April 08, 2021

The Master Sheet: Customer Value

Here's the Master Sheet we've evaluated for more than a week.

Today we'll look at the portion of the table on the far right, colored in yellow. Here I look at annual repurchase rates based on the life-stage the customer is at. Say a customer has a recency = 6 months and frequency = 2. This customer has a 32% chance of buying again in the next year.

When a customer becomes loyal, I like to look at "how long" the customer stays loyal. For this brand, the customer achieves a 60% chance of repurchasing again after a 5th purchase. Read down the 5x to 6x column on the far right side of the table. How many months does the customer stay above the 60% "loyalty" threshold?

Two (2) months. 

That's it.

This company has some work to do if it wants to maintain a loyal customer base, doesn't it?

This is how we use the Master Table. The Master Table tells us all of the Customer Development secrets needed to determine where the marketer should invest time, energy, and money.

In this case, the marketer has several opportunities.
  1. A Welcome Program.
  2. All Buyers Purchase for a Second Time.
  3. Recently Minted "Loyal" Buyers.
Now go get busy creating your own Master Sheet. And if you don't have the resources to create your own table, contact me (kevinh@minethatdata.com) for project pricing (click here).

April 07, 2021

The Master Sheet: Cumulative Repurchase Rates by Month

Back to the Master Sheet.

Today we're looking at the fourth section ... the lavender section of the table. For customers buying for the 1st / 2nd / 3rd / 4th / 5th times, I measure the cumulative repurchase rate by months since the purchase in that column/segment.

Remember, this brand does a good job of Developing lapsed first-time buyers. We see this fact in this portion of the table. 13% of first-time buyers repurchase within three months, 27% repurchase within a year, 40% repurchase within two years, 49% repurchase within three years, and 55% repurchase within four years. I don't see this dynamic happen often. In e-commerce in particular, once the customer gets beyond 13 months the customer generally disappears. That's not what we observe here. Because this brand does a fantastic job of Developing lapsed buyers, repurchase rates for first-time buyers extend beyond the 0-12 month timeframe.

This brand does not do a great job of Developing customers who have purchased for a second time, and as a result rebuy rates for 2x buyers are at 40% after twelve months. It takes five purchases before the customer becomes loyal (64% rebuy rate after twelve months for 5x buyers).

This brand needs to address the Welcome Period, and this brand needs to address Development of 2x buyers. There's a lot of good happening here, but there is plenty of room for improvement as well.

April 06, 2021

The Master Sheet: What Is This Company Doing Well?

Let's start with the Master Sheet.

What is this company doing well? Let's look at the areas in the middle heatmap of the table that are colored green? There's an obvious column that is colored green. First-time buyers beyond about 9-10 months of recency index high. In other words, this company does an outstanding job of Developing lapsed first-time buyers.

To be honest, this is a common outcome for brands that still employ catalog marketing. Catalogs are (expensive and potentially unprofitable) fabulous tools for increasing Customer Development, especially among lapsed buyers.

Keep looking at 1x Rebuy Index column. What do you see in months 1/2/3 for first-time buyers? You see an indexed value < 1.000. This company is about 20% worse at Welcome Programs than my baseline suggests this company should be. That's a bad outcome. This company needs a better Welcome Program, or simply needs a Welcome Program, period.

Look at the column next to the 1x Rebuy column, labeled "Change 2x vs 1x". This column is the indexed outcome of comparing how response increases as a customer purchases for a second time. What color are the cells? They're largely orange, meaning that this brand is about 10% to 15% less effective at increasing response among second-time buyers than my baseline. This brand does not do a good job of Developing customers who purchased for a second time.

What colors do you see for customers who purchased for a 3rd/4th/5th time? Most of those cells are yellow, meaning that this company does an average job of Developing customers through Emergence and into Loyalty.

What grade would I give if I had to evaluate this brand? Probably a C+. The brand does a lousy job of managing the Welcome period, it does an exceptional job of Developing Lapsed first-time buyers, it does a below-average job of developing second-time buyers, and it does an average job of pushing customers through Emergence into Loyalty.

What would you do to fix this outcome?

Think about that question for the next day, ok?

April 05, 2021

The Master Sheet: Comparing Your Customer Development to a Baseline

Ok, it is time for the grand reveal!

Yesterday we talked about Customer Development Indices. We compare how much more responsive 2x (two purchase) customers are than 1x, or 3x vs 2x, or 4x vs. 3x, or 5x vs. 4x.

There are five columns in the middle of the table, forming a heat map. Let's review each column.

  • 1x Rebuy:  Here I index your first-time buyer repurchase rate by recency against the baseline I've developed. A value below 1.000 means your Development tactics result in below-average performance. A value above 1.000 means your Development tactics are above-average.
  • Change 2x vs. 1x:  Here I compare how well your response increases as a customer buys for the second time vs. the baseline I've developed.
  • Change 3x vs. 2x:  Same metric, but for third-time buyers.
  • Change 4x vs. 3x:  Same metric, but for fourth-time buyers.
In the heatmap in the middle of the Master Table, you see three general colors. Green is above-average ... you are doing well. Yellow means you are performing at about average. Orange/Red means you are performing below-average.

Tomorrow we'll talk about what we see in the middle of the table. For today, try to interpret the results and consider what the implications of the findings are.

April 04, 2021

The Master Sheet: Indexed Performance by Frequency Segment

When I review how well you perform at your Customer Development duties, I typically look at three key attributes.

  1. Comparison of first-time buyer response in months 1/2/3 vs. other months (i.e. the Welcome Period).
  2. Annual repurchase rates for 1x / 2x / 3x / 4x / 5x buyers, to determine "when" a customer becomes loyal.
  3. Gains in response after a 2nd purchase, after a 3rd purchase, after a 4th purchase, and after a 5th purchase. These gains are called "Indexed Performance".
Look at the top row of the farthest left columns in the Master Table.

At recency = 1 month, first-time buyers have a 7.4% chance of buying again.

At recency = 1 month, second-time buyers have a 10.0% chance of buying again.

Indexed Performance for 2x buyers vs. 1x buyers is 10.0/7.4 = 1.351.

For every recency level I calculate Indexed Performance for 2x-vs-1x buyers, for 3x-vs-2x buyers, for 4x-vs-3x buyers, and for 5x-vs-4x buyers. The salmon-colored cells in the table illustrate Indexed Performance.

Why do I care about Indexed Performance?

Simple. I get to compare your Indexed Performance against a baseline I've developed across many brands. I get to see how well you Develop Customers against the baseline. If you have weaknesses, I get to see your weaknesses. If you have strengths, I get to illustrate to you what your strengths are.

Your homework assignment is to look up and down the salmon-colored section of the table. Tomorrow we'll address the middle portion of the table ... the meaty section that determines if you do a good job at Customer Development or not!

The Master Sheet: Customer Value

Here's the Master Sheet we've evaluated for more than a week. Today we'll look at the portion of the table on the far right, col...