For years we in the customer experience world have been obsessed with calculating Propensity To Buy (P2B). For those not steeped in the technique this P2B means “the likelihood that a prospect or customer will buy or transact with us under specific circumstances” (including through various channels and contexts).
For example (in an un-proven example), a friend of mine (as in “I have a friend who…”) often quotes work done years ago at well known USA underwear and lingerie brand which has an incredibly high propensity to buy among it’s premiere customer base and is incredibly good at creating customer engagement and driving revenue producing loyalty and customer experiences. He says that a 32 year old woman who holds an Angel Card (their loyalty program) and enters the store during a certain special event period has a 32% propensity to buy and an average “transaction ticket” of $127, which is phenomenal, almost a guaranteed sale. Therefore for every customer in this segment Victoria Secrets can expect to collect 32% x $127 = $40.64 in revenue and in their case $5.68 in net income / profit. They constantly explore special events to bring these customers into their stores.
Similar metrics can be calculated for other customer segments and for interaction through different channels such as web (where a further level of sophistication is to associate a particular sequence of web page interaction or whether interaction originates from an email or Facebook or on a mobile phone or a tablet or direct) and social media such as Facebook (which has a pretty low level of propensity to buy because few people are used to buying through the channel yet .. you can see our block posting earlier this year on the missing “Buy Now” button in Facebook for more information).
However as with most things analytics a new level of metrics is evolving as more important in managing customer relationships. That is Propensity To Interact (P2i). In today’s world people’s time is ever more scarce and there are ever more information and interaction channels demanding their attention. There is also growing awareness that what companies are trying to drive is conversations and ongoing relationships not one time transactions.
Combine this with your Conversion Ratio (CR2) which is the ability to convert the prospect or customer from a “looker” to a “buyer” or from “observer” to “active”. This is a factor of the relationship between your marketing and sales team (a topic for other discussions and and involving lots of underlying “characteristics” like messaging affinity, segmented customer intimacy, trust etc).
So we are seeing customer experience leaders pay more attention to the underlying Propensity To Interact (P2i), the percentage likelihood that a particular individual or group will respond to a particular message through a particular channel (we mean “respond” not look, the first being active and the second often passive, so think the difference between “Impressions” in the online world and “clicks” or visiting a store).
Ultimately P2i x CR2= P2b but in a lot more scientific and measurable manner. Plus there is an interesting view of how P2i and CR2 applies across channels. If a specific customer segment has a high P2i (say 32%) on targeted, exclusive offer emails will the same segment have a very different PTi on an “open” Facebook promotion.
Is it better to have a high P2i score (eg 32%) with a low CR2 score (4%) for a high transaction value segment than against a medium P2i score (12%) with a medium CR2 score (9%) for a medium value segment. I will let you work on that one in your own scenario.
This came up in a discussion with a political friend of mine who is having this exact discussion related to his work on our elections upcoming at end of this year. You can figure that discussion out for yourself although “buy” in his case means “vote” or “encourage someone else to vote”.
Data rules !
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