September 14, 2022

We Can Fix That Rebuy Rate

This happened seven or eight years ago. You've likely been in the same situation. I'm sitting in the Executive Conference room at a nine-figure brand. Everybody enjoyed (to some extent) their box lunch. After a morning of presentations, it was time to get down to business.

This brand had customers who repurchased at a 34% rate (in other words, of all customers who bought during 2015 just 34% bought again in 2016). And the rate had gotten worse and worse over the past five years.

How does Management fix this business?

Well, the CEO had ideas. He starts yelling "WE SIMPLY HAVE TO FIGURE OUT HOW TO GET CUSTOMERS TO BE MORE LOYAL, THAT SOVLES EVERYTHING".

The CEO looks to me, knowing what I'm going to say.

  • "What do you think?"

I'll tell ya what I think.
  • "Stop cutting back marketing spend on customer acquisition and start focusing on what your business is, not what you want it to be. You are in the business of finding new customers on a continual basis."

That was not what the CEO wanted to hear. Knowing I would say that, he slams his fist on the table (I sense this wasn't the first time he's done this to intimidate a consultant or a staff member). "I WON'T ACCEPT THAT ANSWER. I SIMPLY WON'T ACCEPT IT. WE HAVE TO CRACK THE CODE. WE HAVE TO CRACK THE CODE. THAT'S THE WRONG ANSWER. THE ANSWER IS SITTING RIGHT HERE IN THIS ROOM. NOW TELL ME WHAT WE'RE GOING TO DO TO FIX OUR REBUY RATE?"

These are always fun moments as a consultant. The CEO fundamentally does not understand his own business. He is making the wrong decision, and desperately wants to be right by making the wrong decision. Have you ever known an Executive who desperately wants to be right by making the wrong decision?

The entire room turns to look at me ... they're clearly happy the CEO is screaming at me and not them.

This is where there are advantages to being a consultant.

I take a breath.

And then I respond.
  • "You have been CEO for six years. You have tried everything you and your team can possibly think of to increase repurchase rates. If the answer was sitting in this room, wouldn't the answer have appeared before today? You already know the answer to your question."

There are moments when you expect security to usher you out of the building. This was one of those moments. There are twelve executives in the room and one CEO, and not one of them is looking at me or anybody else. Every head is pointed down at the table. Including the head on the neck of the CEO.

Not one of the highly paid people in that room understood their business ... or were too frightened to communicate that they understood their business. Either way, the end result was the same.

You cannot fix your rebuy rate. The merchandise you sell determines the range your rebuy rate will reside in. If your rebuy rate is 34%, it could be 28%, it could be 40%. It cannot be 64%.

And if your rebuy rate is under 40%, your number one job as a Leader is to constantly find new customers at a low cost. You have no choice. The products you sell dictate a low purchase frequency, and given that you are not shifting to a different product assortment, you have no choice but to acquire new customers at "scale" as the kids say, and at a low-cost or at no cost.

Close to a decade later, this business is in the same place, marooned by Leadership that fundamentally does not understand how their own business (products and customers) operates.

You cannot fix your rebuy rate if you maintain the product assortment you've always sold to customers. You can improve it. You cannot fix it.

This is the point in the blog post where the experts send me email messages telling me why they are right and I am wrong. Happens every week. When you do that, please send me the receipts ... cases where you took a 28% rebuy rate and made it a 65% rebuy rate by selling the same merchandise assortment.

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