March 31, 2021

The Master Sheet: Incremental Monthly Rebuy Rates

The Master Sheet tells us the story of how well your brand executes Customer Development strategies.

There are two "heatmaps" embedded in the Master Sheet. Let's look at the series of columns on the far left side of the Master Sheet.

This series of columns represents the probability of a customer buying again next month, given current Recency/Frequency status. Look at the top row. The cells are green, meaning that customers are responsive in the month following a purchase. One might say "duh", and that wouldn't be an inappropriate response. However, we need to have a baseline for comparing customer performance. If recency = 1 and frequency = 1 (brand new buyer), the customer has a 7.4% chance of buying next month. Now read down a row ... if the customer doesn't purchase, the customer falls to recency = 2 and frequency = 1, and the repurchase rate (a yellow cell) drops to 3.8%. If the customer fails to purchase again, the customer falls to recency = 3 and frequency = 1. Here, the customer has a 2.5% chance of buying again next month. Already the customer is lapsing. We repeatedly learn about the importance of a credible Welcome program, don't we?

Read across the recency = 1 row. As the customer upgrades via additional purchases, the customer becomes more responsive. At frequency = 1 the customer has a 7.4% chance of buying next month. At frequency = 2, the customer has a 10.0% chance of buying again next month. At frequency = 3, the customer has a 11.8% chance of buying again next month. At frequency = 4, the customer has a 13.6% chance of buying again next month. At frequency = 5, the customer has a 15.1% chance of buying again next month. You continue to "develop" the customer after each purchase, causing the customer to become more responsive (and ultimately, more "loyal").

Look at the strange "green" cells at recency = 12 months. Incremental monthly response (for this brand) increases at recency = 12 months, recency = 24 months, and recency = 36 months. Why does this happen? This is a classic "seasonality" dynamic that is so important in Customer Development. Customers who bought a product last September, for instance, become more responsive the following September if the customer has yet to purchase by then. Every credible Customer Development program capitalizes on seasonality.

There are additional trends worth pointing out.

Look at how quick the colors change from green to red (high response to low response) in the frequency = 1 column. The customer rapidly degrades, fades, lapses, becomes inactive. This is a common outcome in a Customer Development project. Your first-time buyers generally "don't want" to purchase again, and if they do purchase again, they do it quickly before spreading out and buying for a second time at lengthy time intervals.

March 30, 2021

The Master Sheet

The biggest prize in any Customer Development Project is the presentation of what I call the "Master Sheet".

Yeah, there's a ton of numbers in the Master Sheet. All of those numbers tell the story of how well you Develop Customers.

The Master Sheet is divided into five unique tables, five stories, by months since last purchase. We have incremental repurchase rates by recency, we have indices that tell us how much response increases as we move from a 1st to a 2nd to a 3rd to a 4th to a 5th to a 6th purchase. The indices are important, because I compare your indices against a family of brands, so that you can see how you "stack up" against the competition ... that's the middle of the table. In the middle of the table, I compare your 1x to 2x rebuy rates against the competition, and I compare the rate of growth in response for 2x / 3x / 4x / 5x buyers against the competition. Notice the colors in the middle of the Master Sheet. Greens are above-average (vs. competition), yellows are average, red/orange are below-average. This tells you how you stack up. Finally, I list cumulative repurchase rates after a purchase by months since that purchase, and then the yellow columns at the end of the table show us twelve-month rebuy rates at "recency = x" months.

Combine all of this data in the "Master Sheet", and we have the story of your Customer Development efforts!

More on the topic tomorrow. When you need to hire me to understand how your Customer Development efforts stack up, email me here ( and click here for project pricing.

March 29, 2021

Climbing The Ladder

Take a look at customers who just purchased (read across the Recency = 1 row).

Look at how hard the marketer has to work to encourage a customer to become loyal. When the customer purchases for the first time, the customer has (in this example) a 26.8% chance of buying again in the next year. I mean, that customer is not likely to buy again.

Eventually the customer migrates across the spectrum, and at a fifth purchase the customer has a 63.3% chance of buying again. The customer is loyal.

As the customer climbs the ladder toward loyalty, annual repurchase rates increase consistently ... 26.8% after a first purchase ... 40.0% after a second purchase ... 49.3% after a third purchase ... 57.1% after a fourth purchase ... 63.3% after a fifth purchase ... 68.7% after a sixth purchase ... 73.1% after a seventh purchase.

