September 29, 2014

Diagnostics: Canary In The Coal Mine

Any marketing/analytics system should be able to quickly identify a business issue. One of the problems with modern analytics software is that the software tends to be campaign centric - meaning that software identify problems with campaigns, not problems with businesses.

In most of the businesses I analyze, there is a canary in the coal mine ... a metric that helps determine that something is wrong.

That metric, of course, is the number of new customers.

The example above is very, very, very common. Look at the annual repurchase rate ... it is essentially flat. This means that existing customers are remaining loyal. Now look at spend ($ per rebuy). That metric is also flat. Customers are spending the same amount, year-after-year.

The metric that is changing is the number of new buyers ... down from 55,000 in 2012 to 52,000 in 2013 to 49,000 in 2014. This metric, of course, does not impact sales in 2013 - sales still increase - but the cumulative impact of poor new customer counts does send the business into negative growth territory in 2014.

I always look at new customers - it's the canary in the coal mine.

By the way - I frequently observe this table in modern retail in-store buying - store sales are tepid largely because the number of new customers is in decline.