Is it better for Tokopedia to focus on acquiring new users or increasing purchase frequency of existing customers?

Introduction

The trade-off between acquiring new users and increasing purchase frequency of existing customers is a critical decision for Tokopedia's growth strategy. This scenario involves balancing short-term gains with long-term sustainability in the competitive e-commerce landscape. I'll analyze this trade-off by examining key metrics, designing experiments, and providing a data-driven recommendation.

Step 1

Clarifying Questions (3 minutes)

• What is Tokopedia's current user acquisition cost (CAC) and customer lifetime value (LTV)?

• Why it matters: Understanding the economics of user acquisition vs. retention informs resource allocation.
• Hypothetical answer: CAC is $20, LTV is $100.
• Impact: If CAC is high relative to LTV, focusing on existing customers might be more cost-effective.

• What is the current retention rate and average purchase frequency of existing customers?

• Why it matters: Helps gauge the potential for increasing purchase frequency.
• Hypothetical answer: 60% retention rate, 3 purchases per year on average.
• Impact: Low retention or purchase frequency suggests room for improvement with existing customers.

• What percentage of Tokopedia's total revenue comes from new vs. existing customers?

• Why it matters: Indicates the balance and importance of each customer segment.
• Hypothetical answer: 30% from new customers, 70% from existing customers.
• Impact: If existing customers contribute significantly more, focusing on them might yield quicker results.

• Are there any upcoming product launches or market expansions that could affect user acquisition?

• Why it matters: Strategic initiatives might necessitate a focus on new user acquisition.
• Hypothetical answer: Planning to expand to a new geographic market in 6 months.
• Impact: Expansion plans might prioritize new user acquisition in the short term.

• What is the current market saturation for Tokopedia in its primary markets?

• Why it matters: Indicates the potential for new user growth vs. existing customer development.
• Hypothetical answer: 70% market penetration in primary urban areas.
• Impact: High saturation might suggest focusing on existing customers for growth.