Podcast 18: An Introduction to Recency – A Key Predictive Metric

Hey everybody. Welcome to the Nerd Marketing podcast. Got a bit of a question for you today, who is Drew Sanocki more likely to marry? Woman A, the woman I dated in college who I thought was my perfect match. Intellectually compatible, smart, we had the same group of friends, we had a very stable, loving relationship, or woman B? We will call her the mildly psychotic woman B. It’s a woman I dated 10 years later, who I fell head over heels for. We had a completely unstable relationship full of chases, long email rants back and forth, multiple breakups, backstabbing. That’s the question I put forth to you today, and before I give you the answer, I just want to welcome you to the nerd marketing podcast, the only podcast where you can hear Drew Sanocki make the magic of data driven marketing easy to understand, and fun, and profitable for you.

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Today’s topic is recency. Recency is a metric. It’s one I would love if you could learn to love in the way that I loved both of these women. I love recency because it’s the number 1, most powerful predictor of future behavior, future customer behavior. Because of that, it’s a critical metric for you running your digital business. The problem with start ups is that you don’t know lifetime value. There’s a lot of writing online about lifetime value. “Oh, just figure out the lifetime value,” “Figure out which campaigns drive which kinds of customers with which kinds of lifetime value, and put your money behind the campaigns that drive the highest lifetime value,” but the problem with a start up is that you don’t know your customer lifetime yet. You’re just coming out of the gates.

All the big LTV calculations on kiss metrics, they don’t apply to you. In those cases, there’s some other metrics that are very helpful, and probably the best is recency because it’s predictive. Recency predicts future value. The idea is this, recency is the number of days, or the time since an action has been performed. The more recent, the more likely you are to repeat an action. The less recent, so the more days or time since an action has been performed, the less likely you are to perform that action. It’s largely because you’ve found substitutes, or you’ve had your needs met, or you’ve found another product, or something like that. Let me give you a couple examples. First, non-business examples. I talk about the gym a lot because I’m not creative, and all I have are gym examples, but who’s more likely to go to the gym today? Is it the guy who went to the gym yesterday, or is the guy who last has been in a gym a year ago?

Recency means that the dude who was in the gym yesterday is much more likely to go to the gym today than the dude who was last in the gym 12 months ago. Easy enough, right? Applies to everything. Diet, who’s going to eat a healthy meal at lunch today? It’s the person who probably had a healthy meal at breakfast versus the person who last had a healthy meal in 1990. Okay, so that’s recency. It applies to dating, also, which I’ll get to. Who are you most likely to go on a date with this weekend? Who are you most likely to marry? I’ll get to that. In a business setting, recency becomes really powerful because who’s more likely to purchase from you? The customer who last bought from you last week, or the customer who last bought from you 6 months ago? Naturally, it’s the person who last bought from you last week. The person who last bought from you 6 months ago probably has moved on. They’ve had their needs met. They found a substitute, or a competing product that they like better.

That’s why recency is so powerful. It also applies beyond e-commerce, so if you’re running a content site, who’s more likely to read your content today? It’s the person who read your content yesterday. If you’re running a [sass 00:04:39] business, who’s more likely to cancel their account? Is it the customer who last logged in this morning, or the customer who hasn’t logged in for 6 months? Recency in that case works in revers. It’s the customer who hasn’t logged in in 6 moths, they’re the ones who are going to cancel. That’s recency. If you’ve been listening to this podcast, you’ve heard me talk a lot about this idea of trip wires and latency. You might be asking how does this concept of recency differ from latency and trip wires? It’s because if you think back to latency trip wires, those were had stops. We talked about observing customer behavior, and you set a hard stop after which you want to promote to a customer, or market to a customer. For example, customer hasn’t purchased from my site in 30 days, I’m going to send them an offer to try to get them to purchase from my site. That’s a hard stop, and in many ways that latency, that 30 day latency is something that looks back at past customer behavior, it’s backward looking.

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Give me everybody who hasn’t bought in the past 30 days and I’m going to market to them. Recency is more of a sliding scale. There’s no hard stop in recency. I could have not bought from you 1 day, 2 days, 3 days, all the way up to infinity. It’s a sliding scale, and because of that, it’s more predictive of future value. Latency, the fact that I haven’t bought from you in 30 days doesn’t tell me much about the future value of me to a company. If you turn to recency, it does. The customer who hasn’t bought from me today is much more likely to buy from me going forward. Because of that, it’s a good proxy for lifetime value. It’s not going to be exactly spot on, but if you’re just starting a business, you don’t have much to work with. Recency is the metric that you should use as a proxy for LTV. Big takeaway for those of you running digital business, number one, think about recency. Use recency, I’m going to show you how to use it in upcoming podcasts, but the more you think in terms of recency, especially if you’re a start up, the better you’re going to be.

Number two, the more recent your customers are, the more ripe they are for marketing, for promotions. We’re going to get into marketing automation. This is where your marketing automation is going to play. This is where you’re going to want to be emailing people, sending them promotions, sending them more products to buy. It’s because they’re more recent, they are a higher potential value to your customer going forward. Number three, you can use recency to compare any two things in your business. Any two marketing campaigns or ads. Ad A will drive customers with a certain average recency, and ad B will drive customers with another average recency. The ad with more recent customers wins. That’s the ad that is potentially better for your business. You can get those kind of results before you actually see buying activity. Those are the big takeaways about recency. Just to wrap this up, in the next podcast I really want to show you how to start playing around with recency in Google analytics in a very simple and easy way. I’ll show you some very tactical ways to apply it to your marketing campaigns and start making some money.

Just to go back to the story at the beginning of the podcast, who is Drew Sanocki more likely to marry? Woman A, or woman B? The answer of course, is neither. No, Drew will continue to date and avoid serious commitments for another 10 years after woman B. Probably due to just being a typical dude, and thinking Drew can move to New York City and date supermodels 20 to 30 years younger who obviously have thing for older guys with love handles and thinning hair, who are really into customer analytics, because there are just so many of those women around. I can vouch for that. You can’t swing a dead cat in New York City without hitting those kind of supermodels who love guys who are into customer analytics. The story does have a happy ending though because I did eventually fall in love, and marry an amazing woman who shared the stability and compatibility of woman A, and I would say the lust for life of psychotic woman B. That would be woman C, who’s my wife Sarah. It’s our anniversary today. I am going to dedicate this podcast to my wife, my wonderful wife. She doesn’t know this, but I think she’ll be honored that she got a podcast dedicated to her.

How I overcame being completely retarded in love is a subject for another podcast, maybe another blob. For now, I would keep in mind recency is your competitive edge, especially if you’re a start up. Listen to the next couple podcast episodes and I will show you how you can use that metric to drive your business. Thanks for listening to this episode of the nerd marketing podcast. If you have any thoughts or questions, or want more information, please contact me through my blog, nertmarketing.com, where you’ll find playbooks and action plans that make it easier for you to grow your online business. If you go to nerdmarketing.com/products, you’ll find a host of offerings that I’ve developed to help grow your business. Easy plug-n-play stuff. Even easier if you’re not in front of your computer right now, text the message NERDME, that’s all caps, one word, NERDME, to 44222, and I’ll send you all my best stuff. Playbooks, spreadsheets, et cetera, et cetera, et cetera. Maybe I’ll send you a cheese gift basket for the holidays. That’s a maybe.

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Please review this podcast in Itunes, if you do that you’ll help me bring the magic of data driven customer analytics to the world. My name is Drew Sanocki, I’ll talk to you next time. Thanks.