May 15, 2014

An Average Customer

Look at the customer in the center segment ... this customer is as average (probably above-average) as customers come for many retail-centric brands.
  • 3.5 purchases last year, the majority happening in-store.
  • 9 website visits last year, one every six weeks.
If you count the retail purchases, then the assumed conversion rate is 3.5/9 = 39%.

When you segment customers appropriately, when you add retail purchases to the mix, and when you measure conversion over time, you get a different story - a far different story - than your typical web analytics package measures.

For this retail business, the customer buys something every two-and-a-half months. When the customer buys something, the customer visits the website 2.6 times before buying, then purchases something, 2/3 of the time in-store.

Since the behavior is consistent and repeatable (and usually happens in-store), do we really need to hound this customer with retargeting efforts, cart abandonment programs, discounts, promotions, and other margin-eroding nonsense? Or do we simply let the natural rhythm of this segment's behavior generate $60 of gross margin on a $100 purchase?

Merchants love gross margin.

CFOs love gross margin.

Gross margin allows you to keep your job.

Try taking a longitudinal view of customer behavior, not a conversion-centric view of customer behavior. You'll find that, often, you're giving margin dollars away to drive behaviors that are going to happen anyway. What a shame.

Contact me ( for your own, customized online / retail dynamics project.