January 17, 2007

More On Loyal Customer Behavior Using Multichannel Forensics

Ok, you worked with your friendly programmer yesterday, and identified your overall company repurchase rate.

What was it? Sixty-three percent? If that's the case, your tend to have a loyal customer audience that is in 'Retention Mode'. When this happens, your business tends to grow by getting existing customers to purchase more often, and to purchase more items per trip. Anytime the annual repurchase rate is above sixty percent, your business is in 'Retention Mode'.

If the repurchase rate was between forty percent and sixty percent, you're in 'Hybrid Mode'. These business models are a lot of fun for executives to manage. You can grow by increasing the retention rate, by acquiring a lot of new customers, by increasing purchase frequency, or by adding items per trip.

If the repurchase rate was less than forty percent, you're in 'Acquisition Mode'. Your business will grow by a relentless quest for new customers.

Now that you have this metric for the whole business, your next step is to measure the repurchase rate for each product, brand or channel.

For instance, assume you are a multichannel retailer that has a catalog, online and retail channel. Your overall repurchase rate is fifty percent. Your overall business is in 'Hybrid Mode'.

Now, take one of your channels (i.e. catalog). Measure the repurchase rate for last year's catalog buyers, at a company level, and within each of your channels.

For instance, your catalog buyers might look like this:
*** Company Repurchase Rate For Catalog Buyers = 57%.
*** Catalog Repurchase Rate For Catalog Buyers = 29%.
*** Online Repurchase Rate For Catalog Buyers = 35%.
*** Retail Repurchase Rate For Catalog Buyers = 11%.

This tells a compelling story. Catalog buyers are loyal to the total company, in 'Hybrid Mode'. However, within the catalog channel, these buyers have a twenty-nine percent repurchase rate, putting them in 'Acquisition Mode'. These buyers tend to migrate to the online channel. To grow catalog, there must be a huge infusion of new catalog buyers. Online directly benefits by having a big catalog file of customers that migrate from catalog to the online channel.

Your homework assignment for tonight: Run the above table for every product, brand or channel you have. Tomorrow, we'll talk about the meaning of the individual percentages in the table above, and how to strategically understand the importance of those percentages.

2 comments:

  1. Multichannel Forensics sounds as sexy as our Collaborative Intelligence. Good post, and how do you see blogging as a channel, if at all?

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  2. Help me find a new name, I'm not married to it!

    I guess marketing could be viewed as a channel. If a person divided up the website into specific categories, then the blog becomes a category (just like visiting certain product pages). In that context, there are some very neat things one can do to measure the effectiveness of a blog.

    You've given me something to noodle over --- I'll have to work this into a post next week, thanks!

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