July 28, 2016

Impacting LTV

You just acquired a new customer. You lost money on the transaction (that's common).

You want your money back.

Which of the following two strategies is most likely to get your money back.
  1. Market normally to the customer ... wait until the customer hasn't purchased in 18 months, then use vendor-centric reactivation strategies coupled with discounts and promotions to "win-back" the customer.
  2. Immediately work hard to make sure the customer is happy with the first order, and encourage the customer to purchase for a second time within the first ten weeks following a first order?
The answer isn't even close.

It's (2).

Vendors push for (1) because that's how they make money.

You need to push for (2) because when the customer purchases for a second time (especially within 10 weeks), the customer is worth A LOT MORE than when you wait 18 months to convert the customer to a second purchase. You earn all of that incremental profit in the short-term, and, you push the customer to 3x or 4x or 5x status faster, so you earn even more profit in the long-term.

Any lifetime value simulation makes it perfectly clear that you have to do everything possible to get a customer to place a second order within 10 weeks of a first order.

What stops you from taking advantage of this fact?

What stops your call center from calling this customer to make sure the customer is happy? It's called a "call center", right? So call the customer!!

Ten weeks ... 70 days.

That's the window when you can make the biggest impact on LTV.