December 13, 2015

There Are So Few "Great" Customers!

This is a typical story ... we have time across the x-axis, and we have customer quality across the y-axis. The colors? That's how much customers spend in the next ten days.

Almost the entire twelve-month file can be expected (in this case) to spend less than $9 in the next ten days (it's usually much worse than this). Only the top 5% of the file spends a robust amount of money.

You'll see comparable trends in your data. No doubt about it. There are a ton of infrequent buyers who just aren't going to spend much, no matter what you do. Identify their organic percentage ... measure it. If it is high (> 50%), why pummel those customers with marketing?

Interestingly, the very best customers often have the highest organic percentages ... exceeding 90% in many of my projects. However, because these customers are so valuable, 10% of $50 is $5, and that's more than a customer with a 50% organic percentage and $8 of future value (0.50 * $8 = $4). As a result, best customers are pummeled with marketing offers, aren't they?

The secret to business is finding ways to profitably manage the 75% of the twelve-month buyer file that will purchase infrequently.

Profit per New Customer

It's common for folks to measure cost per new customer. Total Marketing Cost = $10,000. Total New Customers = 130. Cost per New C...