First-Time Experiences Matter

Caesar’s Entertainment (the casino) noticed something peculiar: The majority of first-time visitors to their properties didn’t return. There are a number of reasons why a customer may not return but a big one is their first visit experience. If the customer has an experience they like, it greatly increases their chances of becoming a regular (thus making Caesar’s Entertainment a lot of money). In the casino business, a bad experience is when a first-time visitor loses more than they expect. Since Caesar’s knows the distribution of winning/losing for each type of game they know when the first time visitor is on the losing tail of the distribution (bad experience). This raises a flag in their monitoring system. It’s important to note that most casinos would do nothing for this customer. But at Caesar’s when this event is triggered a manager walks to the customer and asks hows they are doing. The customer says they are having a terrible time and the manager apologizes and offers her a free dinner, a hotel room, or a limo ride (for example). To study the bottom-line impact of this strategy Caesar’s will make the offer to only 50% of first-time visitors who are losing heavily. This allows them to compute the difference. And not surprisingly, that small shift in first visit experience greatly increases customer lifetime value.

This exact same strategy can be applied to your ecommerce store.