December 07, 2020

Velocity

Velocity is a simple concept in marketing. Here is the metric:

  • Velocity = (Life to Date Orders) / (Time on the Customer File).
Example:
  • Customer has 2 life-to-date orders, and has been on the customer file for five months.
  • Velocity = (2) / (5) = 0.400.
Example:
  • Customer has 3 life-to-date orders, and has been on the customer file for thirty-six months.
  • Velocity = (3) / (36) = 0.083.
Does Velocity matter? Yes!

Here is a graph for 0-3 month buyers with exactly two (2) life-to-date purchases. We're measuring repurchase rates in the month of October. Look at the odd relationship in the graph.


High-Velocity (two purchases in two months)?  A very high probability of purchasing again next month.

Mid-Velocity (two purchases in five months)?  A comparatively low probability of purchasing again.

Low-Velocity (two purchases in twenty months)?  A middle probability of purchasing again.

The High Velocity customer outcome is entirely expected ... again, this is why I harp on a Welcome Program all the time. Get that 1x buyer to a 2nd purchase immediately, and you end up with the case on the far right side of the graph. I wouldn't lie to you about the importance of Welcome Programs.

The Mid-Velocity customer outcome is somewhat unexpected in comparison to the Low-Velocity customer. The Low-Velocity customer has one advantage ... s/he has been with the brand for a long-time, and that "time with the brand" translates into Low-Velocity which translates into more familiarity and a modestly higher chance of buying again.

But the biggest takeaway of this analysis is on the far right side of the graph. Get that first-time buyer to purchase again immediately via a credible Welcome Program and you end up with a highly responsive customer who has a good chance of buying for a third time.

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