Recency of Last Purchase
Catalogers tend to think about their house file in terms of the amount of time that has elapsed since the last purchase. In the example below the quantity mailed represents all the customers on the file while buyers are only those people who purchased following the most recent catalog drop. Instead of response rates, catalogers focus on the percentage of customers mailed who went onto purchase. Most commonly, this percentage is called the conversion rate. 1
The purpose of the test is to understand how soon to send another catalog to a given customer based upon their last purchase. In the example below, the relationship is curvilinear: the optimal time to re-contact a recent buyer is some 4-12 months after their last purchase.
Planning
An example below is a test to determine the relationship between recency and purchase behavior.
The minimum sample size for each test cell is determined by the expected error, confidence interval, and allowable percentage error. A handy sample size tool to calculate the minimum sample size can be found by clicking here.
Backend Analysis
By properly designing the test cells in the planning stages, the back end analysis becomes simpler and allows us to learn with a higher degree of confidence.
Using a confidence interval worksheet, one can determine if conversion varies by recency of last purchase. The confidence interval worksheet can be found by clicking here.
For this example, at the 95% confidence level, the 0-3 month buyers had an expected conversion rate of between 1.04% and 1.16%. The 4-6 month buyers had an expected conversion rate of between 1.79% and 1.97% at the 95% confidence level. At the 95% confidence level, the 7-12 month buyers had an expected conversion rate of between 1.79% and 2.01%. Finally, the 12 month+ buyers had an expected conversion rate between .93% and .95%.
Business Implications
Here, the best time to mail is 4-12 months after the last purchase. Statistically speaking, there is no difference in conversion rate between customers who are 4-6 months old versus those that are 7-9 months old. Mailing to customers who purchased most recently will result in a lower conversion rate.
Note
- Alternatively, this percentage can be refered to as the purchase incidence↩
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