January 05, 2022

Getting Loyalty to Work

Annual Repurchase Rates are highly correlated with Annual Purchases per Reactivated Buyer.

In other words, if your twelve-month buyer file has a 30% rebuy rate, those who do repurchase are likely to purchase maybe 1.7 times per year.

If your twelve-month buyer file has a 75% rebuy rate, those who do repurchase are likely to purchase maybe 6.0 times per year.

This is where loyalty efforts should be studied.

Let's say that the goal of a loyalty program is to get customers to purchase 10% more times per year.
  • 30% Rebuy Rate:  1.7 purchases per year * 0.10 = 0.17 additional purchases. Multiplied by a 30% rebuy rate = 0.05 additional purchases.
  • 75% Rebuy Rate:  6.0 purchases per year * 0.10 = 0.60 additional purchases. Multiplied by a 75% rebuy rate = 0.45 additional purchases.
You'd barely notice 30% of customers buying 0.17 additional times per year ... it's 0.05 additional purchases per twelve-month buyer.

You're more likely to notice 75% of customers buying 0.60 additional times per year ... it's 0.45 additional purchases per twelve-month buyer.

See how the math worked?

That's the thing about loyalty programs ... you must manage a high-rebuy customer base purchasing a half-dozen or more times per year before your CFO will ever notice what you've accomplished.


P.S.:  This is where somebody will email me and say "Do better, Kevin. You can do the customer acquisition work and you can do loyalty work." Sure - you can do the loyalty work. But the loyalty work simply won't matter. When you run the simulations, you learn that the customer file doesn't fundamentally change. This is the thing that retention/loyalty marketers fail to understand ... they've never run the simulations so they don't see that all of that hard work yields short-term profit (which is good) but doesn't change the trajectory of the brand one bit. I've run the simulations, and I'm trying to help you at no cost to you whatsoever.

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