Giving your best customers what they really want.
The challenge
I couldn’t believe the numbers. With access to Shopify, Finaloop and apps like Lifetimely, I started poking around in the new client’s numbers. The business was impressive from what the founder had told me, but I was skeptical and wanted to see for myself.
The repeat purchase rates of the customers blew me away. This business didn’t just have repeat customers, it had genuine fans who loved the products. People were spending tens of thousands per year on products with price points averaging just over $100. And these customers were so fired up about the brand they had started their own online group to discuss (and sometimes complain). It was incredible.
My first task was to tell the founders what an incredible and rare brand they had created. You have bottled lightning! Let’s make sure we don’t mess it up and then build on that magic.
The Solution
The decile analysis really told the tale. We could look at our customer base a tenth at a time and see who the best customers were in terms of net sales. We could then also back out the customers who bought the most at discounts and who returned the most. And we could see how this customer tailed off as the top 10% became the top 20%, the top 30% etc.
The results
The decile analysis allowed us to cut the data first by economic value to the company and then dive into specific deciles knowing these were great or not so great customers.
- Who were they?
- Where did they live?
- How often were they buying?
- What were they buying?
- How active in the informal customer groups were they?
We could then see how they were buying. This brand had always focused on bringing out new styles frequently and in limited supply. They had a mix of drops and evergreen. But really whatever wasn’t sold in the drops, just became evergreen and stayed in stock through increasing rounds of discounts until finally blown out in the big semi-annual sales. But even then there was still some inventory that just wouldn’t move. Of course, this was chewing up cash.
What we saw from our top High Value Customers was a strong propensity to buy during the drops. We had our answer. Through lots of discussions and reviewing analyses, scenarios and plans, we settled on a strategy of drops only. Let’s give our High Value Customers what they want. New, fresh, limited supplies along with the anticipation and excitement of the drop model. And in doing so, we dramatically overhauled the business. New collections became easier to plan. Inventory planning became precise as we planned for specific category mixes and units for each drop. This eliminated over buying and freed up cash. And our customer acquisition strategy went from trying to compete with everyone else and focused on ROAS to a strategy completely geared towards acquiring more High Value Customers. Our focus became learning the signals that we had a new High Value Customer and translating that into targeting and campaigns. And a nice side benefit of this is the creative and ads improved because ads were focused on the value of the product, the brand and the excitement of the drops instead of the previous ‘buy now!’ emphasis.