Admittedly, new customer acquisition is exciting. After all, new customers are the indicator that your business is actually growing.
But picking up new customers without a plan to make them return — well, that’s both exhausting and unsustainable.
Unfortunately, one of the most important factors in customer retention is also the most overlooked:
First product purchased.
Let’s look at an example from our cosmetics brand, Bambu Earth.
Bambu Earth’s two most popular first-purchase products are their Sample Kit (a collection of small-format versions of their most-popular products) and their Full Size Kit (regular-sized versions of the same).
While both SKUs are bestsellers, they drive very different repeat purchase behavior.
The average repeat rate within the first 30 days of ordering:
You can see the difference clearly when we plot the repeat rate by monthly cohort:
This varies from month to month, but the Sample Kit maintains a statistically significant repeat rate advantage over both the Full Size Kit and all other products.
This difference becomes more obvious in this histogram of monthly repeat rate:
In other words, the Sample Kit has a demonstrably higher repeat purchase rate than the Full Kit …
Over the first 30 days.
The story changes when we change the timeframe that we consider for a repeat purchase. The cumulative distribution function below shows the repeat rate throughout the first 180 days after purchase - not just the first 30 days:
The repeat rate of the Full Size Kit surpasses the repeat rate of the Sample Size Kit just before 75 days from purchase.
This makes a lot of sense, for 2 different reasons:
If we remove the time limit and just consider 2020-2021 data (giving at least a full year to repeat for the most recently acquired customer), the histogram of repeat rate by month looks much different:
And the results bear that out:
To summarize: the first product purchased impacts both
It doesn’t stop at repeat rate per SKU, however.
We also did a deep dive on second order revenue per SKU:
Surprisingly, second-order revenue from the Full Kit is actually less than the Sample Kit until about 150 days after first purchase.
If the repeat purchase rate on the Full Kits surpasses the Sample Kit’s at 75 days. So what’s going on?
The Sample Kit’s average second order revenue is ~10% higher than the Full Kit’s:
That may be unexpected, but the reason is simple — those that buy the full kit have a lot more product, so their second order is often just a single item they’ve run out of.
If we look at the cumulative average order value, we see a big dip in Second Order Value between 7 days and 75 days:
This raises the question — why would the brand want to sell the Full Kit?
Remember one plot back: at 150 days, the Full Kit’s second order revenue surpasses the Sample Kit’s. And that’s not even considering first order revenue.
Let’s look at how second AND first order revenue per customer look over time:
Now the difference between the Sample and Full Kit becomes even more drastic. Bambu Earth doesn’t have to wait 150 days to make up the difference in revenue; the customers that purchased the Full Kit already spent $100 more.
Since lifetime revenue changes dramatically depending on the first product purchased, it’s crucial to track per-SKU LTV over a specific period of time.
Stay tuned for blog updates as we keep diving even deeper into the complex world of predicting retention revenue.
Or, if you want to chat about how we can help you forecast returning customer revenue, don’t hesitate to reach out.
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Steve Rekuc is the Ecommerce Data Analyst at Common Thread Collective. Based in Vail, Colorado, he has been analyzing data from a systems perspective since his time as a graduate student at Georgia Tech two decades ago. Steve can be found on Twitter and LinkedIn examining data and providing interesting insights into ecommerce, marketing, and data analysis.