Yazuya way of CPM is visualizing existing customers grade.

12Mar - by OnoHaruyo - 0 - In Visualize existing customers

CPM

A company has customers consists of different kinds of spending types. Some are consistent small purchasers whereas some are erratic big purchasers.

Customer portfolio analysis is a process to classify customers in terms of different relationship levels. Customers will be classified in terms of the probability of their purchase in future time periods. Mainly it is involved in both revenue and risk that customers will bring the company.

Creating customers portfolios and visualize them allows the company to better understand customers. They will have important information on how to manage each group to increase profit.

Why is CPM important for E-commerce?

Our views are limited depending on parameters we use. What happens if we can only use web analysis data?

What do you think if you were in the situation?

Revenue Transactions Avg. Order Value
-1.5% -20% +30%

Compared to the previous years, Revenue of the shop is – 1.5%, Transactions is -20% and Average of Order Value is + 30%.

In fact, some owners would not mind the situation as their revenue is almost the same compared to the previous years.

However, you may feel it’s risky. The Revenue is almost the same but the Avg of Order Value is increasing, it means the number of customers is decreasing.

It’s not a good situation. If there are 2 types of customers, which are consistent small purchasers and erratic big purchasers, you may think the shop has to increase consistent small purchasers to reduce the risk. Then, you may suggest them to deal with small price products and acquire different types of new customers.

However, you are not sure if those are good ideas because you don’t have any tools to support it. Moreover, you also don’t know how to identify if your hypothesis is right or wrong. That’s why you will have various worries like when the Avg of Order Value is decreasing and the Revenue is also decreasing, what do you think is the reason for that ?.

In such situation, creating customer portfolio will be a powerful tool to convince others of your ideas with your logical ideas.

One of the CPM methods, Yazuya CPM

The famous CPM method in Japan is Yazuya CPM developed in Yazuya Co., Ltd.

The CPM classifies customers into 10 groups in terms of “Purchase amount”, “Duration of relationships” and “Duration of Non-active” in order to offer differentiated value propositions to different groups of customers.

Purchase amount – how much the customer spent on purchasing products from your shop.

Duration of relationships – the duration from the first day that the customer purchased a product from your shop to the last day of purchasing.

Duration of Non-active – the duration from the last day that the customer purchased up to present day.

Source: リピーターになる時期は予測できる, I translated into English.
    First-time Second-time Trend Stable Loyal
Active Purchase amount over 70,000 yen under 70,000 yen over 70,000 yen
Duration of relationships 0 0-90 days 90-210 days over 90 days over 210 days
Duration of non-active 0-240 days
Non-active When customers have not purchased anything for over 240 days from the last day of purchasing, they move to non-active segments.

Every CPM method has several viewpoints of the segmentation to define customer’s groups such as sales growth, sales volume, and profitability.

Yazuya CPM has “Duration of relationships” as the terms to define the groups, which is one of the features of the methods. It shows the importance of how long relationships a company has with its customers. The CPM does not place much importance on identifying Loyal customers, rather Stable customer is an important segment because they are candidates for Loyal customers.

If a company only focuses on offering a value proposition to Loyal customers, their number will decrease steadily. So, it’s important to retain and expand Stable customers.

Yazuya says its concept:
The most important thing is to retain existing customers rather than acquiring new customers for every business. The purpose of our CPM is to find customers as soon as possible whom we didn’t communicate properly. Then, we will make an effort to communicate with them about attractive products or our company vision to keep them as our long-term customers. The cost of retaining existing customers is not an expenditure, it’s an investment since the customers will become Loyal customers resulted from its activity.

The way of making portfolios based on the Yazuya CPM

1.Classify your customers into 10 groups.

You need to make the table consists of the following:

– The number of each customers groups
– The average of its duration of relationships
– The purchase amount

2.Visualize them with bubble chart.

The horizontal axis of the graph shows how long the relationships of the customers with the company. The vertical axis of the graph shows the purchase amount. The size of the bubble shows the size of the number of each group.

3.Compare monthly trends.

Looking at the graph, you need to consider first what the most important thing to improve first. For example, you may think that one of the issues is the large bubble of “Non-active Stable” because it’s bigger than “Active Stable”. “Active Stable” customers are candidates for “Loyal” customers but the graph shows that a large number of “Active Stable” became “Non-active”.

Non-active – Customers have not purchased anything for over 240 days from the last day of purchasing.

When you implement the next marketing plan to make the bubble smaller, you will identify whether the result is effective or not by monitoring the graph of the following months. The bubble of “Non-active Stable” will be smaller and the bubble of “Active Stable” will be bigger at the same time if your plan succeeds.

To monitor the results of the marketing activities including web marketing, it’s better to compare the graphs every month.

What we have to do is to start from customer’s needs.

While analyzing your shop’s data by using the web analytics data, you can only have viewpoints provided by the system, like New Users, Pageviews, Session Duration or Bounce Rate. Also, you can have the data of E-commerce Conversion Rate, Transactions, Average of Order Value, etc, if you connect the web analytics data to the purchase data.

However, whenever we consider making marketing plans or reviewing the results, we have to begin by measuring the impact on the customer segments that represent customer’s needs.

Actually, we already have created customer segments when we started our business. Unfortunately, with the only use of web analytics data, we do not have the ways to identify the results of the marketing plans that separated each customer’s groups.

It’s necessary to have methods for planning and measuring effect for each customer segment. With Yazuya CPM, it helps us to have a part of them and to monitor the progress of each group of customers.