For years, marketers have been predicting Next Cart Value (NCV) – the amount of money an individual will spend on their next purchase. (Customer X will likely spend $50 on her next purchase.) Historically, this has been tied in with Next Logical Product analysis. (Customer X will probably buy Widget Q and thus spend $50 on her next purchase.) These days, it tends to be more of a standalone metric. Artificial Intelligence/Machine Learning has enhanced the accuracy of Next Cart Value predictions.
Marketers look at Next Cart Value in different ways…
Some look at real-time transactions. Visitors who are in a real-time purchasing process. In other words, people on the site right now. Folks on a Product Detail Page choosing the size/color of a product. Visitors in an active quotation process. And so on. How much will that individual spend in their current transaction? (Calculating this accurately works best when you’re using AI as you’re able to get a fluid value.)
Other companies look at how much the visitor will spend on their next order and/or their lifetime. They’ll also predict if/how the transaction amount(s) and/or the frequency of purchases can be increased. (Customer X is on Automatic Delivery of Widget G for $50 a month and will spend 38 months on Automatic Delivery totaling $1900.)
How is Next Cart Value different from Likelihood to Purchase?
Next Cart Value looks at the dollars involved. In other words, how much will an individual spend with you on their current/future transaction(s), and how can you impact that? Likelihood to Purchase traditionally looks at if/when an individual will purchase.
Nowadays, with Artificial Intelligence and Machine Learning, Next Cart Value and Likelihood to Purchase have morphed into the same bucket. By processing ALL the data you can throw at it, AI/ML allows you to analyze many more variables simultaneously.
“I already measure so many other things… Is Next Cart Value useful?”
I prefer it for real-time (current) transactions. It can really help marketers focus on the dollars at stake and increase their revenues and conversion. I’ve found it can also help you better individualize your offers and messaging, especially in the cart/checkout pages. (Offer personalization works like gangbusters, and very few marketers are doing it.)
If you’re calculating NCV for future transactions without AI, consider measuring Days to Sale (DTS) when calculating Next Cart Value. (Customer X will likely buy Widget Q and thus spend $50 on their next purchase in 180 days.) I find it much more helpful/lucrative to include Days to Sale because then you can figure out if/how to reduce the time it takes for the next purchase. I also like to look at if/how I can affect the transaction’s AOV (average order value). This works for both current and future transactions.
What’s the #1 thing to know about Next Cart Value?
Before you throw all your calculations to the Gods of AI, you should learn how to calculate Next Cart Value – and all analytics – yourself. The #1 biggest mistake I see marketers make with AI is that they go all in without understanding how things work in real life. One of the best parts about AI is that it learns as it grows. However, this can be a massive curse if you don’t have a handle on how/why it’s learning as well as what it’s learning. That’s why it’s essential to figure out each element on your own and then train The Machine accordingly.
Are you looking at NCV at your company? Have any questions or tips you’d like to share? Tweet @amyafrica or email@example.com.
A Down-and-Dirty Definition for Marketers. (Read more about these here.)