Save Money Marketing
to One-Time Buyers
First published 6/18/01
Ah, the One-Time buyer, my companion (but not a
friend) all these many years of database marketing. You
have them, right? Maybe 40%, 50%, even 60% of the customer base?
Seems like such a waste. You went out and spent a bunch of money
to reel these people in, only to find they buy or visit once and that
was it. Then you pound them with all kinds of targeted
promotions and they still don't buy or visit. Your boss (if you
have one) is pulling out all his/her hair, and is starting on yours.
Convert those people to multi-buyers, darn it!
Not going to happen, folks, at least not at a rate that will make it
profitable for you to spend a lot of time and money on it. Years
of direct marketing history and testing come to one conclusion - it's
just not worth it. The One-Time buyer problem is tough to solve
in the catalog world, but even tougher in the interactive world.
If the online customer wanted to buy or visit again, they would have!
In fact, many database marketing companies don't even call One-Time
buyers customers, because it's highly likely they are not customers
any longer. If you are going to spend precious marketing dollars
where you get the highest payback, there are many targets much more
profitable than One-Time buyers to address.
Does that mean all is lost in One-Time buyer land?
No. The solution is to create less of them. One-Time
buyers are created by the circumstances surrounding their first
purchase (or visit), and if you minimize the types of activity known
to generate One-Time buyers, you'll save a ton of money over time.
What do I mean by circumstances? The media used
to bring in the customer and the offer usually play a big role,
as does the product itself. Between these three variables, you
capture 80% of the forces creating One-Time buyers. Some
products just naturally encourage One-Time purchase, as do certain
kinds of offers and types of media. Your task is to find out
which combinations create a high percentage of One-Time buyers, and
minimize the use of these combinations.
Gather up all your One-Time buyers, and see if you can
find any commonality in them. Do the majority of them come from
one particular media or offer, or have they bought the same items or
categories of items? If so, then you can reduce your reliance on
this media or item and put the money you save into media or items you
know tend to generate multi-buyers. By going through this
process, you will automatically raise the long-term ROI of all your
marketing and merchandising.
For example, let's say you feature your most popular
item on your home page. What if this item generates 90% One-Time
buyers? You would be much better off using a less popular item that
generates only 10% One-Time buyers. The real estate this
featured item occupies is very valuable, and you want to get the most
bang for the buck you can out of it.
Sometimes, if you find a particular item is generating
a lot of One-Time buyers, you can fix it. Reasons for One-Time
purchase generation may be linked to poor quality, bad
instructions, shipping difficulty (item often breaks), or other
physical reasons. So hunting down One-Time buyer products can be
helpful to product sourcing efforts; the customer is telling you by
making only one purchase the product has failed.
If you go behind the One-Time buyer products and find
a common vendor (especially a drop-ship vendor where you never
see the merchandise), they may be shipping something different
from what you approved. For example, the packaging may be
different and substandard or the color is different from the photo you
are using. For expensive items, these problems usually show up
in returns analysis, but for items under $30, the problem shows
up as One-Time buyers.
OK, so much for reducing One-Time buyers as a fix.
But what if you are getting all kinds of pressure to convert them
anyway? All I can say is you are going to have one heck of a
long road to walk down, so be prepared. The best way to go about
it is through a qualifying test. Don't try to second guess it,
let the customer and the data show you the way. Customers are
self-selecting One-Time buyer status, and it is best to let them
self-select a solution, if there is one. Let the behavior play
out and look for commonality in the customer.
Take a random sample of your One-Time buyers (or all
of them, if there are under 5,000 and you can afford it) and mail them
a good solid offer, say 20% off. Anything less and you will get
weak response. You might as well "load it up" for a
test - if they don't respond at 20%, they aren't going to respond at
Then look at the responders and see if you can find
any commonality. Did they buy the same first item or category?
Come to you from the same offer or media? Make the first
purchase a certain number of days ago? Have customer service
problems? Return their first purchase?
You may find a couple of segments, usually quite
small, where you can create profitable One-Time buyer programs.
Then it becomes a question of scale - is it worth all the time, effort,
and resources required to reduce One-Time buyers by 1/4 %? You
would be better off creating less of them in the first place by
reducing the factors creating them.
Generally, the more Recent the One-Timers are, the
more likely they are to respond. If you don't know what this
means by now (you must be new to this newsletter), you should take the
Even though the more Recent One-Timers are most likely
to respond, the response rate may not be high enough to pay the cost
of mailing and discounting to them. You have to get right on
them, immediately after the first purchase. This approach causes
a problem of a different kind - subsidy costs. Subsidy costs are
the discounts given to customers who would have bought anyway, without
a discount. If you discount a second purchase to every new
buyer, you will undoubtedly be handing out discounts to people who
would have bought a second time anyway, and this can ruin your
margins. A Recency approach can also create discount proneness
(customer will not buy unless they get a discount). You
end up teaching them early on to wait for your next offer, which is
not a good thing (trust me, I've seen some very bad discount proneness
cases, and it is not a pretty sight).
So it's a very tricky proposition to create a One-Time
buyer program like this; you have to be on top of measuring the true
ROI. A high response rate could mean you are simply giving the
store away to people who would have become multi-buyers anyway.
If you don't know how to create and use control groups to measure the
subsidy cost and discount proneness, you would be better off not doing
this kind of Recency-based One-Timer program at all. If you
would like to find out how to create and use control groups, may I
humbly suggest the purchase of my book
with step-by-step directions.
So, no easy answers in One-Time buyer land, are there?
If you wait too long, they will ignore you. If you act too
quickly, you could ruin your margins. The best answer is really
this: focus your budget on multi-buyers, and determine how to reduce
the number of One-Timers you create in the first place. You will
grow your profitability without any increase in your marketing
The Drilling Down book explains how to maximize the
profitability of your multi-buyers by scoring them for likelihood to
respond, and creating an "early warning system" for flagging
best customers likely to stop buying.