January 21, 2021

Common Development Attributes on a First Purchase

When you look at first-time buyers, there are certain attributes that lead to "development". Not all first-time buyers are created equally. Few first-time buyers repurchase, and those that do are unlikely to ever become loyal buyers. Instead of having Loyalty Programs, we really should have Development Programs.

If we had Development Programs, we'd focus on the following customers.

Units: Customers who buy multiple items are better Development candidates than are customers who buy a single item in a first order.

Price: Customers who buy 2 items at $30 each are typically better than are customers who buy 2 items at $20 each.

Categories: Customers who buy 2 items from 2 product/merchandise categories are typically better Development candidates than are customers buying 2 items from 1 category.

Channels: There are always 2-3 marketing channels that yield better Development candidates than all of the other marketing channels. The channels are different for everybody.

Time: Acquire a customer in December? Yeah, it's easy and profitable, but those are customers who do not want to be Developed. You'll just sit there wasting money on them the rest of the year. If you really want a customer that can be Developed, focus on acquiring customers in September/October if your business has high Christmas seasonality. Why? You get to double-dip the customer (move the customer to a second purchase) at the very time when the customer is most responsive.

  • Yeah, you should take full advantage of this "tidbit" in your Fall 2021 planning.
  • Yeah, not that many people choose to take advantage of this "tidbit".
Existing Items: It is common for new buyers to skew toward existing merchandise. This tends to happen for three reasons. First, marketers tend to feature the stuff that works, and existing merchandise works better than riskier new merchandise. Second, Google has a long memory, and Google remembers existing items more than new items that Google hasn't seen ... so in my project work it is common to observe that Google pushes customers who like items you've always sold. Third, new customers tend to not want to take risks, therefore, they buy the stuff that everybody else loves. So look at "what" a customer buys in a first order. It's common for existing items to yield customers more willing to be Developed.

Above Average Priced Items: You have an item that sells for $30. Then you mark the item down to $20. When the item is sold for $30, it is sold "above average price". When the item is sold for $20, it is sold "below average price". It's typically easier to Develop a customer who buys items sold below the average price ... but it is typically easier to generate Profit from a customer who buys items sold above the average price. This is a fun dynamic to analyze, and is a dynamic that few (if anybody) ever analyze.
  • Analyze this dynamic.
I'm going to continue my focus on Customer Development next week. If you need help with your Customer Development efforts, contact me (kevinh@minethatdata.com) and click here for project pricing.

January 20, 2021

Customer Development: What The Customer Purchases Matters

Here I'm looking at first-time buyers who only bought one item. Remember, these are the customers in our example who are least likely to purchase in the future. So we need something ... anything ... to help us identify the customers in this meager cohort who are most likely to want to be developed.

We're looking at rebuy rates (annual) below.

Look at the product category the customers bought from for clues:

  • Category 2 = 23%.
  • Category 11 = 24%.
  • Category 16 = 18%.
  • Category 17 = 15%.
You're going to invest more energy developing customers who bought from Categories 2/11. There is a ton of urgency developing customers in Categories 16/17, because they are less likely to repurchase and therefore need to be acted upon in the Welcome stage (first three months after a first order).




January 19, 2021

Customer Development: Physical Channels

The physical channel where a first order comes in matters. Take a look at this.


We usually look at marketing channels (search, social etc.) ... but we should also combine in the physical channel that drove the order. Here we clearly see how the Desktop buyer is most likely to repurchase in the future.

The data make it really clear ... the marketer is going to have to work much harder to develop the first-time buyer via the app than via desktop.

Have a plan, peeps! Develop your customers.



January 18, 2021

Customer Development: Many Positive Attributes

Yesterday we talked about the fact that "some" customers want to be developed, while other customers have no interest whatsoever in development.

Take a look at this "combination" of attributes ... items and categories purchased from.


The customer buying one item from one category (obviously) has a 21% chance of buying again in the next year.

The customer buying 6+ items from 4+ categories has a 41% chance of buying again.