Where is the largest "delta" after a purchase? After the first purchase ... going from 26.8% to 40.0%. With each additional purchase, the delta gets smaller. You get the most "value" moving a customer from a first purchase to a second purchase.

Run the table for your brand. Tell me what you observe (

March 28, 2021

Channels Play a Big Role in Customer Development

Each marketing channel plays a role in the development of customers. Take a look at this example.

This is such a common outcome. The vast majority of marketing channels speak to a customer in the Acquisition/Welcome phase. By the time the customer becomes Loyal, the customer is an email shopper.

The email issue is interesting, because so many marketers treat email as the discount / throwaway channel. Got too much of a specific item? Throw the items away via 60% off in email marketing. That's not how you Develop a Customer ... rather, that's not how you should develop a customer!

Use your marketing channels wisely! The customer will develop, and you don't want to hinder development by misusing a channel.

March 25, 2021

Meanwhile in China ...

Read through this thread on Twitter (click here). I promise you will learn something about E-Commerce and Customer Development. The analysis shows just how far behind so many of us have fallen.

March 24, 2021

The Roaring 20s

If you saw my upcoming project load, you'd become convinced that we "might" be headed toward very interesting times.

Following World War One and the Spanish Flu, we experienced the Roaring 20s ... 1920s that is. A period of significant economic expansion.

With one COVID shot in the book and another scheduled for ten days from now, I'm closing in on my "golden ticket" ... a re-entry into society. By mid-late summer, those who want to be vaccinated will be vaccinated. Those individuals will want analog-world experiences, after being locked-into digital experiences for sixteen months.

I don't have data to prove it, but my project load is increasing, and I suspect households are looking forward to attending a baseball game, a play, Saturday night at a bar, or dinner at a bistro or dive.

Maybe we won't have the Roaring 20s ... 2020s ... but something positive is coming.

March 23, 2021

Life Cycle Purchases

Take a look at this image.

Each of my major project types serves a portion of the audience. My "Elite" program serves my most loyal customers. My Business Evaluation project primarily serves first-time customers looking to understand why their business is not meeting expectations. Customer Development projects are newer, and were initially pitched to my most loyal customers. Since then, the project has been a great way to find new customers.

Traditional Catalog Contact Strategy projects speak to catalog-centric brands who do not have a long-time relationship with me.

Finally, ad-hoc projects speak to my most loyal customer base. These clients have interest in other work that isn't easily categorized. Because of the long-term relationship we have, we figure out a way to get work done.

Acquisition clients focus on classically defined projects.

Welcome / Emergence customers begin the shift to my Elite Program and Ad-Hoc work.

Loyal customers love the Elite Program and Ad-Hoc work.

Now, if this relationship exists for my business, imagine what you'll learn in a Customer Development project if you look at the items that your customers purchase, based on the life-cycle of the customer?

March 22, 2021

Your Plan

So I'm in on a conversation and the "brand" is pummeling the vendor. Sometimes vendors deserve to be pummeled, but let's be honest, it is common for "brand employees" to beat up vendors because they've been beat up by in-house co-workers and somebody needs to absorb the punishment.

Anyway, I'm in on a conversation and the marketer at the brand is beating up the vendor about Customer Development. The marketer expects the vendor to toss in a bunch of free Customer Development activities. And you can tell that the vendor is uncomfortable ... uncomfortable to have a bunch of hard work handed to them, work that will not be monetized, work that will cause them to be beaten up.

We all have a framework for developing our customers.

Each cell in the image above requires a strategy. Not your normal "we'll be great at paid search", that's not a strategy within a Customer Development framework ... that's a paid tactic.

What are you going to do at a customer-level that is "different" and "unique" for the customers in Welcome / Emergence / Loyalty phases, by recency segment?

P.S.: The most common response I get to that final question is "I don't know". That's ok. It's much worse to know what to do and then not do anything.

March 21, 2021

Retargeting and Customer Development

We've all been there. We buy from Walleye Direct, and six hours later we see this.

Twitter is a place where reason and digital best practices crack skulls. One person tweeted that he bought a washer/dryer, then spent weeks seeing washer/dryer ads though he just bought a washer/dryer. Same thing happened to me. I bought a Dell laptop last June and for six months I was continually "retargeted" by Dell to buy a laptop.

Then the digital gurus pile on in the opposite direction. "It's cheap", "It's branding", "the ROI is too good (never mind lousy attribution models designed to benefit retargeters", "it's practically free". They seldom say, "yeah, the strategies we promote are stupid, lazy, redundant."

