How big is your one-time buyer problem?
What’s your gross margin on a typical first purchase? Is it less than your acquisition cost for a new customer? If your answer is yes (and that’s most companies), you have a one-time buyer problem.
Getting the second sale and solidifying a buyer as a profitable customer is one of the toughest jobs in selling. The problem is particularly serious for catalogers and on-line merchants. In our eleven years of helping direct marketers, we’ve learned how to size and solve this problem. What’s surprising is that the information you gather when sizing the problem is the key to the process you’ll use to solve the problem. You’ll learn which one-timers are more likely to buy again, when the best window in time is to make the approach, and what to offer them.
The three dimensions
There are really three dimensions to consider:
- Number—what percent of your customer base are one-time buyers?
- Revenue—what percent of your total revenue comes from one-time buyers?
- Age—what percent of your one-time buyers have gone longer without another order than the time it takes for most multiple order buyers to make their second purchase? This is the most useful dimension.
In most cases, the percentages are less than 100%. In all cases, the larger the percentage is, the worse the one-time buyer problem.
For comparison, we have compiled some averages of each dimension of the problem for three types of direct marketers. The bottom row shows the average percentage for each category.
Where do you rank?
Where does your company rank? Let us help you find out and if there’s a problem, we can help with that, too.