October 09, 2018

First-Time Buyers

I created a simulation that allows me to analyze how customers within a cohort distribute over the next twenty-four months.

The image here - and yes, I get it, the numbers are tiny and hard to read - shows how a cohort of 10,000 first-time buyers migrate and evolve after twenty-four months.

After twenty-four months, 5,474 of the first-time buyers in this specific example did not repurchase, meaning that 4,526 first-time buyers did purchase.

Look at the tiny quantities in all other cells beyond 1x buyers with Recency = 25 months. There's a version of diaspora that happens here, right? Most of the customers stay within the original cohort, while those who buy move out into 2x segments (2 purchases), 3x, 4x, 5x, heck, one customer made it all the way to a 10th purchase. That customer is loyal!!

How would you define a loyal customer? Would you suggest that customers who purchase for a fifth time are loyal? Some would, some wouldn't! In our example (not shown), 264 customers make it to a 5th purchase, 114 to a 6th, 46 to a 7th, 17 to an 8th purchase, 6 to a 9th purchase, 2 to a 10th purchase, and 1 to an 11th purchase. In other words, not many customers become loyal.

In total, this cohort of 10,000 first-time buyers generated $437,200 demand over twenty-four months.

Knowing that, you have a pretty short window to impact customers. Impact them when they have just purchased ... for the first time. Tomorrow, we'll take a look at the impact of moving customers along quickly within this specific simulation.

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