Here's what we know.
  • When a customer buys for the first time, you have between 30 and 90 days to encourage a second purchase before the customer begins to lapse.
  • Customers who buy from multiple merchandise categories are more valuable than are customers buying from one merchandise category.
So retargeting has a place. But do something valuable with it. DEVELOP a customer. Cross-shop the customer into adjacent merchandise categories. Tell a brief story. Do anything ... anything ... but sell the darn customer the exact same item the customer just purchased, especially when the customer only buys that item once every "x" years.

Develop your Customers.

March 18, 2021

Customer Development and Velocity

Velocity becomes an important concept in the Emergence stage of Customer Development.

What is "Velocity"?

  • (Life To Date Orders) / (Months On File / 100).
Example #1:  Customer placed three orders and has been on the file for 20 months. Velocity = 3 / (20/100) = 15.0.

Example #2:  Customer placed three orders and has been on the file for 27 months. Velocity = 3 / (27/100) = 11.1.

In the first example, the customer orders 15 times per every 100 months.

In the second example, the customer orders 11.1 times per every 100 months.

The customer in the first example has a faster "Velocity" ... the customer orders more often.

If you are targeting customers as they go through the Emergence stage, go after customers with the fastest "Velocity". In my regression models customers with the fastest "Velocity" are most likely to become Loyal.

Once the customer becomes Loyal, Velocity becomes much, much less important.

If you want to evaluate cohorts of acquired customers, be sure to measure their average Velocity over time. You'll likely see that some cohorts have poor Velocity, signaling key issues with the customers you acquired.

March 17, 2021

The Welcome Model

Here's the outcome of a Welcome Model for a recent project:

  • Most Important Variable = Merchandise Category Purchased From.
  • Second Most Important Variable = Number of Merchandise Categories Purchased From.
  • Third Most Important Variable = Number of Items in a First Order.
  • Other Variables = Channel Purchased From, Price per Item Purchased.
It's all about merchandise, in this case. Repurchase rates varied by 50% (i.e. a 20% rebuy rate could be 10% or could be 30% based on "what" category the customer bought from). That's a big deal! Your website should recognize who visits, and based on who visits, should offer products to first-time buyers that lead to higher rebuy rates ... and consequently ... better Customer Development.

What if the customer wants to buy something that leads to low long-term value? Well, if you can generate profit doing that, go ahead and pocket the profit. But the customer isn't coming back, so strongly push for a second purchase during the Welcome timeframe and then let the customer go.

When you think about Developing Customers instead of Converting Customers, you take a very different approach to growing your business, don't you?

March 16, 2021

A Common Customer Development Trend

Since about June 2020, clients have been asking me a simple question:

  • "Will all of these new COVID-fueled customers convert at the same rate that comparable pre-COVID customers converted?"
When I model future buying activity among new buyers, the number of items purchased in a first order and the number of merchandise categories purchased from play a key role in determining future value.

Would you rather acquire a customer buying 3 items from 3 categories (30.2% rebuy rate) or a customer buying 1 items from 1 category (20.8% rebuy rate)?

This is where the fusion of marketing brilliance and merchandising talent intersect. It is so darn important to encourage a customer to buy "multiples" in a first order.

In my Customer Development projects, I create a Welcome Model designed to identify who is most likely to purchase in the next year. The models adore "multiples", which means that a "one-and-done" customer might be profitably acquired, but you haven't built a framework for Developing Customers.

If you want a Loyal customer in two years, get your prospect(s) to buy "multiples" on a first order.

March 15, 2021

Types of Customer Development

There are many ways to navigate Customer Development. All tactics are serviceable, all have a place.

Influencer-Based Customer Development is popular, of course. Find an influencer, pay the person with products or cash or whatever, collect the orders. It is not a method to build anything long-term, and it is a method that allows you to navigate the Acquisition phase effectively.

Merchandise-Based Customer Development is a common strategy, one that works wonders. When Kohl's adds Sephora to their stores, they're employing a Merchandise-Based Customer Development strategy. In theory, the strategy works well across all stages.

Addressable Customer Development is most effective, of course. Email, Notifications, Print, it's a series of tactics designed to speak to an individual.

E-Commerce Customer Development is the process of merchandising the online pages the customer browses. Creative, personalization, merchandise assortment, they all fit together.

Mass Advertising Customer Development is like when Stitch Fix advertises on television. Costs are likely high, but it is a key way for a brand with sufficient long-term value to find new customers.

Digital Customer Development focuses on paid search, SEO, retargeting, general social media, etc.  The tactics are highly effective in the Acquisition stage.

