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Understanding How Short Periods Change Average Customer Purchase Latency

understanding-how-short-periods-change-average-customer-purchase-latency

A Repeat Customer Insights customer was asking about how the Average Customer Purchase Latency changes when the orders are sequenced on annual reports vs quarter reports.

It’s a common confusion so I wanted to share the details here.

The quarter reports are typically in pulling long-term repeat customers into the lower order numbers. They only have three months to place multiple orders so the Latency algorithm detects them as new customers or with a lower-quantity of orders than their lifetime.

It’s easier to understand with an example:

Let’s say a customer, Frank, orders every month in 2022, every 27 days.

In the 2022 report their orders would appear on the 1st, 2nd, 3rd, 4th, …. all the way to the 12th order lines.

In the 2022-Q4 report they only have three orders which would appear on the 1st, 2nd, and 3rd order lines. Those correspond with the 10th, 11th, and 12th orders Frank has made in 2022.

The Latency would be 27 days in both reports.

Now add in a second customer, Barbara who ordered twice in 2022 (April, Dec) with 240 days between their orders.

In the 2022-Q2 report their first order would appear on the 1st order line. In the 2022-Q4 report, their second order would appear on the 1st order line (their first Q4 order).

But in the 2022 report, their orders would appear on the 1st (April’s) and 2nd (Dec’s) order lines.

Now with that second customer, the Latency for 2022 would become 133 days (27+240 divided by 2 customers) while the Latency for 2022-Q4 would be 27 (27 divided by 1 customer).

The longer the report period (all-time, annual, etc), the more repeat orders are found for customers. That moves the orders into the higher order numbers.

The shorter, the less time for a lifetime repeat customer to place multiple orders and be detected as a repeat customer in that period.

Latency is one of those metrics that is more valuable to track across longer time-frames. Especially if your Shopify store has higher durations.

Customer Purchase Latency and Average Customer Purchase Latency are complicated but really powerful once you track and understand what they measure.

(And I have a lot of articles about it you can binge read on)

Eric Davis

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This originally appeared on the LittleStream Software Blog and is made available here to cast a wider net of discovery.
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