Category — Behavioral

About ten years ago, there was a movement in the catalog industry to reduce mail volume. It seemed like a good idea. Customers were increasingly migrating to websites to place their orders. Segmented sales were down. Order processing costs were significantly lower for web orders when compared to the call center. Why spend the money to mail catalogs when people were ordering online? [Read more →]

Years ago (at the risk of dating myself), there was a great debate in the catalog industry on how to calculate customer lifetime value (LTV). Heavy hitters weighed in with formulas that measured, projected, and/or weighted the numbers.

Most of them required a team of statisticians to run the numbers. In reality, even if you had the team, you probably wouldn’t get a consensus. You would get to participate in a lot of boring meeting where they argued over which data to use.

The term “lifetime value” implies that once a customer has purchased, they have committed to a long-term relationship. The reality is that a customer’s life expectancy is dependant on merchandise and lifestyle rather than the customer’s actual lifetime. [Read more →]

Free customers are like the “World’s Largest Christmas Stocking.” They look good from the outside, but when you start digging in, you find that the value is missing.

A few years ago, I won a raffle for the “World’s Largest Christmas Stocking.” It was so big I needed help carrying it to my car. It measure seven foot tall, three foot wide, and was filled with toys. Winning it was fun.

Opening it was disappointing.

Instead of toys, it was filled with accessories. Every item included required additional purchases to be functional. The children’s excitement transformed into annoyance before the stocking was empty. “Bummer” was the word of the day.

When you analyze your free customers, acquired via the Internet, expect the same results. [Read more →]