“Is there a problem with (some of) your products?” That is typically one of the first questions I try to answer, with data, when working with a new direct-to-consumer (DTC) client.
Understanding customer behavior is crucial for any business’s success, and two key metrics stand out when evaluating product performance, beyond the obvious sales metrics: trial rates and repeat rates. These metrics provide valuable insights into product viability and customer satisfaction, helping businesses make informed decisions about their product portfolio.
1. Understanding the Metrics
Trial rate measures the percentage of customers from your total customer base who have purchased a specific product at least once. This metric indicates a product’s initial appeal and market penetration. For example, if you have 10,000 customers and 2,000 have tried your new protein bar, the trial rate is 20%.
Repeat rate, on the other hand, focuses on customer loyalty to a specific product. It measures the percentage of customers who, after trying a product once, return to purchase it again. If 800 of those 2,000 first-time protein bar customers bought it again, the repeat rate would be 40%.
2. Why These Metrics Matter
These metrics serve as critical key performance indicators (KPIs) when managing and optimizing your product portfolio. They help identify which products are truly resonating with customers and which might need attention or removal from your lineup.
A low trial rate often suggests that a product may be too niche or that your marketing efforts aren’t effectively reaching your target audience. This could stem from various factors:
- Insufficient marketing exposure
- Pricing issues
- Poor product positioning
- Limited distribution channels
- Weak value proposition
However, a niche product isn’t necessarily problematic if it serves a specific customer segment well and maintains healthy margins. The key is understanding whether the low trial rate is intentional or indicative of underlying issues.
The repeat rate is perhaps even more crucial as it directly reflects product quality and customer satisfaction. A low repeat rate raises red flags about potential quality issues or unmet customer expectations. Common causes include:
- Product quality inconsistencies
- Better alternatives in the market
- Price-to-value misalignment
- Changed customer preferences
- Poor customer experience
3. Strategic Decision Making
By analyzing both metrics together, businesses can categorize products into four strategic segments:
- Best Sellers (High Trial, High Repeat): These products are your stars, enjoying both broad appeal and customer loyalty. They deserve prominent placement and marketing support.
- Niche Products (Low Trial, High Repeat): While these products attract a smaller audience, they generate loyal customers. They might be worth maintaining but perhaps with targeted marketing rather than broad campaigns.
- Quality Issues (High Trial, Low Repeat): These products successfully attract customers but fail to retain them. They require immediate attention to identify and address quality or satisfaction issues.
- Deadweight (Low Trial, Low Repeat): These products neither attract nor retain customers. Unless there are compelling strategic reasons to maintain them, they should be considered for discontinuation.
Conclusion: Leveraging Trial and Repeat Rates for Strategic Success
For those already tracking trial and repeat rates, it’s time to delve deeper. Are you using these metrics to their full strategic advantage, guiding decisions across product development, marketing, and customer engagement?
And for those who aren’t leveraging these insights yet, now is the time to start. By understanding what drives initial purchase and repeat behavior, you can refine your product portfolio with precision. Regularly monitoring trial and repeat rates will empower your business to proactively manage products, focus resources where they’ll have the most impact, and build stronger customer loyalty. In the end, these metrics aren’t just numbers—they’re your blueprint for sustainable growth and profitability in the DTC market.
