It is unquestionable that the holiday season reigns the peaks of retail activity. In November and December, shoppers research and buy presents for family and friends, while taking advantage of numerous deals and sales, both online and in brick and mortar stores.
Most retailers, consequently, assume the biggest spike in new customer acquisition occurs during this time frame, the two months of holidays galore — and they would be correct. But, with this rise in customer acquisition that spikes in the final months of the year, retailers ought to consider the lifetime value of these buyers — meaning the total spend of the customer over his or her entire relationship with the store. Inevitably, these customers tend to lean towards what the industry likes to call “one and done” buyers. In it for the discounted prices and out when deals are gone.
A spike in new customer acquisition that comes with poor retention and modest lifetime value? Time to rethink. Despite the jump in customers storming through your door in November and December, the best month to acquire new customers is, in fact, October.
Why October is the Best Month to Acquire New Customers
Here at Custora, we like to use a metric called Early Repeat Rate (ERR).
ERR - Definition
The Early Repeat Rate (ERR) is defined as the percentage of new customers who make a repeat purchase within a certain number of days of their first purchase (typically, 30 or 60 days).
Here’s an example: You just started a company, and managed to acquire 100 customers on the first day (good job!). Say 50 of these customers go ahead and make a second purchase within a 30-day time frame. Your ERR is 50%.
ERR is a new metric that was developed by Custora in partnership with our retail customers. Its goal is to measure how effectively a retailer is cultivating relationships with first-time customers, and converting them into repeat buyers. It is part of our suite of new metrics designed to measure the success of a customer centric-marketing strategy - you can read more about customer-centric metrics here.
Why ERR Matters
A healthy ERR signals that a retailer is doing well converting newly acquired customers into loyal, active ones. It serves as a health metric that indicates what portion of a retailer’s new customer base is inclined to make a second purchase within a certain time period - thanks to the customer’s positive first purchase experience, the retailer’s effective marketing campaigns, and other factors. A healthy ERR stems from three frames of reference: how your ERR performs with respect to how it has developed within your own business’s past performance, how your ERR fares against retailers within the same vertical, and how your ERR compares to retailers of the same customer size.
ERR by Month
You can imagine the value of seeing how ERR changes during the year. In what months are newly acquired customers making second purchases faster? In what months is just the opposite happening? For instance, say your ERR signals that historically, February generates the lowest early repeat percentage throughout the year. It might be advantageous to implement early retention initiatives for customers acquired in this month to encourage a repeat purchase and consequently higher customer lifetime value. On the contrary, say the marketing team observes that the ERR is high in the month of September. Then, strategies can be aligned towards acquisition in that month, for you are quite certain that customers coming through the door during this month are more likely to make an additional purchase. All in all, early repeat rate provides guidance on acquisition versus retention focus for marketing teams.
So, what do the averages say?
October is the highest ERR month of the year. In other words, customer acquired during October are most likely to make a second purchase early.
The following graph illustrates the ERR month by month across 80 retailers. The time frame signals the number of newly acquired customers in that month that are making their second purchase within 60 days of their first purchase.
Makes sense, doesn't it? Those customers that come through the “New Customer” door in October are most likely to make a second purchase during the holiday months that follow.
What does it mean for marketers?
October is the sweet spot for new customer acquisition. Here’s what this means for e-commerce marketers:
1. Double down on acquisition marketing in October. Pulling in new customers here takes advantage of the high ERR of the month, and encourages repeat purchases faster for those newbies.
2. Plan in advance. As most retailers believe new customer acquisition increases in holiday months, optimizing acquisition strategies early on can encourage retention and provide opportunities for cultivation of customer relationships. Gear up for holiday months beforehand and get those new shoppers in the door before deal frenzy hits and competition heats up. They are most likely to repeat faster than customers acquired in any other month of the year.
3. Be mindful of Customer Acquisition and CLV (Customer Lifetime Value) Tradeoffs. Although hitting the gas pedal on new customer acquisition is important for holiday months, these new shoppers come with a “one and done” mindset and meek lifetime values. Remember this Acquisition – CLV tradeoff when pursuing acquisition strategies, and make sure to balance the two by measuring Customer Equity.
While holiday months ostensibly develop new customer peaks, October serves as the month that allows for not only new customers to come in through your door but also the chance to acquire jolly-good customers: The ones that will repeat, have higher CLV, and buy again faster than customers acquired during any other month throughout the year.