Crazy Math Outcome That Actually Helps Not-So-Good Marketers

I was taught this concept in my Demography classes in college. Increasingly, the concept appears in ecommerce.

In a recent video conference, the Executive said "we have a long repurchase cycle". The Executive wasn't wrong, of course. However, the Executive didn't understand one of the reasons why the repurchase cycle was long ... virtually no Marketers understand this concept because nobody bothered to teach Marketers the concept.

We'll start with a simple example. Let's pretend you have 1,000 new customers. Pretend in the first year that 30% repurchase, with 10% of those who remain repurchasing in the second year.

• 1st Year Repurchasers:  1,000*0.30 = 300.
• 2nd Year Repurchasers:  (1,000-300)*0.10 = 70.
• Total Repurchasers = 300+70 = 370.

Now, let's pretend this brand has average marketers who do not encourage first-time buyers to repurchase quickly. As a result, only 20% of first-year buyers repurchase, with 10% of those who are left repurchasing in the second year.

• 1st Year Repurchasers:  1,000*0.20 = 200.
• 2nd Year Repurchasers:  (1,000-200)*0.10 = 80.
• Total Repurchasers = 200+80 = 280.

Did you see what happened in Year Two?

• More lapsed buyers purchased in year two for the average marketer.

The average marketer doesn't meet the standard in year one, so there are more lapsed buyers available in year two. Simply doing an average job results in 80 reactivated buyers instead of 70 for the brand that does a good job. The average marketer could do a bad job (reactivating 9% of those buyers instead of 10%) and still end up with more reactivated buyers in year two.

The average marketer will come to a different conclusion as a result of average marketing.

• Smart Marketer converts 300 buyers in year one, 70 buyers in year two, sees the importance of quickly converting customers.
• Average Marketer converts 200 buyers in year one, 80 buyers in year two, sees that the numbers aren't that different, then concludes that because the numbers aren't different there must be a longer repurchase cycle than average, becoming even more complacent.

The math eventually works out well for the Smart Marketer. The Smart Marketer moves 100 additional buyers close to loyal status, where the customer pays the brand back a fortune in profit ... profit the Average Marketer fails to generate.

This "Crazy Math Outcome" is happening all over the place post-COVID. It's happening because Average Marketers are not quickly converting first-time buyers to a second purchase.