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High-spending customers make a big impact

  • Opinion
  • October 24, 2018
  • Hayden Glass
High-spending customers make a big impact

Secondhand bookshop The Open Book in Ponsonby is in the process of being restored to commercial success by a group of new co-owners who all happen to be economists.We're sharing some vintage stories from its journey so far. This time, Hayden Glass shares a customer spending analysis.

In September we made 274 sales. In November it was 268, practically the same. But revenue was over $1,000 more in November than September. The difference was in average spend per customer, which we call basket value.

Both months customers bought roughly the same number of books (two). But in November, they bought more expensive ones: basket value was $23, whereas in September it was $4 less.

Four dollars might not sound like much, but across nearly 300 sales it adds up. We know from a previous post that we have never hit our weekly revenue target ($1,610) with a basket value below $18 but we have usually hit it if basket value is over $23.

Bottom of the pile

You can see two reasons why basket value was higher in November than September from the chart below:

  • There were a lot fewer low-spending customers in November. Nearly 40 per cent of customers in September spent $10 or less, compared with less than 30 per cent in November.
     
  • November had more high-spending customers. Customers spending $30 or more were 18 per cent of all customers in September, but 26 per cent of customers in November.

You can see the enormous importance of high-spending customers even more clearly in the next chart. It shows the proportion of total revenue for the month contributed by different customer groups.

Customers spending $10 or less contributed about 10 per cent of revenue, more in September, less in November.

Customers spending $30 or more contributed about half of all revenue (46 per cent in September; 60 per cent in November).

At the extreme, the eleven customers that spent $80 or more in November contributed 20 per cent of revenue. Encouraging a few more high spending customers would have a big positive impact on revenue.

This story originally appeared in January 2018 on The Open Book's blog.

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