurchased,populationpatterns,andseveralotherfactors.
LoyaltyScoreisusedtotargetmarketingbasedoneachcustomer’srelativelong-termvaluewithinthecustomerbase.
RiskScore Numeric(0.00000)
0to1 Theprobabilitythatacustomerwillnotmakeapurchasebeforegoing“inactive.”Theactiveperiodisdeterminedbyanalysisofinter-orderfrequenciesamongallcustomers.
RiskScoreisusedtowin-backfadingcustomersortargetloyalcustomers.
LikelyBuyerScore
Numeric(0.00000)
0to1,foreachof10periods
Theprobabilitythatacustomerwillmakeapurchasewithineachof10timehorizons,whichareconfigurable(e.g.7,14,21,28,35,42,49,56,63,and90daysfromanalysis).
Providesguidanceonhowmucheffort,cost,ormargintoinvestinacustomer.Example:ifacustomerhasa60%probabilityofbuying,doesadiscountmakesense?Ifnegligibleprobability,shouldtheygetanexpensivemailer?
ExpectedValue
Currency($0.00)
$0tounlimited Theexpectedamountofrevenuefromthecustomerwithineachof10timehorizons,whichareconfigurable(e.g.7,14,21,28,35,42,49,56,63,and90daysfromanalysis).
Indicateswhetherexpensivemarketingprograms,suchasprintmailingscatalogs,orsalescalls,arejustifiable(basedonexpectedvalueoffuturepurchases).
*Furtherdescriptionprovidedbelow.PredictiveProductRecommendationsforEachCustomer:Metric Type Range Explanation ExampleUsesRe-SellProbability
Percent(float)
0to1,foreachof10periods
Theprobabilitythatagivencustomerwillpurchaseeachitemtheyhavepurchasedinthepastwithin10futuretimehorizons,configurableindays(e.g.7,14,21,28,35,42,49,56,63,and90daysfromanalysis).
Recommendationsthatencouragecustomerstore-purchaseproducts.Particularlyusefultoofferhighprobabilityre-sellofferstocustomerswithdeterioratingloyalty.
Cross-SellProbability
Percent(float)
0to1,foreachof30,60,and90days
Theprobabilitythatagivencustomerwillpurchaseeachitemtheyhaveneverpurchasedbeforein3futuretimehorizons,configurableindays(e.g.30,60,and90daysfromanalysis).
Recommendationsthatencouragecustomerstobuymore,differentproducts.Particularlyusefulforincreasingvalueofmoreloyalcustomersbywideningthebasketofproductstheypurchase.
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Cross-SellRankScore
Numeric(0.00)
0to10,foreachof30,60,and90days
Thepotentialinterestagivencustomerhasinpurchasingeachitemneverpurchasedbeforein3futuretimehorizons,configurableindays(e.g.30,60,and90daysfromanalysis)asarankedscore.
ThismaybemoreusefulthanCross-SellProbabilityinsituationswherethebestproductoffersareneeded,irrespectiveofthecustomer’sloyaltyorcurrentlikelihoodtobuy.
AdditionalAnalyticsforEachCustomer:Metric Type Range Explanation ExampleUsesLoyaltyRank
Numeric(0.0000)
0-100(eachcustomerforceranked)
AforcedrankingoftheLoyaltyScoretoindicateeachcustomer’sloyaltyrelativetooneanother.
ValueRankisusedtotargetmarketingspendforarangeofcustomersbasedontheirrelativevaluewithinthecustomerbase.
PurchaseDelay
Numeric-Days(0)
0toN
Numberofexpectedpurchasesmissedbyacustomer,basedontheaverageinter-ordertimebetweenpurchases.Thedelayperiodisuniquetoeachcustomer.Anumberof2indicates2missedexpectedpurchasesbasedontheaverageestablishedpattern.
Usedasanearlywarningtoaddresscustomerswhoarestartingtofalloffexpectedpurchasingpattern.
CategoryScore
Numeric(0)
0toN(N=NumberofProductCategories)
ThenumberofProductCategories(productsasgroupedforanalysis)thecustomerhaspurchasedfromhistorically(e.g.,iftheanalysiswasrunattheSKUlevel,CategoryScorereferstonumberofSKU’spurchased).
Usedwithothermetricstodeterminehowextensivelytomakecross-selloffers.
Retention Numeric-Days(0)
0tounlimited Thetime,indays,sincethefirstpurchase.
Usedtotailorspecificmessages,basedoncustomerseniority.
Recency Numeric-Days(0)
0toN(N=Inactivedesignation)
Thetime,indays,sincethelastpurchase.
Usedtotailorspecificmessages,basedonrecentcustomeractivity(orlackthereof),orbettertimeforadditionalcommunications.
NumberofOrders
Numeric(0)
0tounlimited Totalnumberofordersbyacustomer(eachorderhavingauniquetransactiondate).
Usedwithothermetricstodeterminetypesandfrequencyofoffers.
AmountSpent
Currency($0.00)
0tounlimited Threeseparatemetrics,includingthetotalamountspentbyeachcustomerinthelastperiod(e.g.month),last12months,andhistoricallyoverentiredataset.
Usedwithothermetricstotailorspecificmessages.
