Date created: Jun 9, 2021 • Last updated: Jul 21, 2021
What is Transaction Recency?
Transaction Recency measures the duration of time since a customer’s last purchase, indicating how recently repeat customers made previous purchases. It is a great way of measuring your business’s ability to bring back customers quickly and may vary based on industry and business model.
Transaction Recency Formula
How to calculate Transaction Recency
Say you have 500 customers who made their first purchases last week. At the end of this week, 300 of these customers have made repeat purchases. Remember, it has been a week, or 7 days, since their last purchase. Your Transaction Recency in this case would be 7 / 300 or 2.3 days. This would indicate that on average, there are 2.3 days between each transaction made by repeat customers.
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More about Transaction Recency
Typically, an organization’s best customers are those with the highest overall transaction value, frequency, and recency. Recency is a great metric for trigger-based communications such as setting a trigger for a campaign, a call center engagement, etc. For example, if a customer’s recency dips below X, trigger a “checking in” email.
Of course, it is important to make sure this type of metric is relevant to your business model. If your business involves customers returning to make purchases, such as e-commerce or adding premium features, then Transaction Recency can be a great indicator of how well and often you are able to bring about additional or repeat purchases from customers. If your business uses a subscription billing model, then the metric might default to either 30 days or one year, based on whether you bill your customers monthly or annually, and might not be the most relevant metric. In such cases, use metrics such as Activation Rate instead to measure customer loyalty.