Vendor-Based Customer Development is littered across everything you read. OMNICHANNEL! The strategies work ... when applied properly. When applied in a manner that benefits the vendor, well, just take a look at the ruined retail landscape for examples of the damage created by Vendor-Based Customer Development. The best marketers apply Vendor-Based strategies appropriately. Average marketers cut-and-paste, leaving their brands harmed.

There are many other examples ... no need to go into more detail here. Your job is to leverage each tactic appropriately, within each of the five stages of Customer Development.

March 14, 2021

Seasonality, Part 2

Here's the image we ended last week with.

I asked you to study what happened 11/12 months after a first purchase. Remember, "Incremental Rebuy Rates" represent the probability of a customer purchasing "x" months after a prior purchase, given that the customer has yet to buy again.

Read down the "1x to 2x" column under "Incremental Rebuy Rates". The customer is somewhat responsive right after a first purchase. After three months, the customer quickly becomes unresponsive. Once again, we are shown the clear value of a Welcome Program.

But at month 10 something changes. The customer starts to become "more" responsive, in direct opposition to all of the rules of classic "RFM" modeling.

Why would a customer become more likely to buy approximately one year after a purchase?

It's seasonality!!

When I worked at Lands' End in the early 1990s we had a thriving swimsuit business. Every year in March/April we'd have an increase in response, driven by seasonal buying of our merchandise offering. I used to create maps for our merchants showing response rate increases for swim in Florida in January, South Carolina in February, the Upper Midwest in March (spring break), the mid-south in April, and then again in the Upper Midwest and New England in May/June.

Your Customer Development strategy needs to incorporate your merchandise offering. When you offer products that are bought at specific times of the year, you change your marketing strategy accordingly.

March 11, 2021


Let's take a look at an average of monthly rebuy rates, cumm'd into annual rebuy rates. In particular, take a look at what happens in months 11/12.

What do you think is happening there?

We'll pick up the discussion on Monday. Think about why Customer Development suddenly surges in months 11/12?

March 10, 2021

Customer Development: The McRib Sandwich and the Shamrock Shake

Customer Development in fast food is different than it is at Orvis. Your job is to get the customer to buy from you several times a month, not five times over two years.

That's where merchandise plays a key role.

The McRib isn't available at all store or at all times. It's a surprise.

Or on a seasonal basis, you have the Shamrock Shake (and in the old-school days, you could get a mix of shamrock & chocolate, and that was a satisfying blend).

All of you have products that have either a seasonal component, or could be leveraged in a way where you don't sell the product at all times in all channels. Why not create some scarcity, and use scarcity as a Customer Development strategy?

March 09, 2021

Customer Development: Oil Changes

Certain industries do an outstanding job of Developing Customers.

Maybe you buy tires at Les Schwab or Discount Tires or Big O Tires if you live out here in the West. How often do you need tires? Certainly not every year.

So what does a Tire Brand do to foster Customer Development?

Yup - you need an oil change. To keep you loyal and active between infrequent tire purchases, your local tire brand has all sorts of merchandising strategies designed to keep you active, moving you along the Customer Development spectrum from Welcome to Loyalty.

Alignments come to mind as well.

Your company has similar tactics available to you. Just use them! There's no need to destroy gross margins by offering 40% off everything in a desperate effort to improve response/conversion. Craft your own Customer Development strategy using the merchandise you already offer. Get busy!!

March 08, 2021

For E-Commerce Brands: Customer Development

Yesterday I shared with you the most popular catalog-brand project request.

Among e-commerce brands, it's all about Customer Development (click here).

The catalog brand looks to optimize how much the catalog brand spends trying to convert customers. The e-commerce brand lacks the Customer Development abilities of print, consequently, the e-commerce brand needs alternatives to develop customers. That's what I am working on with e-commerce brands, trying to convert this huge glut of COVID-fueled buyers (or trying to minimize the decrease in buyers caused by COVID).

March 07, 2021

For Catalog Brands Only: A Primer on Contact Stream Optimization

For the third of the audience that are catalog brands, here is a primer on how I currently manage Contact Stream Optimization (click here). Email me ( when you need assistance.

Among my catalog client base, this is currently the most popular project request. Many catalogers are trying hard to save money by not over-mailing all of the digital customers acquired during the pandemic. You should count yourself in that camp as well.

March 04, 2021

Engagement in Customer Development

Booklet readers (click here) will recognize this image.

