August 10, 2015

Mega Trend = New Customers

As you know, I've been telling you about three mega-trends that impact our businesses.

  1. Merchandise Productivity
  2. New Customer Acquisition Difficulty.
  3. Avoiding Tolls.
This graph actually illustrates the power of marketing productivity. Catalogers only have one advantage over most e-commerce businesses. Catalogers have a paper-based relationship with customers - and this paper-based relationship allows the cataloger to greatly increase the likelihood of a second purchase.

Because e-commerce businesses don't have the marketing advantage of paper between a first and second purchase, new customer acquisition becomes even more critical. Annual repurchase rates for first-time buyers are low - requiring a constant flow of new customers to keep the business growing.

So when customer acquisition becomes a challenge for e-commerce brands, you can expect growth to slow, quickly, especially if annual repurchase rates are (on average) below 45%.

This is why new customer acquisition, especially in e-commerce, is so critically important. For most businesses, merchandise productivity gains allow more new customers to be acquired at a lower cost, helping the business avoid paying tolls to prop the business up.