If you are interested into marketing lifecycle; you might have stumbled upon the concept of customer activation and might want to know more about it. What you'll read below might interest you then :) !
What is customer activation?
At the beginning of the customer lifecycle concept ; a customer will sign-up. He'll put is details, create an account, set-up a password and might enter a few personal details. At this stage, the customer will not be declared active.
A customer is said to be active based on two criteria:
- An interaction component
- A timing componement
The first activation: how to define it?
Very straightforward: If you run a shop and sell physical goods; a customer will be active as soon as he'll do a first successful transaction at your shop. He/she will have purchased at least one item.
If you run a business running with a monthly subscription service, you might want to define 'active' as customers who have a valid subscription fully paid. Now, imagine you are running a fitness club.
How would you really define active customers: would you chose the customers who have a valid subscription or would you say that an active customer is someone who actually came physically to train in your club?
The answer should be the first one. An active customer will have a valid subscription; whether or not he comes to the gym is a question of engagement level. Engagement level is another concept of customer lifecycle.
Defining the timeframe of being 'active': how long is a customer said to be 'active'?
A customer will be said to be active based on a timing period:
- A customer who purchased an item over the past 12 months: typically if you sell luxury shoes; it's not expected to get customer buying such expensive shoes more than 2 or 3 times a year.
- A customer who purchased a product over the past 1 month: If you run a local supermarket and distributed a loyalty card for you to be able to track your customers' habits.
- A customer who fully paid a subscription valid for the next year or 30 days; typically for a a service kind of product.
Not every single business will define an 'active' customer the same way. It actually depends on the industry in which you are. Whether or not customers purchase frequently.
If you are not sure about it, then benchmarking the definition with your competitors' definition of active customers will allow you to establish comparisions between you and your competitors. Is my base of active customers growing fast enough, for me not to lose any market share? That's a sound common best practice.
Why measuring active customers is important?
You want to grow your business.
As such, you need to make sure that the cumulated number of active customers keeps growing. For a subscription business model type, your turnover depends directly on this number of active customers.
To get to your turnover, you will calculate something like: number of active customers x number of transactions x average price per transaction
You want to transform newly active customer to adopting customers
New activating customers need care.
They need to be onboarded to your company and you need to educate them on your product and services while showing them you care for them. This is key to get a good customer adoption.
In order to do so, you'll need to tailor made special onboarding programs aimed at boosting their engagement. This will help create the relationship. Once the customer has churned, developping any kind of relationship might be too late and expensive.
How to measure active customer technically?
Flag active customer in a database
You should avoid working with Excel spreadsheet as spreadsheets can be easily dropped, modified and rows can be altered or deleted.
This implies for you to create a database where you will, for each customer, define their activation first date and track the number of days between now and this activation date. This will allow you to understand who are your old customers and to reward them specifically through marketing actions.
Once you have the first date of activation, you will need to track the time elapsed between their last transaction and the current day. E.g. the last transaction occurred more than 12 months ago will mean that the customer is no longer active and actually churned. In case of a subscription, a simple flag indicating that the subscription has been paid for the next 30 days will be enough.
It all comes down to the business you are running.
You also need then to add multiple pieces of information to make this information more interesting for further deep-dives:
- What was the sign-up channel? Web, face to face, branding, promotional link?
- What was the amount spent for on the transaction which made the customer active? Was the basket particularly high?
- For every single active customer; when was their last date of transaction? Which product was bought?
Build a dashboard
Once the data logged in a database, you can create a dashboard to track and analyze the performance and the quality of your active customers. Average spending, recency, evolution per month and per market, breakdown by product.
Dashboards are no solution, no dashboard will tell you what you need to do. However dashboard will show you where you need to steer your focus.