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[edu]

How can I determine a fair ranking for customers based both on the total amount of purchases and frequency of purchases
Say I have this list:

Ranking / Name / Purchase $

1 Bob $10,500
2 Joe $9,000
3 Mary $7,000
4 Pete $6,450

Ranking / Name / Number of Purchases

1 Joe 18
2 Pete 16
3 Bob 10
4 Mary 8


Is a weighted mean the proper approach?

Thanks
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[wtg]

It really depends on how you want to rank them. I would imagine businesses may rank customers based on net profits, not gross purchases or # of transactions. A customer who purchases many items that are very expensive but have low margin (i.e. % profit) may not be as valuable as a customer that doesn't spend as much but buys items with a large mark-up.

In the end it's the money you make that makes a customer valuable, not the amount or number of purchases.

[edu]

Yes. That is a good insight. I guess I was trying to measure a certain "fidelity" parameter with the number of purchases. Is Bob "my" customer or he is buying mostly from my competitor?

edu
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[Robfm]

[edu]

Thank you. I'll take this approach.

Edu
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