To make the business profitable, Jim decided to invest in a loyalty program. Fearing that Adam and Sharon were already overtaxed (and donating their time), he decided on an outside resource.
Jim knew the rate of repeat purchases was increasing rapidly. The rate of repurchases grew to 10% of total sales from 5%. This last month saw a substantial increase in repeat customers. The programs were affecting but not enough to make profits.
Jim mused that this was a slippery slope. Deploying well thought out tactics felt good, and worked, but not enough to make a big difference. The consultant calculated that a repeat buy was taking out $10 per sale. Those customers were close to break even. They needed more of them. A 10% repeat buy rate saved him $100 for every 100 customers, but he was still paying $1,980
Despite the good results, new customers were still 90% of sales, and that every new customer was costing $22 for advertising and marketing. The number in his head for repeat buys was 20%. He informed the consultant that he would continue to work, but that his budget was limited for the moment.
Decision: Keep it
Choice eliminated fix it
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