Ever wondered which are your customers which stopped buying from you in the last period? Would you like to get them back? Good news, WooReports can help! Let’s explore together how!
Before going deeper, any good topic needs to be labeled with a three letters acronym. Since we’re discussion about Active, Returning and Churning customers, let’s simply refer this concept as ARC.
In the last years, business owners have been more and more interested and open into understanding the customers, their behaviours within the context of the established business relationship and outside it, their likes and dislikes, their social network, friends, colleagues, co-workers, knowing what they do, when they do it, when they interact, with whom, what was their past behaviour, anticipate and predict what will they do in the future is of course relevant for businesses in all industries; in few words, customer spectrum / domain has been defined as an important analytical are for businesses to know, explore and monetise.
I see a lot of organisations looking outside of their customer portfolio, which is a good thing, but firstly, I always advise to look closer rather than farther. Look at your existing customers, know them, understand them, retain them, keep them close and active and don’t let them churn. In Romanian language we have a saying, “nu da vrabia din mana pe cioara de pe gard”, which in English would be “a bird in the hand is worth two in the bush”, according to WikiQuote. The idea is explored also by Paul B. Brown in the article Want To Increase Sales? Target Your Existing Customers.
And such, I think it’s important to:
- understand which are your Active, even Top customers
- know which are your customers which have Churned (otherwise said, who have left you)
- even more, acknowledge why your customer have Returned
- all above make sense when plotted agains the time dimension; ask yourself questions like: Which are my active customers in the last months? What are the customers which have not ordered in the last two weeks? etc. – tailored questions for the nature of your business and the products or services you sell to your customers
There are many more sources of information which can help you raise the right questions; here’s some to start with:
- I always go for Wikipedia, churn & churn rate
- interesting way of looking at active and lost customers in recurrent or recursive services, here
- good perspectives, here
- churning, a process, here
- Google for more!
Web stores, ARC concept and product or services offerings
In case you ask yourself if this is applicable to web stores, then you get a big YES! It does apply easily in e-commerce since most process is digitalised and information is available, often, in structured format.
You can find is heavily used in services, predominantly in recurring services, so subscription based membership websites, TV or communication operators, banking segment (mostly in deposits). But product based businesses must not neglect this analysis perspective. As example, if a web store sells fragrances and body products of various brands, then the business owner can easily consider that current customers will have same or similar needs in the future, thus making the customer a potential future buyer as well; in other words, the client can be considered lost if he/she will not buy in the next quarter or so.
Therefore, a relevant questions is to ask yourself whether your products and services, your business model can be analysed from the ARC perspective.
How WooReports can help
WooReports delivers flexible report to analyse the list of new, active, returning, churning and inactive customers based on number of orders and sales spent by comparing previous time intervals; we call this report ARC Customers List.
The logic behind the scene
ARC Indicator is calculated using the following logic:
- New – the customer has met or exceeded the threshold values in the current intervals but has not done so before (since his/her registration date)
- Active – the customer has met or exceeded the threshold values in both current and previous considered intervals
- Returning – the customer has met or exceeded the threshold values in the current intervals but has not done so in the previous considered intervals
- Churning – the customer has not met or exceeded the threshold values in the current intervals but has done so in any of the intervals, previous considered or previous displayed
- Inactive – the customer has not met or exceeded the threshold values in all of the three intervals, current, previous considered and previous displayed
Current, previous considered and previous displayed time interval types
The report is flexible so that you as a store manager can analyse your customers as long back as you like and consider as many years, quarters, months, weeks or days the three time intervals – current, previous considered and previous displayed.
- interval type – you can choose to analyse your ARC customers on a daily, weekly, monthly, quarterly and yearly basis
- number of current considered, previous periods displayed and previous considered time intervals – for example, if these values would be 1, 3 and 2 and interval type would be Months, the report would display the current month together with the previous three months
Important to understand and decide is how several intervals are used and considered within an interval type – for example, if the number of current considered intervals is 2, of type Month, so Aug and Jul, would each interval be compared to the threshold (Aug vs threshold and Jul vs threshold), or them combined, through either addition or average (Aug + Jul vs threshold or Aug + Jul / 2 vs threshold). Setting this important behaviour in the calculation is achieved by using the parameter Interval consideration method
- Each interval is at Least >= or < Threshold => Each interval is compared to the threshold;
- Sum of Intervals per Type >= or < Threshold => Metrics of all intervals of same type are added and compared to the threshold
- Average of Intervals per Type >= or < Threshold => Metrics of all intervals of same type are averaged and compared to the threshold
You might consider a customer as Active is he/she makes two or more orders and/or spends more than $500 within a quarter. For a barber shop it would be relevant if the men would just book two times within a month, without caring for the amount spent by the customer.
This flexibility is offered via the two threshold parameters – Number of Orders and Amount Spent.
Measures, computation method and usage
As already mentioned, the two measures which are displayed and considered within the calculation of ARC indicator are number of orders and amount spent.
Number of Orders is a count, considering:
- post type is in a defined list by WooCommerce (using the function wc_get_order_types( ‘order-count’ ) ); this assures we’re always in-sync with how WooCommerce looks at counting orders
- post status is in a defined list by WooCommerce (using wc_get_order_statuses() ), so pretty much all possible post type status values; same advantages as above
- obviously, it’s broken down by Month, in case it’s a monthly metric or it’s not, in case of Orders All
Amount Spent is a count, considering:
- post type is in a defined list by WooCommerce (using the function wc_get_order_types( ‘reports’ ) ); this assures we’re always in-sync with how WooCommerce looks at calculating the amount spent by a customer
- post status is in a defined list, Completed or Processing, ( (‘wc-completed’, ‘wc-processing’) ); this is important to understand as it does not represent just th evalue of the order, it represents the value of an order once the payment has been made, provided that the usual flow of statuses is preserved and the store owner sets the order in status completed or processing once he/she acknoledges the money have been transfered to the store
- obviously, it’s broken down by Month, in case it’s a monthly metric or it’s not, in case of Spent All
The parameter Measure(s) to consider offer you the flexibility to choose which of the two measures is being considered for the calculation of ARC indicator. You can choose them Both also, case in which the next parameter, Logical operator, can let you choose the logical operator (And or Or).
To exemplify, going back to our barber shop, the owner would be interested more in number of bookings (so number of orders) rather than amount spent, so he would just select as Measure to consider value Number of orders.
For most store owners however, both metrics are relevant, the amount spend by the customer as well as number of orders. Of course, you can consider the both, strictly compared to the threshold, case in which the logical operator between the And. Or, you can consider either one of them, case in which the logical operator would take the value Or.
And the output is:
- the list of customers, with relevant fields (ID, email, username, first and last names)
- ARC indicator – calculated by comparing current metrics to previous metrics
- the two metrics analysed, number of orders and total spent, plotted agains the time, aggregated by interval type and displayed as many times as configured
- the two metrics analysed, number of orders and total spent, for the entire duration of the customers life (All Orders and All Spent)
A picture is worth a thousand words – click below to see the screenshots
Additional technical details about usage of the report are detailed in this next article.
How to get it
If your web store is based on one of the world’s favorite eCommerce solution, WooCommerce, then you’re good to go; you just need to download and install it as any regular plugin in WordPress.
You can go directly to Shop page in our site’s menu or Buy button on the homepage and take it from there!