December 16, 2015

It Needs To Be Shared Again

I shared this fact a few days ago ...

Profit per customer is highest among recent, high frequency buyers. That's something we all know.

But profit, in total, comes from areas where we have profitable customers in large quantities. In this case, it happens among recent buyers who are early in the customer life cycle. There are so many customers there generating average profit that, in reality, this is where the biggest profit improvement can happen.

Conventional wisdom suggests you should take care of your best customers.

Actual data suggests that there's nothing wrong with taking care of your best customers, but the opportunity is small. The real opportunity is to find new customers at a low cost, and then nurture those customers in the 1-3 months following a first, second, and third purchase. That's where all the real profit is generated, "at scale" as folks like to say.

There is a process of managing a customer base that we don't think often about. That process looks something like this: