For a long time I wondered how to know when a customer is likely to buy again. Then I learned about Customer Purchase Latency which measures exactly that.
Latency measures the time between events. It's used heavily in computer science and on the web for performance measurements (e.g. how long did it take to download a webpage).
Customer Purchase Latency measures how long between customer purchases.
A more useful version is the Average Customer Purchase Latency which averages the time across multiple customers.
- Customer Purchase Latency for a single customer.
- Average Customer Purchase Latency for a group of them.
Calculating your Average Customer Purchase Latency is difficult to do by hand due to the amount of calculations, but easy for software with the right algorithm (like in my app). Once you calculate it though, a wealth of timing questions can be answered with it.
Since it shows the length of time between purchases, it's primarily used to schedule marketing campaigns. If a customer is likely to order after 80 days, marketing to them around that time with buy messages is an efficient use of resources.
The metric can also help prevent deep discounting. If you know customers will order around 80 days later, you wouldn't start to send incentives to them before that time unless you're trying to shift behavior. Otherwise you're just giving discounts (profit) away and training customers to wait for discounts.
The time ranges can be all over the place too. I've seen Shopify stores with latencies below two weeks and some well over one year. It's useful to look at various customers in different stages of their lifecycle to see how the latency changes the more orders they place (using an Order Sequencing Analysis or similar).
Your Average Customer Purchase Latency is influenced by your products (and their replacement cycle) and your existing customer marketing. Products that are quickly consumed will cause customers to want to refill/replace them sooner. Marketing that keeps you top of mind with customers will help them remember to reorder when they are ready.
Since Customer Purchase Latency is purely time-based, the size of orders, profitability, and products ordered won't impact it. Though time-based events like sales or launches can influence the metric in the short-term.
Eric Davis
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