"Customers only" should include quite a few people

With time to kill in Melbourne before I go to the airport I went to go sit in the "Oaks on Market" lobby. It's a  nice place. I didnt stay at the Oaks on this trip and strictly, the management might think it a little odd, maybe annoying, that I would spend a little time sitting here.

Now I doubt that they'll kick me out. Melbourne businesses tend to do less of the "customer is an intrusion" thing than others. But the event brings me to a topic I ponder quite often.

What makes a customer a customer?
The topic has been around in Marketing Science for many years, professors Peter Fader and Bruce Hardie came up with a cool model (NBD/Pareto they called it) that aims to estimate how long a customer should go without repurchasing your product before you can safely call them lapsed.

But as a mere mortal I think of things such as using the compressed air at a service station. So I drive into my local service station and use the "free" air for my tires. And drive out. Should I feel guilty? Should the proprietor get shitty? It's a service for their customers, for sure, otherwise a sensible business wouldn't do it. But what do you mean by customer? How's this for a sliding scale?

• Bought something today.
• Bought something this week.
• Bought something this month.
• Bought something in the last six months.
• Longer than six months
• Haven't bought anything ever.

So as a manager, where do you start to tell someone to "piss off"?

Modern marketing science tells us that we should consider everyone on that list as somebody to be pleasant to.

I'll take the easy one first. A person who has never bought is at least in your geographical area. It may be the first of many, it may be random. But why alienate a potential customer?

Every single one of those other categories is easily explained by a marketing truth that was first noted in 1959. This Negative Binomial Distribution model is the natural shape of consumer purchases. A brand or product category has a huge majority of the customer base purchasing them once (or even not at all) in a week. If a brand collects its monthly figures, a few of those "zeros" get the chance to buy and become single unit purchasers. At six months many more "zeros" tip into the single purchase group.

If we run the time out to an extremely long period - say five years - the proportion of nonbuyers reduces to very low. Everybody becomes a customer.

And if there is no marginal cost increase to let those people use the service the what are you losing? So, run the compressor, leave the lobby free. It's no biggie.

I stayed at Oaks on Market last January. And will do so again. Such is the ebb and flow of life, and business. UPDATE: Of course, life always gives us a chance to curb our self righteous indignation. Perhaps just plonking oneself in a massage chair is stretching the friendship. Same principles probably apply.