It’s Not Always the Fault of Merchandise

The posting by our friend, Bill Lapierre, is directed primarily at multi-channel marketers but applies to e-commerce pure-plays as well.

 
It’s Not Always the Fault of Merchandise

Sometimes Marketing gets away awfully easy by blaming Merchandise for issues unrelated to product performance in the book.
Last week I wrote about the fact that you all have products that lead to a one-time only customer. For a variety of reasons, if a first-time customer buys certain, specific products in your assortment, they are unlikely to ever make another purchase from you. I’ve seen this phenomenon with hard goods, soft goods, gifts and apparel. Judging by the reaction and questions I received last week, this idea resonated with many of you.
However, the majority of readers that responded to last week’s posting were marketers, who basically said “I’ve been telling Merchandise this was a problem, and they won’t listen to me, and that’s why we have so many one-time buyers”. And yes, there is probably some truth to that.
Although, let’s be fair – the reason that customers only purchase once is not always related to the nature of the product purchased. There are a host of behaviors to look for among your customers to determine if they are unlikely to make a second purchase from you. Looking for these behaviors should be part of your catalog circulation planning, and your catalog survival strategy.
Let’s examine two scenarios. First, a customer comes to your website on a non-branded search term, it’s their first visit ever to your site, they land on the product page of the product for which they were searching, visit no other pages, and they purchase the product. Subsequent matchback processing reveals that you’ve never previously mailed them a catalog.
Second, you rent a name from your closest competitor, and mail them a catalog. The catalog recipient visits your website four times, looking at 20 pages, puts three items in their cart, and purchases two of them. The dollar value of this purchase is the same as the purchase in the first scenario.
Are the two customers equal? From an RFM standpoint, yes they are the same. From the standpoint of “propensity to purchase again”, they are dramatically different, and even an untrained marketer can see that difference. Before the internet, we would not have seen that difference. However, even though we see that difference today, most of you still treat these customers identically, mailing them each 12 catalogs a year for probably the next two years at least. And the first customer, who stumbled on your website because they had one specific product need, will most likely never respond again. What a waste for your company.
Determining the identity of those customers least likely to ever respond again, based on past purchase behavior, has nothing to do with merchandise, and everything to do with marketing analytics. The product that the customer in scenario #1 purchased might have been a good product for your company, and one which has led to other purchases from other customers. It’s the sum total of all the behaviors associated with the customer’s first purchase, or most recent purchase, that reveals their propensity to purchase again.
One recent analysis shows that 75% of the customers, who purchased twice, had been mailed a catalog prior to their first order, compared to only 20% of the customers that only bought once.  80% of the customer’s whose first purchase was on a promotion remained one-time buyers, while those customers who purchased without a promotion on the first order tended to make a second purchase.
What does this mean to the marketer? It means stop blaming the merchants for all the short comings in response, and look at the tools and data that you control. Start identifying those customers that are never going to order again, and mail them once or twice a year at most. What’s going to happen? You cut circulation, increase response rate, have negligible impact on sales, and wildly increase profits. You look like a hero, instead of always being the one pointing fingers at others.
Ah, but how do you get there? First you need a database, and if you don’t have a database, Datamann has four database options from which to choose that can answer this question for you – one for every budget. Datamann can help you identify those customers that are never coming back, or those for whom the cost of reactivation is just not worth trying. If you want help in this process, give me a call or send me an email.

by Bill LaPierre
VP – Business Intelligence and Analytics
Datamann – 800-451-4263 x235
blapierre@datamann.com