How active are your customers?

How active are your customers:

For a sales manager it is important to know how many of their customers are active and how much efforts they should put in to make their customers active. One way to identify the activeness of customers is Recency.

Recency is the state of being recent. In sales actions means, when did the customer last time purchased from you. Recency helps in identifying the chances if customers will buy again from you? The customer who has bought material in recent time is more likely to buy from you again. The recency can be defined on the basis of the product consumption cycle. The product consumption cycle is the period in which a product will be consumed and the customer shall be again at store to buy. For example for a bread, it can be consumed in a day time & hence the consumption cycle would be a day while for a Salt packet it might be 30 days.

If the consumption cycle of a bread pack is one day then on the basis of recency the customers can be divided in following categories:

Active Customers are those who have bought the material in recent times and are most likely to buy again. For Bread pack those will be who has bought it yesterday.

Warm Customers who has bought material a little late than the recent past and will buy products on intermittent basis. For a bread pack, The customers who has bought in last 2 weeks will fall in the category

Cold Customers are those who have bought material some time back and would have shifted to competition, for a bread pack they might be someone who has bought a month back

Inactive Customers are those who have bought it long back and not thinking to buy again your products,  for Bread packet, someone who has not bought your products for last 2 months.

The Active Customers are likely to buy more often and regularly as compared to old customers and hence you might need more resources to keep them interested in your brand.

People who have not come back to your stores might have shifted to competition and need more efforts to bring back and hence require attractive sales pitch. While the cold customers are not happy with you and hence probably switched the brand and thus gives you a chance to introspect and analyse why did you lost them.

The Active customers require regular visit by sales team and need to be monitored & followed up with more promotion, while Inactive Customers can be touch based once in a while to know their interest in brand.  But if someone is very important and large customer and he has gone to cold or Inactive mode, then you need to put large amount of promotional efforts.

Hence while recency helps you to segmentise your market and help you in resource allocation, it also helps you to identify the important customers and track them.

The recency phenomenon can also be used to segment the market and for utilisation of your resources.