Retail has a legacy of focusing on immediate results. Historically, the results that counted were the POS tickets and total sales at the end of the day. The better retailers measured store traffic and calculated the conversion rates.
Even with the launch of ecommerce, core metrics of success still focused on traffic – acquiring customers, conversion rate, and average order volume.
This is important because the metrics that are measured are the ones that can be managed and improved.
Studies repeatedly show that second- time buyers are more valuable and more profitable than new customers, yet many retailers are failing to measure the second sale and track the related customer variables, which in turn build lasting relationships that create lifetime value.
So, why do so many retailers focus so heavily on the first purchase and fail to measure the key performance indicators (KPIs) of the ‘second sale’?
Buy twice, buy for life
In 2018, retail marketing company Bluecore analysed purchases from 16 clothing businesses. The results underscored the importance and dynamics of the second sale:
- Although customer value increased with each purchase, the biggest jump in value was between the first and second purchase
- Second-time buyers were far more likely to become repeat buyers
- Approximately 60 per cent of second purchases occur within 100 days of the first
- After 100 days, the chances of a second purchase drop below 10 per cent
Yet, Bluecore also found that 80 per cent of post-purchase messaging from the 16 clothing businesses focused on acquiring new customers.
In the past, retailers have utilised mass marketing and mass media. The goal of the marketing strategy was reach and frequency; that is, acquiring customers and getting them into the store.
The focus, measurement and metrics were on product sales today, not customer relationships tomorrow.
Today, e-commerce retailers like Amazon understand the potential of the second sales, and how to leverage them. E-commerce systems were designed from the beginning to be individual customer- focused, tracking when you visit, what you view and what you purchase.
Then algorithms kick in to repeat-message first time buyers for add-on sales and second purchases, while tracking all the corresponding data from the messages, offers and future sales.
Yet bricks-and-mortar retailers often miss the second sale because:
- Legacy systems are focused on sales transactions, not customers
- Useful data is difficult to access
- Metrics are focused on transactions and year-over-year results, not relationships
- Many lack integrated customer relationship management (CRM) systems to re-market and message customers.
How to nail the second sale
The future of retail and profitability lies in retention and optimising relationships.
In order to do that, retailers must think and analyse from a customer relationship perspective, not transaction sales.
This will require CRM and tracking that enables retailers to answer key questions:
- What categories and products did the customer shop from?
- What category did the customer make their second purchase from?
- How long was it before they made the second purchase?
- What marketing messages did they receive, and what impact did they have on conversion?
- What categories and products were the second purchase from?
- How does that compare to other customers purchasing similar products?
- What is the “basket of core products” that create the lifetime value for the customer?
Having the ability to answer questions about individual customers creates a path to retention and profitable lifetime relationships.
Amazon has mastered using data to convert multiple sales and build relationships through its Prime delivery service.
Traditional retailers have built their customer relationships over decades through talented sales staff – but the key to continued success lies in CRM and a focus on turning one-time shoppers into lifetime customers.
There is no single model for success; however, measuring and managing the second sale is a critical metric for changing the paradigm from acquisition to retention.
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