(How could I make that title longer….) We focus heavily here on profitability, new customer acquisition and increasing the margin for our clients in this channel. New Customer Acquisition is one of the methods we measure programs by as well as a tactic to increase margin and the overall success of the channel for our clients. We’ve written about this subject here, here and even train our staff on the concept. It continues to be growing in importance to our clients and advertisers all over the globe. One of our clients asked about this today and I thought maybe you had some of the same basic questions. Thus, this blog post.
So some notable things about New Customer Acquisition:
What is a new customer? This was the first questions I received. And, I don’t have any one single answer for you, nor did I have for our client. It’s simply different for each company. Let me give you three examples:
Client A: This client sells outdoor gear and kayaks and things like that. Some of their products their customers purchase every year, but many they purchase either once in a lifetime or every 5-10 years. They have 25 stores, mostly in one geographic area, and do not push out any catalogs. So, what is new to them? The most appropriate, determined by themselves, was anyone who hasn’t purchased at all in the last 8 years from any channel. So, if Lucy buys a kayak from their store today and then buys hiking boots from their website two years from now, that second order is an existing customer. But if Lucy then waits 9 years to buy another kayak from their store, she would be considered new.
Client B: This client has 150 stores, a very active catalog division and a very active web division. They also measure those channels independently, almost as if they were different businesses. They don’t have cross channel insight, what I call path to purchase behavior. They also know that a customer makes a purchase every other season, so at least once a year. Because of those things, anyone who hasn’t shopped through their online store in at least the last two years, and shops now, is considered new. Even if they have purchased from a catalog 2 months ago, but they haven’t purchased through their website in over 2 years. They may have made 100 purchases over their lifespan, but not in the last two years. And, if dad buys something, then the son buys something and they live at the same house, the son is considered a separate customer and is new. I’ll get into that more below.
Client C: Very similar to Client B, but they do two things differently. They consider new to be brand new to any channel. If you shopped through their catalog, but never through the web, doesn’t matter, you aren’t new. They also do something very common to the catalog industry – they household. Householding is when you group any purchases/purchasers in the same address as one customer. So if Dad makes a purchase, then mom makes a purchase, they consider them the same customer. So you can’t have an existing customer at 26598 Pines road and a new customer there as well.
Your definition of a new customer is unique to you. It should satisfy your purpose for determining the metric itself, provide some clarity in the performance of individual campaigns and channels when comparing their performance and provide you insight to make better decisions.
As I look over my notes, I believe I just covered all of the things in one “note”. 🙂 The concepts we discussed with our client today came down to:
Time Frame: Is a lifetime really a human lifetime, or is it a given purchase cycle.
Channels: If they never shopped in your channel, but shopped in others, is that new for you?
Households: If two people buy from you at different times but live at the same address, do you treat each one as unique, or group them together.
Now, this isn’t the be-all end-all on new customer acquisition. There is a whole lot more involved, but my hope is you learned a little bit more about it. What questions do you have? Ask them in the comments or email me at Jamie AT jebcommerce.com and I’ll answer each and every one.