May 04, 2022

Question Week: Question #4

Today's question comes to us from Rhonda:  "Hi Kevin, is the COVID-bump still a real thing?"

Not really.

Here's the way to think about it. In 2020 many clients had 50% to 100% increases in Customer Acquisition, as customers marooned at home bought stuff they wouldn't normally purchase. Pretend that you normally acquire 100 customers. Now you acquire 175 customers. The difference ... 175 - 100 ... that is your COVID-bump. And I get it, existing customers likely spent more as well ... but most of your gains came via customer acquisition.

In 2021, you had 75 additional customers. Maybe their rebuy rate was normally 31%. That means that 75*0.31 = 23 customers purchased, with 52 customers lapsing. The COVID-bump of 75 customers has been mitigated by math.

In 2022, you have 23 valuable customers. Maybe their rebuy rate is 52%, yielding 12 customers with 11 lapsing. Meanwhile, you have 52 lapsed customers with a 10% rebuy rate, yielding 5 customers with 47 lapsing further. You have 17 customers purchasing.

See what is happening?
  • 2020 = 75 incremental new customers.
  • 2021 = 23 active customers.
  • 2022 = 17 active customers.
Yup, your COVID-bump is eroding.

That's what we are experiencing, folks.

And worse, with inflation running rampant, we're raising prices which causes customers to become less responsive, so the number of active customers in 2022 from our 2020 efforts is lower than we'd expect.

By next year, the COVID-bump will be a distant memory, in commerce terms. 

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I See Dead People

From LinkedIn, where I wrote this on Sunday: