CRM · Customer Growth Strategy · Customer Insight

What’s the frequency Kenneth?

Every retailer can tell you about same-store sales. Most can readily quote their online conversion rates. Some can even dissect the composition of physical store visits (conversion rate, average transaction value, # of items per transaction and so forth). And, more and more, we’re hearing about metrics such as the growing percentage of digital engagement done on a mobile device. Much of this can be pretty useful.

Yet, we don’t hear much about frequency. When we do, it’s rarely broken down by key customer segments. That’s a mistake. And, all too often, a big one.

In my experience, one of the earliest signs of trouble is a decline in frequency–both in terms of shopping behavior and willingness to recommend. Low frequency, even when it’s comparatively stable, can be a sign of trouble as well. Conversely, growing frequency among core customer cohorts suggests strong forward momentum.

One of the reasons I knew the flash-sales category would hit the wall was the preponderance of low-frequency customers across the customer base of several well-known (and, as it turns out, ridiculously over-funded) brands. This fact, combined with declining frequency among the highest spending segments, spelled impending doom.

Similarly, it was increasingly obvious that a certain luxury department store was headed for trouble when frequency across all but one of the core customer segments we tracked was ebbing. Moreover, the remaining (and most profitable) segment’s revenue was only positive because of significant increases in average unit selling price, not through adding more customers or greater shopping frequency.

Understanding frequency is hardly the be-all and end-all of customer analysis. Yet you don’t have to be a Ph.D in statistics to dissect the data, nor do you need to be some sort of analytics savant to draw the requisite conclusions. You merely need to be willing to ask the question and dig deep into the root causes.

Oh, and it’s important that you be willing to act on the implications.

2 thoughts on “What’s the frequency Kenneth?

  1. It is also important to understand the distribution of frequency. One retailer described their customers’ shopping frequency as “4 times a year”. However, on further analysis it was found that almost none of their customers shopped with that frequency. In fact, a huge number of customers shopped 1 or 2 times/year, and a small percentage shopped 10 times or more each year. In this case, the average was not a good description of reality. Obviously, the strategies for these two groups needs to be very different.

    Another complexity with frequency is that it is difficult to measure accurately. Households may have multiple shoppers, some transactions may be done with different payment methods (and if by cash it is very difficult to capture), and customers often visit the store without completing a purchase.

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