Cross-border e-commerce operations: how to evaluate customer value and old customer value

In cross-border e-commerce operations, evaluating customer value is a complex process, which involves multiple dimensions such as historical value, potential value and added value. In order to better understand the value of customers, we can learn from the RFM model (Recency, Frequency, Monetary) and measure it through a series of indicators.

How to judge the potential value of cross-border store membership

The potential value of a member can be measured through six indicators: last consumption time, consumption frequency, consumption amount, maximum single consumption amount, proportion of special offer products consumption and proportion of consumption of highest unit price products.

• Last consumption time: Convert it into the corresponding index based on the time interval between the member’s last consumption time and now. For example, if there is consumption in the last month, the corresponding index is 5; if there is consumption in the last three months, the corresponding index is 4, and so on.
• Consumption frequency: Increasing members’ consumption frequency can effectively increase store sales. Merchants can convert members’ consumption frequency into corresponding indices, which are 5, 4, 3, 2, and 1 from large to small.
• Consumption amount: According to the “28/20 rule”, 80% of a store’s profits are generated by 20% of its members. Merchants need to give these core value members more resources and convert the consumption amount into the corresponding index.
• Maximum single consumption amount: reflects the member’s purchasing power and hidden purchasing potential. The higher the single consumption amount, the greater the index.
• Proportion of consumption of special offers: Reflects the degree to which members care about product prices. The higher the proportion of consumption of special offers, the smaller the corresponding index.
• Proportion of highest unit price product consumption: reflects the member’s price acceptance, and the specific value is positively related to its price acceptance.

Finally, the merchant organizes each member’s indicators and corresponding index into Excel and creates a radar chart to show the value of each member.

Methods to determine customer value

Customer value usually consists of three parts: historical value, potential value and added value. The potential value is mainly considered from the aspects of customer behavior, and the RFM model is the main measurement basis; the added value is mainly considered from the aspects of customer loyalty, word-of-mouth promotion, etc.

Overall Customer Value Metrics

Overall customer value indicators include important indicators such as number of visitors, visitor acquisition cost, and conversion rate from visit to order.

• Number of visitors: The number of unique users visiting the shopping website within a statistical period.
• Visitor acquisition cost: The sum of marketing and publicity costs required to acquire a new visitor.
• Conversion rate: Within a statistical period, the ratio of the number of visits to submit an order to the total number of visits.

New customer value indicator

New customer value indicators include the number of new customers, new customer acquisition costs and customer unit price.

• Number of new customers: The number of customers who independently visit the website and make a purchase within a statistical period.
• New Customer Acquisition Cost: The various costs a business spends to attract customers.
• Price per customer: The average transaction amount per order per new customer.

Old customer value indicator

Old customer value indicators include the number of old customers and the RFM model.

• Number of regular customers: The total number of customers who have completed two or more purchases within a statistical period.
• RFM model: Describe the value of a customer through three indicators: recent purchasing behavior, consumption frequency and consumption amount.

Calculate the value of old customers

In cross-border e-commerce operations, the calculation of the value of old customers mainly relies on the RFM model.

Latest consumption time (Recency)

The most recent purchase refers to the last time the customer made a purchase. In theory, customers whose last purchase time is more recent are more valuable customers and are more likely to respond to immediate goods or services provided by the company.

Consumption frequency (Frequency)

Consumption frequency is the number of times a customer purchases within a limited period. It can be said that the customers who make the most purchases are also the customers with the highest satisfaction. Increasing the number of times your customers buy means taking market share from your competitors.

Consumption amount (Monetary)

The consumption amount shows that the top 10% of customers spend at least 2 times more than the next level of customers, accounting for more than 40% of the company’s total turnover.

How to judge the value of old customers in cross-border operations

Cross-border operation old customer value judgment indicators include active visitor ratio, loyal visitor ratio, loyal visitor index, number of loyal visitors, visitor participation index and other indicators.

• Active visitor ratio: Measures how many visitors are highly interested in the content of the website.
• Loyal Visitor Ratio: Uses time spent instead of pages visited, depending on the goals of the site.
• Loyal Visitor Index: Refers to the average number of pages visited by each long-term visitor.
• Loyal Visitors: The number of pages visited by long-term visitors as a percentage of the total number of pages visited.
• Visitor Engagement Index: The average number of sessions per visitor, representing the tendency of some visitors to visit multiple times.

Through these indicators, cross-border e-commerce companies can better understand the visiting habits of old customers and formulate more precise marketing strategies.