Dear Catalog CEOs:
A carefully crafted loyalty program can increase sales by somewhere around 10%, among customers who are deemed loyal.
And yet, for most of us, loyalty programs don't work.
At Nordstrom, good customers had an 85% chance of buying again in the next year, purchasing maybe ten times if the customer repurchases. That's 0.85*10 = 8.5 expected annual orders per loyal customer. If a loyalty program increases volume by 10%, then you achieve an incremental 8.5 * 0.10 = 0.85 orders per customer.
At your garden-variety catalog brand, good customers have a 45% chance of buying again in the next year, purchasing maybe two times if the customer repurchases. That's 0.45*2 = 0.9 expected annual orders per loyal customer. If a loyalty program increases volume by 10%, then you achieve an incremental 0.9 * 0.10 = 0.09 orders per customer.
Can you see the difference between the two business models?
It doesn't matter what the cataloger does ... a loyalty program is going to make no difference whatsoever.
It make all the difference in the world what Nordstrom does ... a loyalty program greatly increases sales and generates profit.
Trade journalists, bloggers, and many loyalty experts miss this subtlety in customer behavior.
Loyalty programs work in a high-frequency environment.
Loyalty programs cannot force infrequent buyers into frequent buying behavior.
Subscribe to:
Post Comments (Atom)
Who Embraces Discounted Merchandise?
Many customers embrace discounted merchandise, but the preference is not universal or uniform. In this Time Lapse Analysis, green represents...
-
It is time to find a few smart individuals in the world of e-mail analytics and data mining! And honestly, what follows is a dataset that y...
-
Here's a common dynamic in my projects ... see if this happens at your company. Your average price point is $40.00. Customer response...
-
I always face a challenge from marketers when I talk about implementing a Welcome Program. When I tell marketers that a Welcome Program gene...
Franklin And Marshall propose des vêtements mode de vie pour les personnes qui croient en portant des vêtements de qualité élégant et bon. Internationalement connu pour son extérieur élégant et décontracté le porter s'adresse principalement à la jeune génération. Ils fournissent des vêtements d'été ainsi que des vêtements d'hiver pour les hommes et les femmes.
ReplyDelete