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Techniques for managing customer activity and value

Within the online customer base of an organisation, there will be customers who have differ-

ent levels of activity in usage of online services or in sales. A good example is a bank – some 

customers may use the online account once a week, others much less frequently and some 

not at all. Figure 9.17 illustrates the different levels of activity.

To improve the adoption of ‘web  self-  service’ which helps reduce costs it is important to 

define measures which indicate activity levels and then develop tactics to increase activity 

levels through more frequent use. Objectives and corresponding tactics can be set for:

● 

Increasing number of new users per month and annually (separate objectives will be set for 

existing bank customers and new bank customers) through promoting online services to 

drive visitors to the website.

● 

Increasing % of active users (an appropriate threshold can be used – for some other organ-

isations it could be set at 7, 30 or 90 days). Using direct communications such as email, 

personalised website messages, direct mail and phone communications to new, dormant 

and inactive users increases the percentage of active users.

Spam

Unsolicited email 

(usually   bulk‑  mailed  and 

untargeted).

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Chapter 9  Customer relationship management

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Decreasing % of dormant users (were once new or active, could be  sub-  categories), but 

have not used within a time period to be classified as active.

● 

Decreasing % of inactive users (or  non-  activated) users. These are those who signed up 

for a service such as online banking and username was issued, but they have not used the 

service.

You can see that corresponding strategies can be developed for each of these strategies.

Another key metric, in fact the key retention metric for e-commerce sites, refers to repeat 

business. The importance of retention rate metrics was highlighted by Agrawal 

et al. (2001). 

The main retention metrics they mention and show the impact on profitability are:

● 

 Repeat-  customer conversion rate – how many  first-  time customers purchase a second 

product?

● 

 Repeat-  customer  base – the proportion of the customer base who have made repeat 

purchases.

● 

Number of transactions per repeat customer – this indicates the stage of development of 

the customer in the relationship (another similar measure is number of product categories 

purchased).

● 

Revenue per transaction of repeat customer – this is a proxy for lifetime value since it gives 

average order value.

Figure 9.17

Activity segmentation of a site requiring registration