July 27, 2020

Equalization

Here are annual repurchase rates by recency/frequency combination for a "brand".


Yellow colors are important ... yellow cells represent cases where a customer has a minimum annual repurchase rate of about 35% (which isn't anything to write home about). There are different customers who are essentially "equal" in terms of repurchase rate.
  • Recency = 18 months, Frequency = 6 orders.
  • Recency = 16 months, Frequency = 5 orders.
  • Recency = 12 months, Frequency = 4 orders.
  • Recency =   9 months, Frequency = 3 orders.
  • Recency =   4 months, Frequency = 2 orders.
All of those customers are essentially "equal" in terms of repurchase rate. Each time you get a customer to repurchase, you buy yourself more time to convert the customer next time.

Notice that not a single first-time buyer in the example above has a 35% or better annual repurchase rate. First-time buyers are unlikely to repurchase again ... this is why Welcome Programs are so darn important. You spent all that money acquiring the customer, why not focus on getting a second purchase out of that customer before the customer goes dormant?


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