September 07, 2017

Leverage

You have a solid marketing program in place to convert buyers within three months of a first purchase, right?

RIGHT?

Why is this so important?

This data is from a company that has a 50% annual repurchase rate - far greater than the repurchase rate most of you possess. Look at the probability of a second purchase by months since first purchase.
  • Recency = 01, Rebuy = 17.3%.
  • Recency = 02, Rebuy = 9.1%.
  • Recency = 03, Rebuy = 5.7%.
  • Recency = 04, Rebuy = 4.0%.
  • Recency = 05, Rebuy = 3.5%.
  • Recency = 06, Rebuy = 2.8%.
  • Recency = 07, Rebuy = 2.3%.
  • Recency = 08, Rebuy = 2.0%.
  • Recency = 09, Rebuy = 1.9%.
  • Recency = 10, Rebuy = 1.6%.
  • Recency = 11, Rebuy = 1.5%.
  • Recency = 12, Rebuy = 2.0%.
  • Recency = 13, Rebuy = 1.3%.
  • Recency = 14, Rebuy = 1.0%.
  • Recency = 15, Rebuy = 0.9%.
  • Recency = 16, Rebuy = 0.7%.
After three months, the customer is virtually lost.

Think about this ... you could take a 14 month customer and apply some "win-back" program and increase repurchase rates that month from 1.0% to 1.1% (that 10% gain is hard work, by the way). But you haven't accomplished anything.

What happens if you improve the repurchase rate in the first month after a first purchase by 10%? You go from 17.3% to 19.0%. THAT'S MEANINGFUL! Not only is it meaningful, but you gain 1.7 points of repurchase vs. the 0.1 point you gain on the 14 month buyer ... that's 17 times more impact!!

17 times more impact!!

We call this "leverage" ... a first time buyer with 0-3 month recency designation is at a "high" leverage point. The customer who last purchased 39 months ago is at a "low" leverage point.

  • High Leverage = Many Customers, High Likelihood of Change.
  • Low Leverage = Few Customers, Low Likelihood of Change.
So why do we spend so much effort trying to reactivate lapsed buyers when you could have a marketing program in place to get the first-time buyer to purchase again 0-3 months following a first purchase?

Show of hands, how many of you have a marketing program in place to convert the first-time buyer to a second purchase within 0-3 months of a first order? I'm not talking about your mass email marketing campaigns and your mass catalog mailings, those don't count. I'm talking about a specific program only for 0-3 month first-time buyers:
  • A Welcome Package.
  • A Call 10 Days After Package Arrives, Asking If Everything Is OK With The Order?
  • If You Love Offering Discounts, How About A 2nd Purchase Discount?
  • Offer To Join Your Loyalty Program?
  • Offer To Join Your Subscription Program?
  • Cross-Shop Personalized Email Campaigns Based On Items Purchased In A First Order?
  • Free Expedited Shipping For Christmas For 1st-Time Buyers In Oct/Nov.
  • Membership In A Customer Council To Improve Products/Service.
  • Invites To First-Time Customer Events In-Store.
  • First Opportunity To Purchase From New Merchandise Assortment.
  • Credit Offers With Low APR.
  • Request To Follow Your In-House Employee Influencers On Instagram.
Again, a show of hands ... how many of you have a marketing program in place to convert the first-time buyer to a second purchase within 0-3 months of a first order?

If you didn't raise your hand, what is stopping you from implementing a program? Discuss.