- An ecommerce Perspective
   User: Someone who uses    (browses, interacts, contributes) your    website.   Customer: Someone who buys something  ...
   Era: A period of time when there is a shift in    the user base.                                                e.g   ...
Customer1          2           3            4               First                           Repeat       Regular    User  ...
   There will be users who did not buy anything: (N)   There will be users who bought only once: (O)   There will be us...
… and Ask these questions every era.   Is the conversion rate from User -> Customer    getting better?   Was it a season...
Assumptions   Era definition: 10% growth in Unique users.   Repeat buyer as a % of one-time buyer: 5%   Regular buyer a...
Revenue Growth during 22 successive “Era”s:     One time and repeat users grew 7.5 times.     Regular users grew 71 times*...
Revenue Composition during 22 successive “Era”s:      ERA 1: Revenues from one-time buyer/ Total Revenues = 0.8      …    ...
   Era ∞ :Revenues from one –time buyer / Total Revenues = 57%Revenues from regular buyer/ total revenues = 31%… and this...
   No matter the growth rate of the website, first-time buyers will always be the bulk    composition of the revenue.   ...
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Customer lifecycle and worth in the online world

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A Model describing the role of different types of customers in the ecommerce world.

how do we classify our customers?
how do we look at the revenues they bring in?
What should be the focus of a ecommerce company at different stage of its growth?

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Customer lifecycle and worth in the online world

  1. 1. - An ecommerce Perspective
  2. 2.  User: Someone who uses (browses, interacts, contributes) your website. Customer: Someone who buys something from your website (non ad-supported model).
  3. 3.  Era: A period of time when there is a shift in the user base. e.g Early stage Product: 10% growth in unique users. Media Stage Product: 30% growth in unique users. Mature Product: 10% growth in unique users.The Duration of an Era can be (is typically), different from its previous Era.
  4. 4. Customer1 2 3 4 First Repeat Regular User Time Buyer Buyer Buyer
  5. 5.  There will be users who did not buy anything: (N) There will be users who bought only once: (O) There will be users who bought 4 – 6 times: (R) There will be users who bought >6 times: (C) N >> O >> R >> C
  6. 6. … and Ask these questions every era. Is the conversion rate from User -> Customer getting better? Was it a seasonal increase/ decrease ? (you will know from the items purchased) What did I do right/ wrong? (Web Analytics)
  7. 7. Assumptions Era definition: 10% growth in Unique users. Repeat buyer as a % of one-time buyer: 5% Regular buyer as a % of Repeat buyer: 10% Avg Revenue from ◦ One – time buyer: “x” ◦ Repeat buyer: “4x” ◦ Regular buyer: “10x”
  8. 8. Revenue Growth during 22 successive “Era”s: One time and repeat users grew 7.5 times. Regular users grew 71 times* Total revenues grew 10 times Rev from Regular Rev from Repeat Rev from One Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 * Regular users get added over previous eras
  9. 9. Revenue Composition during 22 successive “Era”s: ERA 1: Revenues from one-time buyer/ Total Revenues = 0.8 … ERA 22: Revenues from one-time buyer/ Total Revenues = 0.6 Even though Regular customers have grown 71 times, they account only for 29% of revenues 100% 90% 80% 70% 60% Rev from Regular 50% Rev from Repeat 40% Rev from One Time 30% 20% 10% 0% 1 3 5 7 9 11 13 15 17 19 21
  10. 10.  Era ∞ :Revenues from one –time buyer / Total Revenues = 57%Revenues from regular buyer/ total revenues = 31%… and this is very less dependent on the Growth %( If Era= 20% user growth, instead of 10%... Era ∞: revenues from one –time buyer / Total revenues = 67% revenues from regular buyer / Total revenues = 20%. )
  11. 11.  No matter the growth rate of the website, first-time buyers will always be the bulk composition of the revenue. The normal assumption of “Costs for First time buyer is high, Costs for regular buyers is low” is not valid. To keep a regular buyer as a regular buyer, requires a LOT of investment (product upgrades, category upgrades, service upgrades) Companies must continuously focus on first time buyers always! No breaks, no time-outs… the growth of first-time buyers must not slow down. Costs spent on new customers and regular customers must be similar to the revenues they bring in. i.e ifRevenue from New customers / Revenue from Regular customers = 60/30Then Marketing investment / Product-service investment must be 60/30.

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