Foundations: Customer Entropy

The law of customer entropy: at scale, customers tend to become more promo-driven over time unless you intervene.

There are two reasons why this happens:

First: a customer’s pool of disposable income at the time of purchase puts an upper boundary on what the customer can pay for a given item. 

Someone who has $100 of fun money per week is probably not going to buy a $450 pair of shoes multiple times a year…unless they REALLY like your shoes.

It takes years (sometimes decades) for a person’s disposable income situation to change in a significant, sustainable way. That’s why the first purchase is a good signal of what the person is ABLE to pay for what you’re selling.

Second: we teach our customers how to behave. Most retailers run the same calendar of events season after season and year after year (gotta comp!). 

If a customer opens your emails consistently over a six month period, they basically know the entirety of your bag of tricks…if you operate like most retailers. So why would they purchase anything at full price today if they know it’s going to be 50% off two months from now?

To counteract customer entropy you need to find ways to bring customers into your business at full price, and you need to develop promotional strategies that are less predictable or more personalized.