In my project work, I like to review (at minimum) how many times the customer performs email clicks, site visits, and pages viewed.  From a Customer Development standpoint, each "engagement touchpoint" adds to increased response for a short period of time. Engaging on social media might increase response for a day. Engaging via a typical website visit might increase response for two weeks. Engaging via email marketing (click through a campaign - only actions matter, opens are not relevant in my models) might increase response for a month.

If you want to be a master at Customer Development, you'll have programs in place that cause customers to interact with you on a period basis. You essentially become a media brand in addition to e-commerce. It's a prerequisite for success in 2021.

March 03, 2021

Elements of Customer Development You Control

I talk a bit about this in the booklet (click here to purchase).

For an average client, your merchandise assortment is responsible for +/- 60% of what you sell. If advertising is responsible for 80% of your sales, you've done something wrong. You want customers to buy from you simply because of what you sell.

So you control what you sell.

You control what your customer sees when the customer arrives at your website. Showing every customer the same thing every time worked in 1999, it doesn't work in 2021. Well, it works, but it is highly sub-optimal.

You control the notifications you send to your customer. Every night Clubhouse is sending me a couple of notifications every hour. Most of it is garbage, of course (How To Make $10,000 A Month ... Blurring Boundaries of the Forth Industrial Revolution ... How To Launch A Podcast). But that's not the point. The point is that they're working overtime to let me know to interact with the app. The same concept applies to Orvis. I can get notifications from Rakuten about what retailers want me to buy but I can't get notifications directly from retail brands. Tells you something, doesn't it?

You control every aspect of your email marketing program. Most of us don't personalize anything. My team personalized email campaigns at Nordstrom in 2001. Tells you something, doesn't it? Clients who personalize email campaigns get 10% to 50% gains in productivity, and that greatly accelerates Customer Development.

You control all print marketing activity. Old school catalogers still generate half of their sales from print, stunning as that may sound. They know something about Customer Development that most e-commerce brands fail to understand. Of course, that level of knowledge comes at a cost, a cost that paper reps, printers, and postage mavens love.

You control your loyalty program. Points, discounts, promotions, perks. All of this gets communicated in an outbound manner. Use this real estate wisely.

You control your audio and video efforts. Podcasts. YouTube. Instagram. Tik Tok. Every brand great at Customer Development has a credible Audio/Video program. I've worked with several brands who are essentially old-school television stations, sans linear programming. It's a no-brainer, folks.

You control a lot of stuff, but I'm not interested in itemizing everything you control. I'm interested in seeing you do something to facilitate the Customer Development process.

March 02, 2021

Post-COVID Customer Development

Your annual repurchase rate will determine how your brand will emerge out of COVID.

Many of you possess annual repurchase rates < 25%. Your COVID-bump will end when COVID simply becomes a persistent irritant. There will be a ton of pent-up demand for in-person activity. Some of your new customer acquisition gains may continue, most of 'em won't, and with a low repurchase rate your business will revert to a "new normal" quickly.

Annual repurchase rates between 25% and 40% will experience a different dynamic. Their gains will not be temporary, but they won't be lasting either. Expect a year of "compound interest" paired with contraction. In other words, as new customers revert back to a "new normal", you'll see a contraction in sales. However, all of the customers you acquired pay you back compound interest for a year (+/-), offsetting some (or all) of the sales loss from reduced new customers.

Annual repurchase rates between 40% and 60% will have 2-5 years of compound interest that offsets the sales losses from fewer new buyers. This is a fabulous place to be. My simulations show that these brands will be able to fund all sorts of innovation if they budget their profits wisely.

If you are a rare e-commerce brand with annual repurchase rates beyond 60%, you'll be printing money for years because of COVID (assuming your new customer counts thrived as a consequence).

March 01, 2021

Lots of Customer Development Options

If you want to learn about Customer Development at a high level, you simply click here and read for free. This document has been downloaded nearly a thousand times, so there's some interest here.

If you want more explanation and details, you click here and buy the book.

If you are looking for your own, personalized Customer Development project, I have one (1) slot that just opened up from March 15 - April 10. Send me an email ( and heck, before that, click now on the project pricing page so you have an idea of what you'll need to provide for me in order to get started.

Customer Development is the story as we emerge from COVID to find ourselves in a different world. Find out what you'll need to do with all the extra customers you have, or find out how to rebound from being closed at times in 2020-2021.

Alex Morgan (Yes, This Will Be About Merchandise)

When the USWNT Olympics Team was announced, all-time great Alex Morgan wasn't on the team. Nor was she on the four player alternate list...