Kevin Hillstrom: MineThatData

Do You Measure The Categories New Buyers Purchase From?

Many of the secrets of your business are buried deep in merchandise/marketing reports that simply do not exist. The modern digital world could care less about the products a customer purchases.

You, meanwhile, need to care deeply about what a new buyer purchases, because as it turns out, you are setting your business up for either long-term success or the alternative. Be mindful of what you are doing.

Here are twelve-month rebuy rates for first-time buyers based on the merchandise category the customer bought from in a first order. The categories are dummied-up to protect the innocent.

Category 01: 36% Rebuy Rate.
Category 02: 29% Rebuy Rate.
Category 03: 31% Rebuy Rate.
Category 04: 27% Rebuy Rate.
Category 05: 27% Rebuy Rate.
Category 06: 37% Rebuy Rate.
Category 07: 32% Rebuy Rate.
Category 08: 37% Rebuy Rate.
Category 09: 30% Rebuy Rate.
Category 10: 33% Rebuy Rate.
Category 11: 34% Rebuy Rate.
Category 12: 39% Rebuy Rate.
Category 13: 35% Rebuy Rate.
Category 14: 37% Rebuy Rate.
Category 15: 23% Rebuy Rate.
Category 16: 28% Rebuy Rate.
Category 17: 29% Rebuy Rate.
Category 18: 33% Rebuy Rate.
Category 19: 40% Rebuy Rate.
Category 20: 34% Rebuy Rate.
Category 21: 37% Rebuy Rate.

For this brand, the two most popular categories just turn out to be two categories that attract spectacular customers ... Category 12 and Category 19. In Nordstrom terms, those would be "casual apparel" categories. Look at Category 15 ... that would be like a Home category (towels, bedding etc).

One of the valuable lessons I learned back in the early 1990s at Lands' End was that categories that had narrow appeal were terrible categories to acquire customers in. You wanted the new Womens Casual customer because she'd buy Womens Casual and Womens Tailored and Kids and Mens Casual and Mens Tailored and Home. Her long-term value was better because she was pre-disposed to buy from most of our categories. The Home buyer? Nope. The customer had a narrow interest and consequently, low long-term value.

Nobody listened, of course, but it was such a valuable lesson.

This brings me to you. When you are out there paying tolls on Facebook, are you making sure that you attract customers who love your entire assortment (i.e. high-value prospects) or are you just paying for anybody (i.e. low-value prospects)?

You run this analysis for your business, right?

If you don't run it, what stops you from running it?

Yes, I'm building a case toward something ... if you've made it this far, you're one of the smart ones!

How Do You Know It's Working Properly?

About six months ago one of you reached out to me to tell me that you were having "wild success" via a fusion of AI and customer relationship management. The individual said "we don't know what it's doing, we just know that as of today it works."

#reassuring

Then you have Grok going ... well ... nuts on Tuesday (click here - gift link from the NY Times).

You can't through a large language model on LinkedIn without it hitting some pundit who has no mathematical training telling you how wonderful AI is. Sure it is. You don't have to know anything and can have AI do your job. Fun!

When it comes to customer relationship management, and you're trying to squeeze money out of your loyal customer base, please explain to me how exactly you know that the AI you are using "works"? Be specific, especially those of you who don't have mathematical training. How do you know that the customer relationship management decisions that you've outsourced to AI are the "right" decisions? How will you know when your vendor-trained AI solution goes off the rails like Grok did today?

Problem #1 With Digital Marketing

FYI - yesterday's quiz apparently sent some of you to the unsub button. It's not my fault you don't know the answers to the questions ... that's on you!

On to today's topic.

Here's actual data, showing the twelve-month rebuy rate of newly acquired buyers based on how many items were purchased in a first order. Tell me what you observe.

Customers buying just one item have an approximate 30% chance of buying again in the next year.

Customers buying multiple items have ever-increasing chances of buying again in the next year ... nearly a 40% chance for those with three items purchased.

I know, I know, this is the point in the program where you tell me that you have an automated AI-infused cross-sell and up-sell program. Good! Now why the heck does it do such a poor job?

Your AI-infused program might not be doing a bad job. Your source of new customer traffic might be responsible.

For instance, look at these results from recent work:

New Customers via Catalogs = 43% purchased multiple items in a first order.
New Customers via Email Marketing = 44% purchased multiple items in a first order.
New Customers via Google = 33% purchased multiple items in a first order.

Repeatedly, I see instances where the marketer goes for the easy win ... paying Google/Facebook to do the heavy lifting ... those channels are doing heavy lifting ... they're identifying customers who want a specific item at a specific point in time. Those channels have no responsibility to send you a quality prospect, they are responsible for sending you ANY prospect. You don't want ANY prospect.

It's your job to identify prospects who want to buy from your full assortment, both today and in the future.

Do you see the difference? It's an alignment issue ... your marketing efforts are not aligned with subsequent success efforts.

When I measure companies with low long-term value, it's frequently because of the decisions marketers made 1-3 years ago to acquire easy-to-find customers who want an item at a point in time instead of acquiring hard-to-find customers interested in a relationship where they buy from your full assortment multiple times.

