Customer Latency - What it is and how to use it to avoid Customer Churn
What is Customer Latency
Customer Latency, also known as Customer Purchase Latency simply refers to the average time between customer activity events, for example, making a purchase, calling the customer service, visiting a site or using the mobile app. In order to calculate latency, you simply need to calculate the average time (ie latency) between the two known events. You can then use Latency metric as a guide for anti-defection campaigns (e.g. Email, push notifications, customer service, promotions). Tracking Latency means that you know which customer and when should be contacted to avoid customer churn. It also allows companies to get better understanding of their customer base, their needs and “expected” behaviours.
Types of Customer Latency
Customer Purchase Latency - this is the most commonly measured by businesses type of Customer Latency, and it simply means time between purchases.
Customer Visit Latency - this is time between Visits to the website (or mobile app). It gives you an idea of how often customers use your site or app, and you might often see it being strongly correlated with Purchase Latency.
Which companies should measure Customer Latency
The need for Customer Latency measurement will vary depending on your offerings and the business model. Generally, if you expect your customers to be “active” several times a year, then you should definitely be measuring latency. In fact the more frequent the expected activity is, the more important it is that you monitor and optimise latency. If however you are a business that expects customers to be coming back in very pre-defined/long intervals, such as Insurance company selling yearly insurance cover, then you would not really benefit from latency measurement as much. Businesses with long-term contracts, would benefit more from other customer metrics, such as Renewal Rate.
What is “good” Customer Latency
So it depends (of course). Generally, the shorter the Latency, the more engaged customers are and it is generally a good sign if you do happen to have short Latency. But latency will vary from business to business, and even within a business. An e-commerce business selling groceries, would probably see that large share of their repeat customers does purchase on a weekly basis. Though the very same business may also have a group of customers who purchase bi-weekly. And so ideally, a business of this sort should be measuring Customer Latency separately for the different groups of customers, and targeting them with slightly different messaging and product offerings. Latency for an insurance company would naturally be much longer, and dependent on the typical length of contract (e.g. 1 year).
Related article: Customer Recency
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