Who buys more and why? The residents of which city are more susceptible to discounts? What’s the worst day for online businesses? New Optimove research delves into the online buying trends of two of America’s largest cities.
New York City and LA: the financial capital of the world, and the global mecca of entertainment. They are two of the largest cities in the US and home to some of its most intense consumer action. Their populations share many traits: a median age of 34, a median household income of $37K and an education of BA or higher among 27% of adult residents. There are also, of course, striking differences, most notably in the size and distribution of the population (NYC’s population is twice as large as that of LA and its density is 2.5 times higher), and there are also large variations in ethnic and economic disparity.
But how does all this affect consumer behavior? Which urban environment is home to the more savvy customers, and how does that reflect on the businesses catering to them? Crunching the data of over 1M consumers on each coast, with more than 24M online transactions from a variety of retailers over a period of 24 months, we set out to find out.
NYC Loves a Discount
New Yorkers and Angelinos make about the same number of purchases a year, both in respect to number of orders and to number of order days. However, the average order amount is 6% higher for New Yorkers, a gap caused by the fact that NYC customers buy 5% more items per order (the price difference is insignificant). But the most striking difference is that New Yorkers enjoy average discounts that are 10% higher than those offered and redeemed by their western counterparts (even though the discounts, in percentages, are similar). In short: New Yorkers spend more, but also save more.
A discount on a customer’s first purchase makes a significant impact on the customer’s decision to get to a second purchase. While the average return rate of customers after the first purchase is 41% for LA and 42% for NYC the numbers change dramatically if that first purchase was for the full price – 26% in NYC and 25% in LA – or for a discounted price – 57% in NYC and 58% in LA. When comparing these tendencies for each city, it turns out that New Yorkers are 2.24 times more likely to make a second purchase if they get a discount on the first, while LA residents are only 2.15 times more likely to do so.
Discounts have a substantial impact on future buying trends. These, too, are more pronounced in NYC. As a rule, when a discount is on the table, all metrics jump pronouncedly. New Yorkers have a full 205% leap in order amount (compared to customers who didn’t get a discount), while LA exhibits only a 160% increase. Comparing the two cities shows a massive 28% gap in favor of NYC for total order amount at a discount deal. In other words – when a discount is given, the typical NYC customer will buy more in order to use that discount to the max. This effect can be found in another data set – the rise in orders made by customers who got at least one discount, compared to customers who never got any, is 11% higher in NYC than in LA.
According to conventional marketing wisdom, customers are more likely to make another purchase and to spend more if they’re offered a discount. Our research reveals that New Yorkers embrace this truism more closely than their LA counterparts. Discounts play a more important role for NYC customers than they do for LA customers. Getting a discount is a greater motivator for the people of NYC – they are more easily enticed by discounts to order more times, and to order more items each time.
Fighting the Monday Blues
Two areas that are similar between East and West are the way in which online shopping grows with each additional order, and the distribution of orders over the days of the week. For the residents of both cities, the probability of a customer making another purchase grows with every order, giving retailers a huge incentive to help their customers get over the hurdle of the first and second purchases:
And when do all these online orders take place? Both cities are apparently fighting the Monday Blues by ordering online: 17.5% and 18% of all orders in NYC and LA, respectively, were made right after the weekend. Numbers slowly dwindle as the week progresses, until they crash on Saturday with only 10.4% of the orders by New Yorkers and 9.6% of LA residents being made on that day – and Sunday is not much better.
Maybe more online retailers should offer a special Saturday discount. New Yorkers would love it.
Omer Liss is Optimove's Director of Strategic Services, helping CRM executives of top online entertainment and e-commerce businesses optimize their customer retention strategy. Omer has vast experience consulting clients, analyzing their customer data and revealing actionable, data-driven marketing insights. Omer holds a BSc in Industrial Engineering and Management, specializing in Information Systems.
