New data confirms that consumers who first purchase a full-price item are 2.5 times more valuable than those who take advantage of a holiday promotion.
BOSTON, MA, November 26, 2014 – With another holiday shopping season underway, new research from Coherent Path suggests that many retailers will miss significant opportunities to attract loyal customers online. In fact, the study reveals that new customers whose first transaction involves a discount or special offer are 50% less likely to return to make a second purchase. This data illustrates a significant challenge for many retailers, but also an opportunity.
With data compiled primarily from their client’s e-commerce sites, Coherent Path Inc. compared consumer purchases based on various discounts over a period of time. The results showed that while discounts and special offers reliably cause a short-term spike in sales, they rarely attract customers inclined to be loyal beyond the first transaction.
“A first-time Cyber Monday customer who purchases something that is marked down may not be as valuable over time as someone who goes online three days later and purchases a product at full-price,” said Dr. Greg Leibon, CTO of Coherent Path and a resident scholar in Mathematics at Dartmouth College. “The reason for this appears to be the motivation of the consumer. Our data shows that when price plays a significant role in the first-time purchase with a retailer, even online, the chance of them becoming a long-term and loyal customer can be low.”
While many retailers invest significantly in deep-discount sales to attract new customers during the holidays, the findings suggest that the return on the investment could be short lived. Customers who visit an e-commerce site for the first time and make a purchase at full-price are more than twice as likely to make a second visit. Further, these returning customers will spend 150% more per visit versus those who are initially motivated by a sale. Over the lifetime of the relationship, a customer whose first interaction with a retailer does not involve a discount is worth at least 2.5 times more than a customer who responds to a short-term discount or promotion.
“It makes sense that customers who pay full price on an initial visit can be worth more over time, but I think the impact this trend has on overall customer loyalty gets lost, especially around holidays,” said James Glover, President and CEO of Coherent Path. “Strategies to attract customers with lower prices can be near-sighted and fail to inspire valuable relationships that last into the New Year. The good news is that loyalty can increase if the initial sale is followed up with personalized engagement that guides customers from being one-time discount shoppers to more frequent ones”.
Keep em’ Coming Back
Cyber Monday can be an expensive way to attract new customers if no effort is made to engage them beyond the initial discounted sale. Superior order fulfillment, better follow-up after the sale, and additional promotions to move excess stock are all ways to increase shopping frequency and value. In the New Year, Coherent Path clients will compliment their Cyber Monday promotions with re-engagement programs specifically designed for recently acquired customers. They will use purpose-oriented personalization to guide new Cyber Monday shoppers towards the more loyal and valuable behaviours exhibited by their very best customers.
For more information about the strategies Coherent Path clients have implemented to drive engagement and loyalty from their Cyber Monday customers, please visit coherentpath.com/holiday.
About Coherent Path
Coherent Path’s personalization solutions help top retailers increase loyalty, drive in-store purchases, and optimize customer engagement around strategic business objectives. Using a patented, cloud-based combination of mathematics and technology, Coherent Path builds maps of product and transactional environments and identifies unique customer journeys through these geometric spaces. With this foundation, retailers can deliver personalized multi-step offers and optimize promotions around products that increase customer lifetime value. On average, clients realize a 20%-40% lift in key engagement metrics as well as revenue.