Casual Customers vs Biggest Fans

One of the biggest misconceptions in eCommerce and digital marketing is that all of your customers have the potential to become your best customers.

The latest edition of Nik Sharma’s excellent newsletter digs into a topic near and dear to our hearts at No Best Practices: some customers are more valuable than others. An excerpt:

“…we found that a certain set of subscribers had better metrics than the average subscriber. Immediately, I wanted to dig in and see what they all had in common. Was it a coupon code? Did they all sample first in store? Did they all try a specific flavor at first that led them to be more curious about the others?”

What was it that ultimately made these customers more valuable than the average subscriber?

“(1)Their first purchase was a well-merchandised introduction to the brand — they tried a variety of the top-selling flavors…

(2) The best subscribers did NOT subscribe on their first purchase. 

(3) They all came in from a piece of content/creative that told the brand story and answered the question of why the company had started in the first place.”

This gets to the heart of the question: why do some customers deliver sustained value while others make a single, low-AOV purchase and walk away for good? 

The reason: some customers are super-fans, while others remain fairly casual. And both types are important to the growth and financial health of your business…as long as you use them strategically.

First, let’s dig into what sets a super-fan apart from a casual customer.

What Is A Super-Fan?

A super-fan is the type of customer you wish all your customers could be. They make multiple purchases with you and are likely to make many more. When you release a new product, collection, or flavor, they’re the first to try it. And if you have a subscription option, they’re all in.

Although we want every customer to be a super-fan, they typically make up around 5-10% of your active customer base. But there is power in that small number, because they typically generate between 25-35% of your annual revenue.

A customer with super-fan potential has a few key traits:

1. They have enough disposable income to purchase from you multiple times in a calendar year. This threshold varies with the price of your product, both in absolute terms and relative to your category.
2. They care enough about your category to invest in it. There are a few rich yahoos who want “the best of everything”, but even multi-millionaires cut corners in categories they don’t care much about.
3. They have a personal connection to your brand’s story. Something about it resonates emotionally, or the problem you’re setting out to solve really bothers them too.

What Is A Casual Customer?

A casual customer is the polar opposite of a super fan. They typically make a single purchase containing a single item. That item might be your brand’s most well-known product, or it might be purchased at a steep discount. 

This customer is unlikely to return within 12 months of their first purchase. If they purchased when you were running a promotion, they might come back if you run the same offer again.

Depending on the scale of your business and your marketing and distribution strategy, the casual customer will make up between 40-70% of your active customer base. They don’t exactly pull their weight revenue- and margin-wise, but without them your business would be much, much smaller.

Casual customers have very little hope of becoming super-fans because they are the mirror image of a super fan:

1. They have a relatively low amount of disposable income. An unfortunate truth: due to stagnant wages and the rising costs of housing and healthcare, this is going to describe many of your potential customers.
2. They feel passive about your category. It may be something they use out of necessity, but it isn’t something they spend much time thinking about.
3. They’re relatively indifferent towards your brand. They bought it because it happened to be there, or the price was good. Maybe they were vaguely familiar with your brand, but it didn’t mean much to them.

Getting The Most From Casual Customers

Casual customers are most likely to come from three sources:

1. Your deepest, most widely advertised sales and promotions
2. Products in your assortment that “go viral”–they become more popular or well known than your brand itself
3. Customers you acquire from third party marketplaces like Amazon or Farfetch

It’s worth giving all new customers a chance in the first one to three months post-purchase. Having a robust new customer nurture program in place will help you maximize the potential LTV of all your customers.

But beyond that, you need to understand how many of your customers are casual, and what percent of sales they’re driving. Because these customers are unlikely to return, you need to comp the acquisition source or tactic if you want to comp the sales.

Here are a few examples:

(1) 50% of a brand’s sales last year came from an item that went viral on Tiktok when several large accounts used it as a prop in a dance challenge. Few of the customers acquired this way returned to purchase anything else. If the brand wants to successfully comp those sales, it needs to manufacture another viral breakthrough or come up with another way to gain broad exposure.

(2) Between 20-30% of a brand’s annual sales come from a bi-annual “sample sale” event where the product is marked down to at least 70% off. A new eCom leader does some analysis and determines that the sample sale is mostly unprofitable. If the brand wants to do away with the sale, it needs to find another way to comp that revenue OR plan for a topline sales decline.

You Can’t Spin Straw Into Gold

One of the biggest misconceptions in eCommerce and digital marketing is that all of your customers have the potential to become your best customers. 

But let’s dig into the implications of that statement a bit. Let’s say you are selling a $125 product to a customer base with household incomes ranging from $45k to greater than $150k. At the lower end of that range, the customer likely purchased at a steep discount.

Someone making $45k a year is bringing home around $1k per paycheck if paid bi-weekly. In all likelihood, around 60% of their take-home pay is covering expenses like rent, utilities and debt service–the non-negotiables. They have $800 per month to cover short and long term savings goals, food, other basics, and fun. 

This means that your $125 product at full price represents 2-4 months of saving. That already puts a hard cap on annual purchase frequency. This person is going to really need to love your brand to make that sacrifice once, much less multiple times.

Fighting to turn this person into one of your best customers is essentially fighting the laws of physics. I can invest millions trying to turn straw into gold, but it’s never going to happen. And that kind of fruitless quest can be devastating for a business. Yet…it is the central sales pitch flogged by many software and marketing tech vendors.

Instead, you need to build an understanding of which traffic sources and campaign creatives bring in casual customers vs super-fans. You can invest more revenue and effort into scaling campaigns that are bringing in the super-fans, while using casual customer sources as a fallback when you need to move inventory.