Have you ever heard somebody refer to his or her customer list as a "file"? If you have, you were probably listening to someone who has been around the catalog block a few times. Before computers(huh?), catalog companies used to keep all their customer information on
3 x 5 cards.
They’d rifle through this deck of cards to select customers for each mailing, and when a customer placed anorder, they would write it on the customer’s card. These file cards as a group became known as "the customer file", and even after everything became computerized, the name stuck.
Who cares? It happensthat while going through these cards by hand, and writing down orders, the catalog folks began to see patterns emerge. There was an exchange taking place, and the data was speaking. What the datasaid to them, what they heard, were 3 things:
1. Customers who purchased recently were more likely to buy again versus customers who had not purchased in a while
2. Customers who purchased frequentlywere more likely to buy again versus customers who had made just one or two purchases
3. Customers who had spent the most money in total were more likely to buy again. The most valuable customerstended to continue to become even more valuable.
So the catalog folks tested this concept, the idea past purchase behavior could predict future results. First, they ranked all their customers onthese 3 attributes, sorting their customer records so that customers who had bought most Recently, most Frequently, and had spent the most Money were at the top. These customers were labeled "best". Customers who had not purchased for a while, had made few purchases, and had spent little money were at the bottom of the list, and these were labeled "worst".
Then they mailed their catalogs to allthe customers, just like they usually do, and tracked how the group of people who ranked highest in the 3 categories above (best) responded to their mailings, and compared this response to the group...
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