June 13, 2018

Impact of Price Purchase History on Future Performance

Here's a table ... customers are segmented based on their average historical price point. Then I measure in the next year the percentage of demand they spend by price point band. Tell me what you observe.
What do customers who buy from very cheap price points do in the next year?
  • 44.3% of future demand is from price points >= $50.
What do customers who buy from very expensive price points do in the next year?
  • 79.9% of future demand is from price points >= $50.
In my project work, "brands" are constantly trying to push customers into new price point bands.

Too often, customers don't want to move into new price point bands. The example above is actually a "good" outcome ... the disparity isn't huge, is it? But it is there. If the merchandising team tries to introduce new merchandise in expensive price points, then Management has to be ready to accept the potential of a sales decline.





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...