July 05, 2022

Compounding The Problem, Part 2

We talked about this post numerous times ... because it is the most important thing that is happening in direct-to-consumer Customer Development. Worse, it is going to create enormous problems for below-average performing brands.

Yesterday I covered the fact that new merchandise development has fallen far behind levels needed to fuel future growth. This will cost companies millions in sales next year when a dearth of new items becomes a dearth of existing items.

The second issue compounding the rough ending of the COVID-bump?

Prices.

Based on my analyses and what many of you have told me, rebuy rates are trending -10% this year. That's a bad thing ... not as bad if your rebuy rates are < 33%, but still, not good.

You're also telling me that your average price per item purchased is up somewhere between 5% and 10%.

Now, I realize that correlation does not mean causation.

But, come on.

I get it ... you perceive you had no choice but to raise prices to offset cost increases.

When cost of goods sold increase, you have two choices, and they're both bad.

  1. Increase Prices, Sacrifice Customers, Sacrifice Profit.
  2. Hold Prices, Keep Customers, Sacrifice Profit.

When prices increase, your marketing team typically throws their hands up in the air and grumbles about how their ROAS gets worse. This is not the time for marketers to grumble, this is the time for marketers to dig in and help the rest of the company mitigate challenges.

If you need to see what the relationship is between prices and rebuy rates, send me an email (kevinh@minethatdata.com) and we'll get busy.

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