A new blog post at Optimove, a provider of cloud-based marketing functionality, has come to a deflating conclusion about all the efforts retailers make to attract new customers during the holiday season, which is this: those efforts are completely misdirected.
Tel Aviv-based Optimove found that new customers acquired during the holiday season will be of less value to the retailer over the following twelve months compared to its already existing customers.
First-time holiday customers turned into repeat customers 19 percent less frequently, the analysis showed. And when first-time holiday shoppers do become repeat customers, the number of their additional transactions is dramatically lower than that of those who were already repeat shoppers prior to the holiday season.
Now for the Shocker
That first-time holiday customers provide less ROI to retailers for the rest of the year is not that surprising, especially after Yohai Sabag, head of Optimove's Data Lab, explained it to CMSWire (which we will get to in a moment).
But let's put that aside to consider this lollapalooza that Optimove also discovered in this analysis: first-time customers are also less valuable during the holiday shopping season. Yes.
Going Against the Grain
It has been a given that new shoppers splurging on gifts at the end of the year drives retailers' lift. Indeed earlier research by Optimove Data Lab showed proves that.
It found that during the holidays, online businesses experienced 50 percent more transactions from new customers. Repeat customers made only 17 percent more purchases during the holiday period as compared to their rest-of-year monthly average.
"The rise in holiday traffic in all e-tailers is attributed mainly to new shoppers, who in greater percentage than usual are likely to remain one-timers," wrote Optimove founder Pini Yakuel in a blog post explaining this data finding.
Now here's the rub: Existing customers are not staying faithful to their favorite brands. They are spending more because of the holidays — thus accounting for the industry lift — but they are spending it at both new retailers and their favorites.
But, ultimately, when they do head to the online retailers with whom they have been doing business all year, they will spend more than the first-timers.
Millions of Transactions Analyzed
That last data point especially is a hard one to digest. If it weren't for the huge number of transactions that Optimove studied and the extended time frame in which these transactions occurred, it would be easy to dismiss.
The company analyzed millions of online purchases made over the past three holiday seasons, including 2015, to come to this conclusion.
And that conclusion is unshakeable, it states.
Repeat customers have higher transactions amounts and higher numbers of items purchased during the holidays compared to new customers, Sabag wrote in the more recent blog post.
Their "transaction amounts came in 30 percent higher, while the number of items purchased was 40 percent higher."
Okay, we understand (now) why existing customers make for better holiday shoppers, but why can't first-time holiday shoppers convert into loyal customers as the year goes by?
The answer is very straightforward, Sabag told CMSWire.
People don't shop for themselves during the holiday season, they are shopping for others. So during the run up to the holidays they are likely shopping at sites that have products that they wouldn't necessarily want for themselves. If they do see something they like at an online retailer while they are shopping for a friend or family member, they might return for it, but it probably won’t be the start of a full blown love affair with the retailer because, after all, they first came to the site for someone else.
For online retailers the conclusion is obvious: invest in and cultivate your existing client base during the holidays. Welcome new shoppers, of course, but the group you want to reward the most are not the first-timers.
And don’t try out thinking any of these people, Sabag said. "This is the one time of year where online shopping behavior is irrational and unpredictable."