One of the first queries I run is a simple one. I run a rolling-twelve month file count of customers in five segments.
- Customers purchasing 5x+ last year.
- Customers purchasing 4x last year.
- Customers purchasing 3x last year.
- Customers purchasing 2x last year.
- Customers purchasing 1x last year.
When a business is about to struggle, two things often happen.
- Management tries to squeeze as much volume as possible out of best customers.
- The "bottom of the file", infrequent buyers, begin to disappear.
|October 1, 2011||926||1,511||1,930||4,198||11,478||20,043|
|September 1, 2011||925||1,506||1,926||4,239||11,503||20,099|
|August 1, 2011||922||1,502||1,933||4,293||11,541||20,191|
|July 1, 2011||916||1,493||1,910||4,314||11,572||20,205|
|June 1, 2011||914||1,481||1,902||4,361||11,593||20,251|
|May 1, 2011||909||1,477||1,897||4,388||11,608||20,279|
|April 1, 2011||910||1,470||1,890||4,422||11,613||20,305|
|March 1, 2011||907||1,467||1,898||4,429||11,608||20,309|
|February 1, 2011||906||1,460||1,891||4,426||11,637||20,320|
|January 1, 2011||902||1,448||1,886||4,391||11,618||20,245|
|December 1, 2010||893||1,436||1,882||4,380||11,559||20,150|
|November 1, 2010||887||1,427||1,867||4,362||11,530||20,073|
|October 1, 2010||883||1,438||1,849||4,337||11,493||20,000|
In other words, you'll see that the 3x, 4x, and especially 5x+ segments may exhibit increases in customer counts, as your marketing team squeezes as much as possible out of that audience, in an effort to grow a business that is stalling.
Meanwhile, your less frequent buyers ... those who purchased twice in the past year, and those who purchased once in the last year, began to decline somewhere between January 1 and February 1.
This is one of those early signs that a business is about to struggle ... think of it like a blood test where you have high sugar levels in your bloodstream ... high sugar levels are a harbinger of diabetes ... here, increases in the 3x/4x/5x+ segment coupled with decreases in the 1x/2x segment are like high sugar levels in your bloodstream.
Run this query each month. Look for this trend, it is a leading indicator that your business is about to struggle. When I left Nordstrom in March 2007, our customer file exhibited this behavior, and we all know what happened to the economy, beginning in October 2007.