July 13, 2022

What 2022 Has Become

File Power has two different components.

  1. Number of Customers.
  2. Quality of Customers.

It turns out that it is really hard to impact the Quality of Customers. I mean, seriously, what could you possibly do to double the value of an existing customer? Almost nothing. You're sunk.

This means you really have to focus on Number of Customers.

At the start of 2019, maybe you had 100 customers, and 30 customers would repurchase. You might have had 70 new/reactivated buyers.
  • 100 Customers * 30% Rebuy Rate = 30 Active Customers.
  • 70 New/Reactivated Customers + 30 Active Customers = 100 Customers.

The business is stable.

Then in 2020 we had 110 New/Reactivated Customers instead of 70. The dynamics of the business changed.
  • 100 Customers * 30% Rebuy Rate = 30 Active Customers.
  • 110 New/Reactivated Customers + 30 Active Customers = 140 Customers.

You remember what your p&l looked like at the end of 2020. Your p&l looked good because you had 140 customers instead of 100.

In 2021 all of the new/reactivated customers ripped through the file, generating profit.
  • 140 Customers * 30% Rebuy Rate = 42 Active Customers.
  • 70 New/Reactivated Customers + 42 Active Customers = 112 Customers.

So we didn't generate 140 customers like we did in 2020, but we had 112 customers because all of those new/reactivated customers developed to some extent.

In 2022, it has become hard to acquire customers (especially for those of us who raised prices). Instead of 70 new/reactivated customers, we now have 60 new/reactivated customers.
  • 112 Customers * 30% Rebuy Rate = 34 Active Customers.
  • 60 New/Reactivated Customers + 34 Active Customers = 94 Customers.

Did you notice that in each scenario the rebuy rate stayed the same? Now, that's not what I'm seeing in my work, but rebuy rates don't have a lot to do with File Power. Nope. What matters is your effectiveness at generating new/reactivated buyers. In 2022, there are fewer new/reactivated buyers, causing headaches. We're causing part of the problem ... well ... those of us who felt compelled to raise prices, we're causing the problem.

File Power leans heavily toward new/reactivated buyers. There is a one-year lag ... you do a good job of acquiring customers this year, you get sales next year from those customers. We had an ok 2021 because we grew the customer base in 2022. We're going to have a lousy 2023 (at this point) because we are doing a poor job of building the customer file in 2022. That's what 2022 has become ... a battle for 2023 survival given our ability to find new/reactivated buyers at an acceptable cost in 2022.

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