October 04, 2021

Wildly Different Levels of New Customer Quality

You pay Facebook $100,000 a month and let them do the work. You're a Marketer!

Do you remember when you were early in your career and the financial person arrived at your company and gave a long, windy discussion about "diversifying your 401k portfolio"?

What did you do? You listened to the woman. You did what she told you to do. She's the expert, you are the one with matching company funds that will someday retire using those funds.

You diversify your portfolio, correct?

The same thing applies to the customers you acquire. You don't just outsource the work to Facebook or to an Influencer and call it quits. You have numerous sources of new customers and those customers display numerous behaviors ... some positive, some negative.

This is data from an actual brand. Here are the 12-month rebuy rates for first-time buyers, modeled via Logistic Regression and ranked by decile. "1" represents the first decile, the best customers. "10" represents the tenth decile, the worst first-time buyers. What do you observe?

The best first-time buyers have a 58% chance of buying again in the next year.

The worst first-time buyers have a 28% chance of buying again in the next year.

Which customer would you rather acquire? The one with a 58% chance of buying again in the next year, or the one with a 28% chance of buying again in the next year?

New buyers possess wildly different levels of quality.

Now let's dig into the attributes that cause a customer to be likely to buy again vs. not willing to buy again.

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