ProductAffinitiesTable:TheProductAffinitiesTablecontainsproductsalsopurchasedbycustomerswhena“PredictorProduct”hadbeenpurchased,rankedbylikelihoodtomaketheadditionalproductpurchase.Thefilecontainspair-wiseproductcombinations.ThefirstProductIDisthe“PredictorProduct.”ThesecondProductIDpairedwithitisthe“CompanionProduct,”whichisidentifiedwithitsliftvalueintermsoflikelihoodtobepurchasedbybuyersofthePredictorProduct.EverypairofProductCategoryID’sisevaluatedandallpairswithliftvaluesaboveauser-definedthresholdareincludedinthefile.
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*LoyaltySegmentsAtwodimensionalsegmentationiscreatedforthecustomerpopulationbasedontwometrics:predictedLoyaltyScoreandRiskScore.LoyaltySegmentscanalsobethoughtofas“lifecyclestages.”One-andtwo-timebuyersarenotincludedinthemainloyaltysegmentation,butarescoredforallmetrics.ReportsareproducedindicatingcustomersineachLoyaltySegment,rolledupfromtheirindividualscores,andidentifyingcustomertrendsandmovementsbetweensegments.Thisisonewayoffindingcustomerstotargetbasedonloyaltyandlifecyclestage.
Belowarethedescriptionsofthesegments:Loyalists–Highvalue,low-riskcustomers.Thesearethebestofthebestcustomerswhobuymostfrequently,mostbroadly,andspendthemost.Thesecustomersareusuallythebesttargetsforcross-sellitems,astheyhavebrandloyaltyandhavenumeroustransactions,whichleadtostrongerscoringrecommendations.Also,manyLoyalistswillmakeapurchasewhethertheyaremarketedtoornot,solargediscountsarenotnecessarytomovethesecustomers.AstrategythatsomeofourSubscribersuseistoofferadiscountonlytoLoyalistsiftheyincludeacross-sellitemintheirpurchase,thusincreasingtheirtotalbasketsize.Nurturers–Lowrisk,midtolow-valuecustomers.Thisgroup,andUnderperformers,areusuallythemostinterestinggroupsofcustomers.Nurturersarebuyingconsistentlyandperiodically,sincetheyhavealowRiskScore.Buttheyarenothighvaluecustomers,inthatthedollarstheyspendarelowortheymaynotbuyverybroadlyacrosscategories,orboth.Eithertheyarebuyingatcapacity,inwhichcasetheywillstaywheretheyare,ortheyarebuyingotherproductsfromcompetitors.Alittleinvestigationandsometargetedprogramscouldincreasethedollarsperorderforthesecustomersandincreasetheirvalue.Underperformers–Highvalue,midtohigh-riskcustomers.Thesearecustomersthatusedtobebettercustomers,butrecentlyhavefallenoffpattern,eitherbybuyinglessperorder,orbuyinglessfrequently,orboth.Therearemanyvaluablecustomersinthissegment,andreversingtheirbehaviorisessentialtoincreasingrevenue.Fortunately,thesecustomerstypicallyhavean
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Customer Migration Heat Map – December 2015 [Color – 6 Months Ago]
Highlights • Movement to the
top/left is the goal • Large group of Loyalty
that are drifting to Underperformers
• Huge opportunity in the Underperformer Segment
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establishedpurchasinghistory,somakingrelevantproductoffersiseasytodo.However,thesecustomersmayneedsomeadditionalincentivetogetbackontrack,sodeeperdiscountsarerecommendedforthesecustomers.Faders–Lowvalue,midtohigh-riskcustomers.Thesearecustomersthatneverreallytookofforestablishedasignificantbuyingpattern.Theymakesporadicpurchasesoflowdollaramounts,andtheytypicallybuyverynarrowlyacrosscategories.Othermetrics,suchasExpectedValue,canbeusedtodeterminewhichcustomersinthisgroupareworththecostandefforttosavevs.whichonesarenotprofitableinthelongrun.Deepdiscountsandrichoffersareusuallyrequiredtomovethesecustomers,butmaynotbecosteffective.WinBacks–High-riskcustomers.Thesearecustomersthathavenotmadeapurchaseinalongtimeandhaveahighlikelihoodofdefecting.Thesecustomerscanalmostbeconsideredasacquisitionsbecauseoftheeffortinvolvedinregainingtheirbusiness.OrderingthesecustomersbyValueRankcangiveastartingpointforacampaign.Theadvantageofthesecustomersoveracquisitionsisthattheyhavesomepurchasinghistory,andrelevantproductoffersarepossible.1&2xBuyers–Thesearecustomersthathavemadeatmost2purchases,whereapurchaseisdefinedasauniquetransactiondatewithpositiverevenue.Thesecustomersmaynotyethaveaclearloyaltysegment,andmaybeseparatelytargetedfromothercustomersinre-sellorcross-sellcampaigns.InactiveCustomers–Ananalysisofthetransactiondatacanbeusedtodeterminethemostappropriatecut-offpoint,intermsofnumberofdayssinceapurchase,todesignateacustomeras“Inactive”(cut-offpointcanbeoverriddenbytheSubscriberifspecialcircumstancesexist.)Inactivecustomersaregenerallynotworthpursuing,althoughsomecustomerswhoformallywerehighvalueatsomepointbeforegoinginactivemightbeworthsometargetedeffort.
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