September 06, 2023

Then The CEO Smashed His Fist On The Table

Pre-COVID, I'm visiting a client. Customers have a 30%ish annual repurchase rate, and the rate hasn't changed in a decade. In fact, any modest change in the metric has been negative.

I present my findings, stressing the dire need for new customers. Every few years the client had a good customer acquisition year, especially when the marketing leader focused on new customers. It wasn't that the brand couldn't acquire new customers at acceptable rates - it was that the brand chose to not do it every-other-year, then had to go back to the drawing board when the subsequent year stunk after marketing budget cuts.

After presenting my findings, the CEO smashed his fist on the table. "WE ARE GOING TO FIGURE OUT HOW TO CREATE LOYAL BUYERS. WE ARE GOING TO SQUEEZE MORE JUICE OUT OF THE LEMON!"

Let's just say that, after years of visits, I wasn't invited back again.

The challenge we have is simple.
  • We sell products that customers don't frequently need. We aren't Target.
  • The products we sell dictate our rebuy rates.
  • Rebuy rates can be marginally moved by marketing efforts, but at a cost.
  • If customers don't need your products often, any increases in frequency are marginal.
  • This means you need a constant flow of low-cost new customers.

When I worked at Nordstrom, our customers bought six times per year. A 10% increase in purchase frequency resulted in an additional 0.6 purchases per year per customer.

For most of my clients, customers purchase 1.5 times per year. A 10% increase in purchase frequency results in an additional 0.15 purchases per year per customer. You'd barely notice the difference.

This is why you need a steady diet of new customers!

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