Customer Recency - the most powerful customer variable
What is Customer Recency
Customer Recency is simply time since last customer activity event, for example, time from last purchase, or last visit to the website or the mobile app. It can be measured in time units (e.g. days, weeks, months etc), but it can also be represented in a form of a Recency Score (for which you could use deciles or quintiles). Whatever you end up using really depends on the application and how thorough you want to be.
How to use Recency to increase customer loyalty
Time is arguably the most powerful tool in the data-driven marketing, though very often overlooked and underutilized. Generally expect to see that the more time has passed since customer’s last activity, the more effort it will take to bring those customers back. So you would use Recency in order to identify the right group of customers, and also adjust the promo/offerings accordingly. It is all about finding the right balance, as you probably would not like to target with promotions customers who have been recently active anyway, as that would not drive incremental value. Instead, you would want to target customers with the right Recency range so that the impact is both, incremental as well as material.
How to measure Recency
Customer behaviour does change over time, and so would Recency. As an absolute minimum, you should know the current state of the customer, that is Recency as it is right now. That means that on a regular basis you would update this current state with the most recent state, and effectively replace the old value.
But it is even better to know how customers got to this current state. This will help you to assess the success of your engagement campaigns, as well as deepen your understanding of customer behaviour over their lifetime. Recency over time effectively becomes something that we refer to as Customer Latency (click the link to find out more).
Related article: Customer Latency
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