Convert One Time Buyers to Two and More Time Customers
by Stephen Lett
I have written several times about the importance of converting one time buyers to two and more time customers. Catalogers spend a great deal of time and money acquiring one time buyers but more should be done to get these individuals to purchase again. Typically, less than half make a second purchase. This month, I want talk about one time buyers and how to convert them to customers.
By definition, a one time buyer is someone who purchased once; a customer is someone who purchased more than once. Obviously, buyers come before customers. With the high cost of mailing catalogs today coupled with lower response rates, most catalog companies acquire new buyers at an incremental loss. Catalogers have to be willing to make an investment in acquiring a new buyer in order to grow knowing the payback will come sometime in the future. The amount of time to payback the investment, normally one year, can be reduced by developing a strategy to convert one time buyers to two and more time customers. More can to be done to this large group of buyers than simply re-mailing them as part of your normal mailing cycle.
I have always felt that catalogers take a short-term view with respect to prospecting by focusing mainly on the initial results. For example, catalogers expect a particular prospect list to achieve breakeven the first time it is mailed. Often the list or segment is dropped if it doesn’t. But what about the life-time-value of buyers acquired from that list? How much do they return over time and what can be done to accelerate the payback? As catalogers, we should be more concerned getting one-time buyers to buy again and less concerned about their initial results.
There are too many one-time buyers on most housefiles. Or, said another way, too many individuals only buy one time. Some move and leave no forwarding address. Others die. Or, they buy based on a one-time need never to buy again. Maybe the buyer did not have a satisfactory buying experience with your company. There are many reasons why buyers never buy again. Some reasons are in our control; others are not. If you can give a single buyer a reason to buy again, it will dramatically change the economics of prospecting as well as your bottom line.
Let’s look at the number of single buyers typically on a consumer housefile (see chart below). I have divided this chart into 0-12 month buyers and 13-24 month buyers.
|LETT Direct, Inc.
|SINGLE BUYER EXAMPLE
|0-12 Mo.||13-24 Mo.|
|Percent Single Buyers||57.7%||66.6%||61.4%|
In our example, approximately 61% of the 0-24 month buyers have purchased only one time. Yet, we continue to mail the single buyers with the same frequency as the 2X+ customers. Assuming a catalog cost in-the-mail of $.60 per book, and a 10 times a year mailing schedule, the investment in mailing these single buyers would amount to approximately $12 per buyer in two years. With a total of 156,828 single buyers on the 0-24 month file, the total selling or publicity expense mailing these individuals would amount to almost $1.9 million! And, not one order from this group either. Once again, if we can increase the percentage of one time buyers who buy again or if we can better identify those buyers most likely to make a second purchase, our investment in future mailings can be reduced.
Obviously it is not realistic to think that 100% of the single buyers are going to purchase a second time. However, the percentage of one-time buyers on the file can be reduced if programs are developed and implemented to convert these individuals to customers. Here are a few proven ways:
- Bounce-Back Offer to First Time Buyers - Include a bounce-back offer to first-time buyers to encourage them to buy again. A bounce-back is a promotional piece or a catalog that’s packed within and accompanies the buyer’s outgoing order. A bounce-back can come in many forms. It can be a promotional sheet, a flyer or a full-size catalog. Someone who just purchased is the best prospect to make a repeat purchase.
- “Welcome New Buyer” Announcement – Pack a letter or sheet that welcomes all new buyers in their outgoing order. This will make new buyers feel special and let them know how much you appreciate their business. This may encourage them to buy again. (This idea can be incorporated in point #1 above.)
- Mail First-Time Buyers More Often – At least initially, you might want to mail first-time buyers more frequently. Make two or three extra and more frequent mailings to first-time buyers as a way to encourage them to purchase again.
- Optimize the Single Buyers – Using one of the cooperative databases, optimize your single buyers and mail the group that is most likely to purchase again. Do this after you have mailed the single buyers a few times and converted those you can. Then, send the remaining group to a coop to have help you select who should (and should not) be mailed again.
- Long-Term Value Prospect Response Model – Wiland Direct has a new L-T-V response model that focuses on converting one time buyers to two and more time customers. Their model is produced using a proprietary modeling method that studies repeat purchase patterns. It identifies prospects that have an above average tendency to buy and then make numerous repeat purchases. It finds consumers who have an unusually high affinity for a particular product or market and an unusually strong tendency to make repeat purchases in that market.
- Call Center and Customer Service Programs – Good customer service practices build loyalty and therefore promote repeat purchases. Check your own customer friendly policies and procedures. Have your telephone sales representatives welcome first time buyers. They too can make special offers to first time buyers to encourage them to buy again.
- Segment your one-time buyers from the rest of your R-M-F. If your file size is not large enough to split out by dollar and frequency, simply segment the singles by date of last purchase, i.e., 0-6, 7-12, 13-18 and 19-24 or 0-12, 13-24. Track the performance of the one-time buyers and focus on this group.
I feel catalogers have an opportunity to lower their direct selling expenses and ratio by paying more attention to the one time buyers. If 50% of any given housefile is made up of one time buyers, the cost to mail and re-mail these individuals is expensive.