Metrics That Matter

How many of you know how many of last year's customers will purchase again this year?

All the business intelligence pap about dashboard reports sells software. A few key metrics, metrics that I used to see printed out on green/white tractor paper back in 1991, will give you insight into where your business is heading. Let's review a few simple tables that many direct marketers produce.

This table analyzes existing customers. These were prior customers, acquired more than a year ago. For the 2008 row, these customers were acquired in 2006 or earlier, and placed at least one order during 2006.

Last Year Existing Buyer Performance
	Households	Rebuy Rate	Spend/Rebuy	Volume/HH	Tot. Demand
2008	124,384	53.7%	$274	$147.14	$18,301,613
2007	135,048	56.1%	$283	$158.76	$21,440,626
2006	117,349	52.4%	$249	$130.48	$15,311,228
2005	110,841	51.9%	$208	$107.95	$11,965,508
2004	119,439	50.9%	$203	$103.33	$12,341,274
2003	117,430	54.9%	$201	$110.35	$12,958,283
2002	102,843	55.8%	$200	$111.60	$11,477,279

This is direct marketing's version of "comp store sales". The marketer reviews the volume per household column, to understand if performance is improving over time. In this case, performance is down significantly in 2008, because the repurchase rate and spend levels are down. Also notice what happened back in 2005 --- metrics improved, but total demand decreased, because of a lack of file momentum coming out of 2004.

Direct marketers produce a table of this style for existing customers. A comparable table is produced for customers who were newly acquired in the prior year. This helps the direct marketer understand if newly acquired customers are holding up their end of the bargain.

Another table sums new and reactivated customers. Any customer who did not purchase in 2007, but purchased previously, and purchased during 2008, is included in the table, as are all new customers. The table looks something like this (each row replicating prior years).

New/Reactivated Buyer Performance
	Households	Rebuy Rate	Spend/Rebuy	Volume/HH	Tot. Demand
2008	53,941	100.0%	$188	$188.00	$10,140,908
2007	47,204	100.0%	$215	$215.00	$10,148,860
2006	42,048	100.0%	$203	$203.00	$8,535,744
2005	50,884	100.0%	$189	$189.00	$9,617,076
2004	48,778	100.0%	$185	$185.00	$9,023,930
2003	45,224	100.0%	$183	$183.00	$8,275,992
2002	39,005	100.0%	$180	$180.00	$7,020,900

In this table, we observe that 2008 hasn't been a bad year for new/reactivated buyers. Of course, your analysts will keep close watch on cost per new/reactivated customer, but from a dashboard standpoint, buyers are up, demand is down, yielding about the same amount of demand as last year.

These three tables tell the Executive an awful lot about the health of the brand. You can run the tables by channel or merchandise division if you wish. For many direct marketers, these metrics help diagnose the health of the business.