Trial and repeat purchase are the two metrics to assess a new FMCG product’s market potential. For the product to succeed, it needs to establish a base of regular consumers who continue to buy it. It must generate appeal so that a substantial number of consumers try it. Once they experience it, an adequate number of them should be willing to continue buying it.”ashokcharan
Mini Case Study: Food Delivery Apps
Food delivery Apps are all the rage now. Businesses like Über Eats, DoorDash and Deliveroo have quickly become multinationals; and let’s not forget industry leader Meitun who has focused on China (for the time being).
This is an industry where the dynamics of customer acquisition cost versus repeat usage are starkly apparent. I estimate Deliveroo has spent on average £104 acquiring each customer yet its average order value is £23. Deliveroo makes on average £6.8 per order and net contribution after overheads is £1.80. So the average Deliveroo customer has to repeat order 58x before there’s a payback. That’s a big challenge!
(Sources: Deliveroo IPO, Dealroom)
Whether my calculations are spot-on isn’t the point, it’s that customer acquisition costs for new brands can be exorbitant. Only when customers stay loyal is there ever a chance of a payback.
So businesses have two jobs. The first to acquire new customers and the second to keep them coming back time and time again. This applies in your domestic market and it’s equally true in any export markets you enter.
In this lesson I’ll take you through the nuts and bolts of building repeat sale.
This lesson also offers tips to smaller companies on advertising. If you thought that advertising isn’t an option, think again!