December 08, 2020

Consistent Behavior

I've analyzed customer behavior for about 250 brands. And there is one things that is consistent across the 250 brands.

  • When you acquire a customer, the customer quickly tells you who the customer is.  
What do I mean by that?

I've told you this story before ... when I worked at Nordstrom, Oprah blessed us by sharing with her audience of tens of millions of devoted viewers a key item that was ... sold at Nordstrom!

New customers rolled in the door. They flooded the customer file.

Thirty days later my team analyzed the glut of customers blessed upon us by Oprah. The customers weren't repurchasing. A retail newbie might have had an 8% rebuy rate in the first month after acquisition. An online newbie might have had a 5% rebuy rate in the first month after acquisition. The Oprah newbie? Maybe 2%.

We followed the cohort of newbies for a year or so, until we were convinced that the customer wasn't coming back. We should have been convinced after two weeks, but we gave it a lot more time just to be sure.

The customer tells you (when lumped in with similar customers) ... really, really quickly ... whether the customer wants to have a relationship with you. You can influence the trajectory. Take the 2% rebuy rate after thirty days for the Oprah customer and influence it up to 3%. That's a good outcome. But you won't move it up to 5% like the online buyer or 8% for the retail buyer.

Customers exhibit consistent behavior. From day one, they tell you whether they're coming back or not. If you partner with an Influencer and you get 50,000 new customers, good, as long as you generated profit acquiring the 50,000 customers you did well. But from that moment forward, the customer is telling you who s/he is. If the customer isn't repurchasing after a few weeks, odds are the customer is already a lost cause.

P.S.:  Every month, you have a baseline performance for a new customer. Maybe it is the customer who buys online without attribution, maybe the customer is the customer who buys via paid search. Regardless, every month, take the baseline customer, segment them, and then follow the customer month-by-month. Compare all sources of acquisition against the baseline customer, measuring sales, return rates, gross margin percentages, ad cost expenditure, promotional expenditures, pick/pack/ship expenses. All of it. By segment. By month. Compared against your baseline. Then stop wasting money on sources of customers that do not meet your objectives.

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