There are two columns in our Life Table (click here to see the table - the table isn't emulating properly via email).
The "Monthly Rate" is the probability of a customer who has yet to repurchase through "x" months repurchasing that month. Tell me what you observe as you look down that column?
The "Cumm Rebuy" column represents the cumulative probability of a cohort of new customers repurchasing over time. After twenty-four months, 39.1% of first-time buyers (in our example ... actual data) have purchased for a second time.
Read down that column (Cumm Rebuy). How many months does it take for half of the audience to repurchase?
- About two (2) months.
In other words, if you don't convert the customer (quickly), it quickly becomes unlikely that the customer will repurchase.
Look down the "Monthly Rate" column ... go to month = 17. If the customer has not purchased for a second time after sixteen (16) months, the customer has a 0.75% chance of buying again in month = 17. Yeah, in other words, the customer has close to no chance of repurchasing that month.
The customer is highly responsive in months 0/1/2/3, is somewhat responsive in months 4/5/6, then begins to lapse, and by month = 14 the customer is dormant.
As marketers, we think we can get the customer at month = 14 to "reactivate". Let's say we increased repurchase rates that month by a whopping 30% (which won't happen). The incremental repurchase rate changes ... from 0.97% to 0.97*1.3 = 1.26% ... still close to zero.
Meanwhile, imagine increase rebuy rates by just 10% for customers at month = 2 ... the rate that month goes from 4.6% to 5.1%.
Go after your new customers during the compressed timeframe when they are most likely to respond. Don't let your opportunity slip away, ok?