Your annual repurchase rate dictates everything about your investment strategy, doesn't it?
When you retain 20% of last year's buyers, your newly acquired buyers have minimal long-term value, requiring you to make money on the acquisition transition.
When you retain 50% of last year's buyers, your newbies generate a healthy amount of long-term profit. You get to make an important decision:
- Do I want to generate a TON of short-term profit and sacrifice long-term growth?
- Do I want to "scale" my business and lose money for several years but then have a much larger business that generates a ton of future profit?
Most of the businesses I've worked with that retain 50% of last year's buyers choose short-term profit. It's a choice, and there isn't a right/wrong one. But you can have a huge brand that is wildly profitable if you execute the latter strategy.
When you retain 80% of last year's buyers, you can lose a FORTUNE acquiring the customer because the customer will pay you back for years. Years!!!
Marry your acquisition strategy to downstream customer dynamics. You almost have to make money on the initial transaction if you manage a business with a low annual repurchase rate.