October 18, 2023

One of My Favorite Tables of All Time

Across thirty-five years, I've been able to quantify a bunch of relationships. There's a reason why loyalty efforts are so darn feckless. The reason is in this table.




Across brands, I modeled the relationship between annual rebuy rates (among twelve-month buyers), frequency (orders per repurchaser), AOV (your mileage will vary), NY Sales Value (Rebuy Rate * Freq * AOV), and "% Via Loyal" (percentage of total sales that come from loyal buyers with 0-12 month 5x+ LTD orders).

This is one of my favorite tables of all time, and for good reason. The table demonstrates why so many e-commerce brands attempt loyalty programs ... and nothing happens.

Pretend your e-commerce brand has customers with a 30% annual rebuy rate. This is one of those moments when somebody on your Executive Team suggests that "we'll just make 'em more loyal." #Sigh. 

The reason customers possess a 30% rebuy rate is because they don't need what you sell more than 2 times per year, if that often. It's what you sell that causes the problem, not some marketing solution including discounts.

It's what you sell that causes the problem.

If you are a department store, you might be failing, but the customers still purchasing merchandise want/need what you sell often. Your rebuy rate might by 70%, the customer might purchase six times per year.

The 30% rebuy rate brand generates $70.49 per twelve-month buyer at the start of the year.

The 70% rebuy rate brand generates $512.25 per twelve-month buyer at the start of the year.

That's a big difference.

The 30% rebuy rate brand generates 22% of annual sales from loyal buyers (0-12 month 5x+ LTD frequency).

The 70% rebuy rate brand generates 79% of annual sales from loyal buyers.

What you sell determines your annual rebuy rate.

What you sell determines if you have a large number of loyal buyers.

One of my favorite tables of all time makes this story crystal clear.

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