The 1/1 combination customer needs to be developed quickly (first three months). Welcome this customer and get busy immediately.

The 6+/4+ combination customer is developed all year long.

Again ... email (strong hint = personalized email) is the secret weapon in your development strategy. Personalize the merchandise you show to the customer, in an effort to develop great habits (multiple items per order, multiple categories per order, higher price points per item).






January 17, 2021

Customer Development: First Order Attributes

The customer tells us an awful lot while placing a first order. The customer is giving us all sorts of subtle hints about whether the customer wants to have a long-term relationship. Most first-time buyers don't want a long-term relationship. The customer had a want/need at a point-in-time, the need was fulfilled, and the customer leaves (theoretically) happy.

But some customers give away information, useful information!

You are like a Quarterback approaching the line of scrimmage. You are pointing out the middle linebacker. You might have two plays called, a run/pass option, and you have to decide which option you want to select. You might not want your run/pass option, you might audible out of your play into something else that suits the personnel you have on the field.

All of that is you. You are the Marketer, and based on what customers present to you following a first order, you decide to take advantage of the situation. You decide to develop customers.

Here's an example. We have first-time buyers, and we have annual repurchase rates illustrated in the table below.


In this example, the customer might order just one item ... the customer might order six or more items. The customer might buy inexpensive items, or the customer might buy expensive items.

Which customer has the best chance of being developed, based on annual repurchase rates following a first purchase?

A customer buying one item from a low price point has a 17% chance of buying again within a year.

A customer buying six or more items from high price points has a 44% chance of buying again within a year.

Yeah, you want to develop the customer with a 44% chance of buying again. Take some time and be planful here.

The customer with a 17% chance of buying again? That's a customer requiring a very different development strategy. That's a customer that is only responsive in the first three months following a first order, so you invest all of your energy within that window, then you let the customer go.

Know "who" needs to be developed.

Know "when" a potentially unresponsive first time customer needs to be developed.

Know "channels" (strong hint - personalized email) to use to develop customers.

Welcome the customer.

This is what Customer Development is all about.






January 14, 2021

Next Week

This week I introduced you to the idea of Developing Customers ... Customer Development.

Next week, I'll begin the work of sharing with you how customers evolve and change as time progresses ... and will share how you play a key role in the development of the customer.

You have all of these new customers, blessed to you by a pandemic. It's your job to do something with the customers if you want all of these new customers to become loyal. 




January 13, 2021

A Department Name

I drove from Ames, IA to Dodgeville, WI on a crisp fall day in November 1990. I had a job interview at Lands' End. I wanted to become their next Statistical Analyst ... something akin to the modern "Data Scientist" job title that is popular today. In time, I'd wear a pocket protector and a bow tie ... our team's way of fighting back against the opinions others had of us.

My position was part of a department called "Customer Planning and Development" ... "CP&D".

Customer Planning and Development.

The mission of our department was to plan (forecast) how customers would behave in the future, and then develop customers (through the only tool we had in 1990 ... the mailing of catalogs).

We had a lot of customer reporting, telling us how good of a job we did at developing customers. First-time buyers, developing buyers, loyal buyers, we had a process for developing customers. Sure, the reporting was antiquated compared to real-time insights obtained in 2021.

But the process was not antiquated.

It was at Lands' End where I learned the perils of over-investing in Emergent Customers and Loyal Customers. It was at Lands' End where I learned of the importance of new customers, of Acquisition. All of those concepts apply today.

What's missing today is the concept of "Developing" a customer.

COVID gave most e-commerce brands a whopper of a blessing ... with +20% comp segment gains on Emergent Customers paired with +50% to +150% gains in New Customer Acquisition.

During the second half of 2021 and first half of 2022, we will need to have a process in place to Develop customers.



January 12, 2021

Five Stages of Customer Development

At some point in 2021, enough of your customers will be vaccinated and/or have had COVID to allow some semblance of normalcy to return. Not "normal" ... I'm not confident "normal" is coming back and when it does come back it won't be like 2019 ever again ... but "normal" enough to shift your business out of the current mode it operates in.

