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.

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