When I review how well you perform at your Customer Development duties, I typically look at three key attributes.
- Comparison of first-time buyer response in months 1/2/3 vs. other months (i.e. the Welcome Period).
- Annual repurchase rates for 1x / 2x / 3x / 4x / 5x buyers, to determine "when" a customer becomes loyal.
- 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, 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!
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