For so many e-commerce businesses, the past ten months have been all about Acquisition. Most e-commerce businesses (aside from apparel) didn't even have to try hard, the new customers came flying in and have continued since.

So as things start to become "more normal", my e-commerce clients are moving into the third stage of Customer Development.


Acquisition was maximized without significant marketing activities or spend, for the most part ... though some e-commerce brands dumped marketing fuel on the fire and really maximized their opportunity.

The "Welcome" stage was utterly squandered. There needs to be a strong program in place to quickly convert the first-time buyer to a second order, and almost nobody puts in the effort to do this. That's a shame.

So with the opportunity squandered, the customers who self-selected themselves for a second purchase enter the Emergence stage. That's where a ton of effort will be expended in 2021 and beyond. The goal is to develop the customer so that "some" customers enter the Loyalty stage (typically after a fourth purchase ... when a customer has a 60% or greater chance of purchasing again).

The burgeoning Acquisition phase is going to end ... the Welcome phase will be squandered, and the Emergence stage becomes the biggest story of the second half of 2021. Marketers will have an opportunity to develop customers, moving them through the Emergence stage toward Loyalty.

Anybody not focusing on this framework and not developing marketing plans for the second half of 2021 and the first half of 2022 is squandering the enormous blessing gifted to e-commerce brands on behalf of a horrific pandemic.

Get busy, Dear Readers!

January 11, 2021

Customer Development

I mentioned last week that new customers are going to be a focus of my work in 2021. But it goes well beyond that. New customers are the first stage in the development process, called "Acquisition", of course.. It's generally the most ignored stage in the development process across my client base. That's a mistake.

The second stage is the "Welcome" period. The first three months after a customer is acquired are critical to customer development. If you do not convert the customer to a second purchase immediately, you waste your new customer opportunity. This process is almost universally ignored across my client base. That's a mistake.

The third stage is "Emergence". If you get a customer over the hurdle to a second purchase (which is very hard to do), your focus shifts to Emergence. Obtaining a third or fourth purchase becomes much easier. This is the stage where you shift your focus from marketing channels to merchandise preference, trying to expose the customer to every opportunity your brand presents to the customer.

The fourth stage is "Loyalty". The customer has a 60% (or better) chance of buying again in the next twelve months. This typically happens after a 4th purchase, though your mileage will vary. You harvest all of the profit necessary to keep your business moving forward. These customers were likely acquired a few years ago, but they are generating the money necessary to pay your salary today. Do not over-market to these customers and waste all of the profit they generate.

The fifth stage is "Retirement". The customer extracted everything the customer needed from your brand, and you extracted all of the profit you needed from the customer. The customer is being retired. Your job is to now communicate with the customer, but there isn't a reason to beg this customer for business. The financial aspect of the relationship is over. Use free tools to communicate, and if the customer wishes to purchase again, so be it. For the most part, the customer relationship has ended.

There are five stages to Customer Development in my framework.

  1. Acquisition
  2. Welcome
  3. Emergence
  4. Loyalty
  5. Retirement

January 10, 2021

Tough Decisions

At least two Analytics / Direct Mail individuals were involved in what happened at the Capitol last week.

Both organizations are obviously overwhelmed, given what you see on their websites. The Analytics brand scrubbed the site of the "About" section - you won't learn about the Leadership attributes of their Executive Team. The Direct Mail brand changed their website home page to a simple statement.

We'll all make choices in 2021 and beyond. It's bad enough we have to figure out how to deal with COVID in the workplace and in sales/profit. Now we've got another thing to think about.

January 06, 2021

January 6

I had a post written for today, but the events of January 6 are more important than my views about new and existing customers.

You've been through a lot in the past year. Persevere. I'll talk to you next week.

January 05, 2021

New Customers

All of my recent projects have a common theme.

  • "What happens when most people who want to be vaccinated are vaccinated and I'm not getting a COVID-bump anymore?" 
Good question!

