October 10, 2019

Customer Life Cycle Matters

This is one of my favorite tables in the "Hillstrom's Pricing" booklet.

In the table, I look at share of annual demand that is attributed to various attributes. 

Look at the most loyal customers ... those with 26+ life-to-date orders. They like items $0.01 to $9.99 more than any other segment ... and this is a pricing segment that the brand being studied is vacating. In other words, the most loyal customers are being starved of the merchandise they like.

Look at the "Above Average Item Price" and "Below Average Item Price" rows. First-time buyers spend 76% of their volume on items priced at/above the average price for a specific item. However, the most loyal customers spend 64% of their volume on items priced at/above the average price for a specific item. In other words, the most loyal customers either know how to look for bargains, or are being given bargains. Either way, this probably isn't a good dynamic.

Look at the "% New Merchandise" row. First-time buyers spend 35% of their volume on new items (new in the past year). The most loyal buyers spend 51% of their volume on new items. In other words, newbies are attracted to stuff that has always worked, while loyal customers want a fresher assortment.

In a pricing project, I can easily set up new/existing preference variables ... so that you can target customers appropriately. When a loyal customer visits the website, show the loyal customer something fresh and interesting (and likely, something at a low cost).

Hillstrom's Pricing.
  • $8,500 through 12/31/2019, $12,000 thereafter.
  • Included FREE when you purchase a TOTAL PACKAGE PROJECT.

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