Customer Retention

You've heard me say this many times before ... Customer Retention is a function of your Merchandise Assortment.

This doesn't mean you cannot impact rebuy rates ... you can!

But you can only do so much.

In the early 90s at Lands' End we retained about 55% of prior year twelve-month buyers. That's a very high rate. We sold mens/womens casual, mens/womens tailored, kids, home merchandise.

In the late 90s at Eddie Bauer we retained about 45% of prior year twelve-month buyers, even though we had catalogs and e-commerce and stores. Our customers didn't really like us, even though we were a direct competitor to Lands' End.

In other words, similar companies had 45% - 55% rebuy rates. The difference was due to marketing effectiveness and customer trust.

In the first half of the 00s at Nordstrom we retained about 74% of prior year twelve-month buyers. Not only did our customers trust us, but with more skus than people living in Milwaukee we had a breadth of merchandise to allow customers to continually purchase all year long.

I have gift-centric clients with rebuy rates around, say, 20%. Those brands might be brilliant marketers, but with a limited assortment for nine months of the year rebuy rates will be suppressed.

Starbucks operates a whole 'nuther business model. When you sell a product that can be purchased daily (or more often), you'll retain even more customers on an annual basis ... maybe 90%. Thought Leaders will tell you to emulate what Starbucks does in an effort to create your own loyal customer base, but unless you sell an addictive product that can be purchased daily, nothing that Starbucks does applies to your business. Nothing.

If you sell products that are needed often (like Starbucks), your retention rates will be high.

If you sell products that are not needed often (i.e. a Lexus SUV), your retention rates are incredibly low.

Customer Retention is a function of what you sell. There is no right/wrong rebuy rate, given that rates are dependent on how often customers need what you sell and the depth of your merchandise assortment. Rates can vary based on marketing effectiveness ... +/- 5% off of a baseline is common ... if a company has a 30% rebuy rate, the good marketer will hit 35%, the bad marketer will hit 25%.