The New Customer Valuation Formula

New research by Wharton’s Eric Bradlow shows how marketers can track binge-buying behavior to effectively target profitable customers.

Source: knowledge.wharton.upenn.edu

One of the most established practices in the field of marketing and customer valuation is to summarize a customer using what’s called RFM segmentation — recency, frequency, monetary value. You have to add one more letter to RFM, and I call that “C,” which [stands for] clumpiness, which means some customers do buy in a regular pattern, kind of equally spaced arrivals or equally spaced purchases. Clumpiness refers to the fact that people buy in bursts.

What this dispels is [the notion] that the arrival pattern of people is uninformative. It’s very informative. People [who] come in bursts, then go away and then come back in bursts and then go away … those people are fundamentally different. There are clumpy-type people and non-clumpy-type people.

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The New Customer Valuation Formula

New research by Wharton’s Eric Bradlow shows how marketers can track binge-buying behavior to effectively target profitable customers.

Source: knowledge.wharton.upenn.edu

One of the most established practices in the field of marketing and customer valuation is to summarize a customer using what’s called RFM segmentation — recency, frequency, monetary value. You have to add one more letter to RFM, and I call that “C,” which [stands for] clumpiness, which means some customers do buy in a regular pattern, kind of equally spaced arrivals or equally spaced purchases. Clumpiness refers to the fact that people buy in bursts.

What this dispels is [the notion] that the arrival pattern of people is uninformative. It’s very informative. People [who] come in bursts, then go away and then come back in bursts and then go away … those people are fundamentally different. There are clumpy-type people and non-clumpy-type people.

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