S-Tier New Customers

We're a quarter century into the acquisition of customers via digital channels (more like thirty years, but that makes me sound old).

We're also a quarter century removed from having a lot of knowledge about "who" we are acquiring. In the era of Amazon acquired direct-to-consumer customers (#marketplaces), we really don't understand who we are acquiring and we certainly don't understand how the customers we acquire impact the future of the businesses we manage.

Yes, it's a problem.

This is the reason we need to study S-Tier New Customers. They're the ones that are bursting with potential. They're the ones who are likely to become high quality customers in the future, generating most of your profit.

Here's actual data ... segmenting new customers into S-Tier, A-Tier (really good customers), B-Tier, C-Tier, D-Tier, and F-Tier (lousy). I tabulate attributes about the newly acquired customers.

In this example, S-Tier new customers have a 36% chance of buying again next year ... F-Tier new customers have an 8% chance of buying again next year. So, yeah, there's a big difference in S-Tier new customers (34,717 of them in the past two years) and F-Tier new customers (242,607 of them in the past two years).

Let's compare year-over-year changes. 

This is what a losing company looks like ... 13% fewer S-Tier customers year-over-year, 13% fewer A-Tier customers, 11%/12% fewer B/C Tier customers, 23% more F-Tier customers (who have an 8% chance of buying again in the next year).

When a company is struggling to acquire new customers, it is common for that company to paper-over the problem with low-value new customers. Because nobody is measuring S-Tier to F-Tier new customers, nobody really cares that the new customers being brought into a business (Amazon cough cough) are AWFUL ... just full of empty calories. They're able to show Management that new customer counts are fine (here, they are +1.9%) ... it will be two years before the analyst notices these customers have poor long-term value.