1%

If you are having a hard time acquiring customers (and many of you are), you are looking at all of your lapsed buyers and you're saying to yourself ... "let's convert THOSE buyers".

Which always leads to the following thought on my end ... "you've had 25 years of e-commerce at your disposal to accomplish that task, so why haven't you already done that?"

The reason you haven't accomplished the task is that it can be really, really hard to accomplish the task. A lapsed customer does not want to be reactivated ... if they wanted to be reactivated, they'd have purchased from you.

The "Life Table" is a methodology tailor-made for understanding "if" a customer can be reactivated. I've been talking about this methodology forever ... this post is from January 2008 comes to mind. I've found that the methodology illustrates a fundamental truth about reactivation.

• If a lapsed customer has a 1% (or better) chance of purchasing in the next month, the lapsed customer "could" be reactivated and therefore deserves marketing attention.

Pretend you have a $100 AOV and 40% of sales flow-through to profit.

• 0.01 * 100 * 0.40 = $0.40 of profit can be generated by this customer.

This means you can attempt to spend money marketing to this customer ... even if you lose some money (say a dime per customer) you can come out ahead on a lifetime value standpoint.

Once the customer dips below a 1% chance of buying in the next month, it's horribly hard to encourage the customer to buy again. That's where essentially free (Social, YouTube) and nearly free (email) efforts take over. 

Above 1% on a monthly basis is where you can think about spending money.

Score every single customer in your database for the annual probability of purchasing again ... a 1%+ monthly rate roughly translates to a 12% - 15%+ annual rate:

• Twelve-Month Buyer 75%+ = Elite.
• Twelve-Month Buyer 60% - 74% = Loyal.
• Twelve-Month Buyer 40% - 59% = Quality.
• Twelve-Month Buyer 20% - 49% = Average.
• Twelve-Month Buyer 1% - 19% = Struggling.
• Lapsed Buyer 15%+ = Lapsed Spend Money.
• Lapsed Buyer 5% - 14% = Lapsed Experiment.
• Lapsed Buyer 0% - 4% = Lapsed Save Money.

Contact me right now for your own, customized scoring process (kevinh@minethatdata.com).