The Power of Recency

The term Recency refers to the amount of time that has passed since the last customer transaction. It is the single most important parameter to record in your database.

Why?

Because it has been shown time and again that if you want to determine how a person will act in the future, look at what they have done in the recent past. Recency is simply a measure of customer engagement. It's really not complicated.

Who do you have a better chance of selling to - someone who purchased from you last week or someone that purchased last year? The more recent someone has engaged with your products and services, the easier it will be to reengage them a second time. Simply put, more recent customers have a higher potential value than less recent customers.

Where's the Proof?

Maybe your saying, "Ok, I understand the concept of recency, but where is the proof? How do I know that more recent customers are REALLY more valuable than less recent customers?" That's a very valid question and I'll answer it by summarizing a study that was performed by database marketing expert Jim Novo.

Take a look at the below graph showing the number of unique web visits by the date of last visit.

This actual website graph shows about 6 million visitors to a web site over a 90 day period (nice traffic, huh?) As you can see from the graph, most of the visitors have been to this site in the past few days. Then, you see a nice long tail that moves out to about a 90 day period.

What Jim did in this study was to track each daily group of unique visitors to determine when they came back for a repeat visit. If you believe in the concept recency, than the more recent visitors have a higher chance of returning than less recent visitors.

Here's a couple of interesting results that were determined.

1. In the graph above, there were 50,000 people that visited the website at the point labeled "45 Days Ago" on the horizontal axis. Of those 50,000 people, 25,000 visited again. In other words, at a recency of 45 days, people were just as likely as not to visit again.

2. People that visited the site at the point marked "Yesterday" on the horizontal axis were 484 times more likely to visit again than the people that visited at the point labeled "90 Days Ago." There are many more studies out there that show this same effect. It works for online as well as offline business models.

Recency Equals Engagement

Now, just because someone comes back to a website doesn't mean they are going to automatically purchase. But, the chances are much higher to convert an engaged and active web visitor.

This is one reason why every small business website must have a way to collect customer contact information. An engaged visitor is more likely to sign up for your newsletter or download a free report in exchange for an email address. The best time to market to a web visitor is right after they have visited your site and either purchased or registered for something. The best time to mail out a direct mail promotion is close to that customer's last business transaction.

Now, I am making some assumptions here. I'm assuming you have original, engaging and helpful content that is directly related to your target market. You won't be able to sell a thing if you can't build trust and confidence through the information your site provides. You must presell your visitors through quality content before you can monetize them.

What types of activities should you use for recency monitoring? The rule is this: as long as you can measure it, you can use it for running recency data. This includes the following.

Online purchases
Offline purchases
Registrations
Downloads

For many businesses, the purchase transaction is most indicative of value. If you run an information website, then registrations or downloads are probably the transaction to use.

How to Use Recency

How do you actually use recency in your day to day business? Once you have defined the type of transaction that is most valuable to your business, you simply export your customer data into a spreadsheet based on the date of this transaction. This assumes that your record this transaction in your customer database (if you don't, start now!)

For a retail store, you would simply export your customer information along with the date of last transaction into a spreadsheet program like EXCEL. Let's say you have 2,000 transactions over the past 3 years. You could set up your spreadsheet with columns showing your customer's name and address as well as their most recent transaction date.

Once you have done this, sort the spreadsheet by the date of last transaction, from most recent to least recent. Spreadsheet programs like EXCEL all have a sorting function to make this easy. Be sure to select the entire data set before sorting in order to ensure everything stays together when sorted.

After sorting, you will have your entire set of 2,000 customers sorted by the recency of their last transaction. The more recent a customer, the better the chance they will respond to a marketing promotion. If you want to do a direct mailing piece to your customers but can only afford to mail to 500 people, you simply select your top 500 customers by recency and mail only to them.

Sorting your customers by recency is a very simple but powerful way to uncover customers that are most likely to respond. Small business owners should be using this tool on a regular basis in their marketing efforts.

If you'd like to learn more about recency and database marketing, please read the three-part article titled Intro to Strategic Database Marketing.