New Customers

A few years ago I analyzed a business that was struggling with new customers (duh). Upon digging into the information, another issue revealed itself.

The customers the brand acquired STUNK. They were lousy customers.
The brand didn't always acquire lousy customers ... the brand changed their marketing strategy and the customers they now paid Google for were not "customers", they were "Google Users" who had a need at a point in time and Google facilitated the transaction.

This isn't the only brand that has problems. In the post-COVID era, there are all sorts of acquisition nightmares taking place. Some of this is facilitated by the easy nature of modern digital marketing. Marketers know the creative and subject lines and offers that attract customers. Marketers have NO IDEA whether the customer being attracted is worthwhile. None. Modern digital reporting is notoriously bad at helping marketers understand what they are doing.

So, let's ask a few questions. Count how many times you answer YES.

Question #1: Do you know the percentage of new customers who purchase 2+ items in a first order?

Question #2: On the acquisition order, do you know if your new customers prefer new merchandise more than existing merchandise?

Question #3: On the acquisition order, do you know if your new customers prefer winning items (best sellers) over hard-to-find items?

Question #4: On the acquisition order, do you know if your new customers prefer higher price point items than are preferred by your loyal customer base?

Question #5: On the acquisition order, do you know if your new customers prefer full price items or discounted items?

Question #6: Do you know if September is a better month than December to acquire a new customer?

Question #7: Do you know how much worse customers acquired from Google/Facebook are compared to other sources, in terms of future value?

Question #8: Do you know which merchandise category delivers new customers with the best future potential?

Question #9: Do you know the percentage of new customers who will repurchase in the twelve-month following a first purchase?

Let's grade your efforts.

6+ Yes Responses = You are a very smart marketer and likely know more than most of your peers.
4-5 Yes Responses = You are likely an average marketer, good job!
2-3 Yes Responses = Talk to your analytics team and get some answers.
0-1 Yes Responses = Oh oh.

If you answered "Yes" to only 0-3 of the nine questions, please follow along in upcoming days because issues you have could be connected to your level of knowledge regarding the customers you are acquiring.

Buc-ees

Recently somebody emailed me and said "where have all the customers gone?"

They're at Buc-ee's, founded in 1982, expanding in 2025 like there is no tomorrow.

Let me just start by saying that I thought it was a tad inappropriate to take a picture of the restroom (for obvious reasons) ... but the stunned look on my face when I walked in ... I mean, this is Making America Great Again. I've been in some filthy latrines in all sorts of Shell / BP / Amoco stations this year. I mean, red/green led lights to show you if a bathroom stall is being used? I get it, your CFO will tell you that you don't make money on a modern restroom. Your CFO needs to stop talking.

As you drive in, you notice that no semi-trailer trucks are allowed. None. There was a Loves right across the freeway and Buc-ee's says "you can have those customers, we don't want 'em". Meanwhile, you're taking every customer Facebook will allow you to pay for. Heck, we even saw truckers walking a quarter mile from their rigs to visit Buc-ee's.

The gas pumps ... all three hundred of them (I have no idea what the actual number is, it felt like 300, it wasn't) were generally being used.

Cars packed the parking lot.

Inside, the store is busier than a 1990 Mall the Saturday before Christmas.

Many readers work for apparel brands. You want to know where your customers are? They're inside this store in Amarillo! I walked off the square footage ... 3,000 square feet dedicated to apparel, until my wife told me I missed a section ... 4,000 square feet. 2/3rd the size of a mall-based store. My home town just leveled a mall ... it's time for apartments ... meanwhile, Buc-ee's is reinventing apparel retail.

"But Kevin, I just want to get a bag of Doritos after getting gas." Ok, have at it. They have Doritos. But they prominently feature THEIR in-house brands ... and they merchandise a lot of products!

You'll also find a jerky bar, a candy bar, and essentially an entire restaurant paired with performing employees.

Can I ask you a question? Do you post your salaries anywhere / everywhere for anybody / everybody to see?

The Assistant Food Service Manager is making $80,000 a year.

One of those "strategic leaders" on LinkedIn messaged me about a job paying $180,000 a year, wondering if I'd be interested? The "strategic leader" needs to look at what Buc-ee's is paying a GM and re-evaluate ... well ... just about everything. I mean, if I have to hear one more person tell me that "nobody wants to work" or "young people just don't want to work" ... it's just cruel. It means your work environment does not attract top-level talent. Either your culture stinks, your leadership stinks, you aren't paying enough money, or some combination of all three is true. Look in the mirror.

The people in the Buc-ee's store were working their living butts off ... they had no choice, because customers were just opening their wallets and throwing money at 'em.

Businesses with a heritage that pre-dates e-commerce all decided to jump off the omnichannel deep end ... tethering old with new, forcing sameness everywhere, offering tepid products that are perpetually available and always 30% off or more, focusing entirely on discounts/promotions for success while constantly throwing money at Google/Facebook for customers that have well-below average lifetime value. We called this a "best practice". We were so dumb.

Walk into a Buc-ee's and see what real leaders were doing while we spent decades aligning channels. My goodness.

P.S.: This is where many of you email me and tell me the reasons why Buc-ee's is "wrong". Here's my email address: kevinh@minethatdata.com