April 27, 2022

How Do We Treat Our Customers? It's Interesting

In any Hillstrom's Profit project, we take a look at how customers are treated along the customer life-cycle.

Here's how one company generates differing metrics along the customer life-cycle.

Price per Item Purchased:

  • $32.08 first order.
  • $30.63 second order.
  • $30.28 third order.
  • $29.91 fourth order.
  • $29.86 fifth order.
  • $29.19 6th-10th order.
  • $28.46 11th-15th order.
  • $27.69 16th-25th order.
  • $26.98 26th+ order.
Gross Margin Percentage:

  • 53.7% first order.
  • 53.6% second order.
  • 53.7% third order.
  • 53.9% fourth order.
  • 53.8% fifth order.
  • 53.5% 6th-10th order.
  • 52.9% 11th-15th order.
  • 52.1% 16th-25th order.
  • 50.2% 26th+ order.
Percentage of Items Sold Below Their Historical Average Price Point.
  • 50.9% first order.
  • 52.9% second order.
  • 53.1% third order.
  • 53.2% fourth order.
  • 52.9% fifth order.
  • 53.9% 6th-10th order.
  • 55.5% 11th-15th order.
  • 56.7% 16th-25th order.
  • 59.9% 26th+ order.
How are first-time buyers treated? Expensive items at high margins, paying full price.

How are best customers treated? Less-expensive items at lower margins via discounts.

I know, there's a fraction of the audience that will suggest it is fine to tickle the buying bone of best customers with best prices. Sure. But that also means that Management is happy to let profit just drip out of a hole in a bucket. Eventually, that kind of behavior comes back to haunt Management.

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