The Five Laws of Velocity Marketing
Velocity marketing starts from the point of view that traditional demographic segmentation is irrelevant if customers are motionless, sitting on the sidelines. Active customers are the ones making the purchases—they're the ones who matter. Therefore, the first law of velocity marketing states that customers who are on the move, whose velocity is changing in a positive direction, are more likely to buy. After analyzing many companies' housefiles, Loyalty Builders found that typically more than 75 percent of accelerating customers will continue to accelerate in the next period. The more they accelerate, the more revenue they generate. They are prime targets for smart marketers. Some of them may be your oldest and best customers; some may be brand new customers. What they share is velocity.
A Radar Gun for Speeding Customers
One way to spot accelerating customers is to map customer behavior, a visual technique that clearly identifies the accelerators. The chart in Figure 1 is a map of velocity behavior. Three metrics are plotted for each customer: changes in revenue (along the horizontal axis), changes in loyalty score (along the vertical axis) and the loyalty segment in which each customer falls (the color of the dot representing that customer). A loyalty score is a proprietary metric that is highly predictive of more purchases in the near future, and loyalty segmentation is based on this score. But there are many other metrics, such as the change in inter-order purchase time, that can be useful tools in velocity marketing.
In this map, the accelerating customers are in quadrant II and the laggards are in quadrant IV. Every customer in quadrant II spent more money in the recent quarter than in the previous one, and their loyalty score increased as well.
The highest ranked customers are in Loyalty Group 6 (dark red) and the lowest are in Loyalty Group 1 (darkest blue). Since loyalty is influenced by longevity, many customers with low scores have great potential but simply haven't been around that long. More lower ranking customers (dark, medium and light blue) are shown than higher ranking customers only because higher loyalty groups are plotted first, so lower rank dots hide some high-ranking customers. Customers in lower loyalty groups who show big changes in their loyalty score usually are new customers showing rapid growth.