November 17, 2009

This Week In Business: The Most Important Time In A Customer Relationship

If you are like me, you've read a lot of content about customer loyalty.

If you are able to analyze actual customer transactions, you quickly learn that the most important time in a customer relationship is the three months following a first purchase. When I run a life table analysis, I'll frequently observe that something like 40% of customers will ever purchase again --- and within the first three months, half of the 40% place their subsequent order.

My simulations strongly suggest that the two levers that really propel a business into the future are customer acquisition and first-time to second-time buyer conversion.

So focus on this important time in a customer relationship --- manage the tactics you love to employ (free shipping, discounts, promotions, all of that stuff), and add a customer service strategy (i.e. actually ask the customer if everything went well during the first order, ask the customer if she needs anything else). Treat this early timeframe with urgency!