March 21, 2016

More On Weak Performance Among New Buyers From December

Let's review some data from a business from 2010 ... this allows me to evaluate long-term value for five years. But in the short-term, I want to show you the cumulative probability of a customer purchasing for the second time, by month. Watch this:

1st Time Buyer in December 2010:
  • Cumm Rebuy Rate at End of 12/2010 = 2.7%.
  • Cumm Rebuy Rate at End of 1/2011 = 4.7%.
  • Cumm Rebuy Rate at End of 2/2011 = 6.1%.
  • Cumm Rebuy Rate at End of 3/2011 = 7.9%.
  • Cumm Rebuy Rate at End of 4/2011 = 9.4%.
  • Cumm Rebuy Rate at End of 5/2011 = 10.9%.
  • Cumm Rebuy Rate at End of 6/2011 = 13.1%.
  • Cumm Rebuy Rate at End of 1 Year = 21.7%.
  • Cumm Rebuy Rate at End of 2 Years = 26.9%.
  • Cumm Rebuy Rate at End of 3 Years = 29.8%.
  • Cumm Rebuy Rate at End of 4 Years = 31.8%.
  • Cumm Rebuy Rate at End of 5 Years = 32.9%.
1st Time Buyer in October 2010:
  • Cumm Rebuy Rate at End of 10/2010 = 4.1%.
  • Cumm Rebuy Rate at End of 11/2010 = 9.5%.
  • Cumm Rebuy Rate at End of 12/2010 = 13.3%.
  • Cumm Rebuy Rate at End of 1/2011 = 15.1%.
  • Cumm Rebuy Rate at End of 2/2011 = 16.5%.
  • Cumm Rebuy Rate at End of 3/2011 = 18.7%.
  • Cumm Rebuy Rate at End of 4/2011 = 20.6%.
  • Cumm Rebuy Rate at End of 1 Year = 29.1%.
  • Cumm Rebuy Rate at End of 2 Years = 34.4%.
  • Cumm Rebuy Rate at End of 3 Years = 37.6%.
  • Cumm Rebuy Rate at End of 4 Years = 39.8%.
  • Cumm Rebuy Rate at End of 5 Years = 41.5%.
Do you see what happens? In this case (your mileage will vary), the December buyer starts off with low repurchase rates (Jan/Feb are not big demand months), and the customer never catches up. Look at what happens to customers acquired in October 2010 ... they are immediately responsive ... you get the same percentage to repurchase in two months that you get from December 2010 buyers in six months. Why? In large part, this happens because Nov/Dec are highly responsive months. Look at the October 2010 data, especially once you get to January ... cumm repurchase rates slow down dramatically, because Jan/Feb are not big demand months.

You obtain an advantage when you acquire customers just before big demand months. If I were a catalog co-op, Google, or Facebook, I'd be selling that message very hard - heck, it isn't hard to run a life table to measure the dynamic, is it?

And if I were you, I would assign my analytics team this challenge ... they need to explain the dynamic to the whole company. Maybe your peak season is in April ... then you need to acquire customers in February so that those customers can purchase for the second time in April, right? Have your analytics gurus analyze this issue thoroughly. Pass the information along to your customer acquisition team. Pass the information to your Brand Response Marketing team. Then craft tactics that capitalize on this dynamic.

P.S. Critics will say that this is old data, and I should focus on new buyers from 2014. Ok. Tomorrow, we'll do that.