Evolve · Business made easy
What can I do to understand my customers?
Start with one line of arithmetic. Worked through for a $2m business.
The formula
Start here. Every retail business runs on one line.
The formula · customers
Your customers are the ones you retained and the ones you acquired.
The formula · spend
What each one spends is the size of a sale, times how often they come.
The formula · the sale
Each sale is the price of an item, times the items in the basket.
The formula
That is all of it. Five numbers that describe how your customers behave.
A $2m shop · filling it in
Fill it in and you can see your customers.
Growing it · the hard way
You want 10% more. What if it all came from acquisition?
Growing it · across the formula
Or spread it: a few more customers, one more visit, one more item.
7% more acquired customersNot 17%.
One more visitFrom one customer in eight, once in the year.
One more itemIn every fourteenth basket.
No price riseThe average price stays at $23.
Drilling down
Every number in the formula has a question behind it.
| Start from | Look at | The question | What it is for |
|---|
| Customers | Where they buy | How many customers buy in store, online, or both? | Setting what you spend on each channel |
| Retained | Who comes back | How does the retention rate differ by channel and by store? | Keeping customers and winning new ones |
| Visits a year | How often they buy | How many bought once, twice, or three times and more, and what did each group spend? | Keeping customers and winning new ones |
| Items per basket | Basket size | How do one-item baskets compare with the rest? | Testing ways to add one more item |
| Spend | What they buy | How many buy from each part of your range, and how many from more than one? | More visits and bigger baskets |
Drilling down · what it found
At one large retailer, this is what the drill-down showed.
51%
of customers bought once in the year.
26%
of customers made 54% of the sales. They came five or more times a year.
3×
the spend, from the customers who bought across the two biggest parts of the range.
It changed the focus in marketing: chase frequency, acquisition and product overlap.
Lessons from the coalface
- Start simple and keep simple.
- Start with the end in mind.
- Work top down.
- Experiment and learn.
- You don't need the latest tech.
A $2m shop · the formula of retail
Every retail business runs on one line.
Start
Want to understand your own customers?
Let's get together and figure out the value of your customers.