That's what I'm working on these days ... forecasts that demonstrate what the future looks like ... analysis of the veritable plethora of customers who have been acquired, measuring who moves to loyal status and who disappears ... and careful analysis of merchandise performance given that so many of these COVID-newbies seem to prefer existing merchandise over new merchandise.

You'll be hearing a lot about new customers in the first quarter ... it's your #1 question over the past three months and is the subject of just about every email I've received in the past few weeks.

January 04, 2021

Attribution and Fraud

Stop what you are doing and read this tweet storm ... right now (click here).

I won't give away the plot ... you need to click on the link and read it for yourself.

I will say, however, that I continually see awful attribution solutions. I'll look at email mail/holdout tests, catalog mail/holdout tests, or experiments where the search budget is gutted for a month and observe that almost nothing changes when ad dollar investments are reduced. And yet? Vendors (and client Professionals who'd rather side with vendors than with their own p&l and yes that happens all the time) keep telling my clients that all these dollars are not wasted.

I spent one (1) year in the retargeting world (way back in calendar 2000) ... working for a retargeting startup. I witnessed the half of the employee base who acted with integrity, and I witnessed the half of the employee base who'd lie, cheat, steal, threaten employees, have relationships with various employees, and do just about anything awful to keep the dollars flowing. Too often, the awful half trumped the half with integrity.

Years ago, I wrote a booklet about holding your vendors accountable. I sold four (4) copies of the book. 

Four!

And when I'd bring the topic up on my blog, I'd get just as much criticism from client-based marketers as I'd get from vendors. Heck, I spoke at a conference about holding vendors accountable, and the client-side attendees chided me after the talk. That was a surprise.

Something needs to change.

You could be the person who acts with honesty and integrity, electing to protect your CFO. Why can't that person be you?


P.S.: One of my favorite moments of vendor fraud happened in a catalog mail/holdout test. The client didn't mail catalogs for three months. The vendor attributed 80%(ish) of the orders in the holdout panel to mailed catalogs ... even though the client didn't mail those customers a single catalog for three months. Let that one sink in. And when the fraud was discovered, the client chose to not change the attribution algorithm. Also let that one sink in. Rampant vendor fraud requires a willing client base to make the process work.


P.P.S.:  Follow this woman, please (click here). And subscribe to her newsletter here.

January 03, 2021

SIGN UP ON MONDAY MORNING!!

On January 6 at 1:00pm EST / 10:00am PST Bill and I will hold Office Hours for a small group of 25 students. The audience is limited to current catalog practitioners (there may be Office Hours in the future for different disciplines, but this is where we are starting). So if you want to participate, hold the date of January 6 at 1:00pm EST open on your calendar.

Frequently Asked Question?

  • How do I sign up?
Here's how I am doing this.
  • You can sign up at exactly 1:00pm EST / 10:00am PST on Monday, January 4. Not a minute sooner.
  • The first 25 time-stamped emails I receive from current catalog marketing practitioners (send your email to kevinh@minethatdata.com) are in. If your email arrives one minute prior to the deadline, it is thrown out. The next 10 time-stamped emails go on a waiting list.
  • You will receive e-mail confirmation that your Office Hours application has been accepted, wait-listed, or denied.
One catch:
  • Your email application MUST include a link to one industry article that you think is interesting, an article that you'd like us to consider for discussion during Office Hours. Here's an example of what I'm talking about (click here). Go ahead and tell me what you find interesting about the article and what you'd like Bill & I to consider discussing in relation to the article.
  • No link to an article, no acceptance of your application.
  • I will collect all of the articles that are submitted by all applicants ... and I will forward the list of all articles to all applicants, regardless whether your application is accepted, wait listed, or denied.
That's what I'm experimenting with, peeps. Let's try something different, and let's see how it goes.

It's time to sign up ... get your submission in!!!

Common Development Attributes on a First Purchase

When you look at first-time buyers, there are certain attributes that lead to "development". Not all first-time buyers are created...