... for the second sale
It’s the end of the year and you’re probably tabulating the first-time buyer count—how many customers have made their very first purchase this year. And you’re also looking at how many first-time buyers you have overall—customers who’ve only made one purchase in their lifetime.
To keep the customer file strong and profitable, these first-time buyers need to buy again next year. But, next year is just days away. What can you do to influence a second purchase?
Begin With RFM
Planning how to influence the second sale should be part of your overall annual contact strategy. The annual contact strategy is the blueprint that identifies which segment of the customer file is mailed, how often and with what offer.
It usually begins with segmenting your customer file. Segmenting generally is achieved with recency, frequency and monetary value (RFM). Customers on your database are uniquely placed into categories based on their most recent order [R] combined with their frequency of purchases [F] and their average monetary spend [M].
In the RFM segmentation example provided on page 22, you can see that in the year 2004, there are 138,000 first-time buyers who made only one purchase in their lifetime. You also can see that 138,000 is a subset of the 785,624 total one-time buyers. The immediate goal is to ensure the 138,000 first-time buyers from 2004 make a second purchase in 2005—building on their recent experience with your company. Then it’s important to influence a second purchase from customers who bought from you nearly two, three or four years ago (337,024, 255,000 and 55,600 respectively).
One reason you’ll want to use an RFM report is to monitor the shifts in purchase behavior. This way, you can track progress within each customer segment, such as how many of the 2004 first-time buyers have made a second purchase.