Are you looking for the best ways to reactivate dormant customers and reduce churn? Here’s a roundup of the 10 most effective practices today, in both business and consumer markets. Consider which of these may be the most applicable to your business, your customers and your objectives.
Are you looking for the best ways to reactivate dormant customers and reduce churn? Here’s a roundup of the 10 most effective practices today, in both business and consumer markets. Consider which of these may be the most applicable to your business, your customers and your objectives. And don’t forget to set aside some budget for ongoing retention and reactivation marketing. It’s the best money you can spend.
1. Move Quickly
The longer a customer is inactive, the more likely an eventual defection. Early action is arguably the single most effective technique in reactivation marketing. But, you can take this principal a step further if you examine customer behavior patterns to predict inactivity before it even starts. For example, if purchase frequency slows, or order size shrinks, inactivity is likely to follow. Analyze the characteristics of your purchase cycle. Anomalies in a particular customer’s behavior may indicate a problem that, with early intervention, can be addressed.
2. Segment Your Dormant Customers, and Treat Them Differently
As marketers well know, different customers have different needs, and represent different levels of value to the firm. Applying segmentation is a key success factor in the reactivation effort, just as it is elsewhere in marketing. Consider such segmentation variables as:
- Original acquisition source media, like email, SEM, direct mail, display advertising, event, or telemarketing.
- Channel usage. This can be communications channels like email or telephone. Or it can be purchase channel preferences, like retail store, tablet, mobile, or desktop computer.
- Product usage.
- Customer value, using indicators like RFM, cumulative margins, or intent signals.
- Inactivity length, typically divided by months or years, depending on the purchase cycle in your business.
3. Deepen Your Understanding of the Dormant Customer
There are a number of approaches you can take, among them:
- Analyze behavioral patterns, looking for insights. For example, you may notice that an unusually large order is followed by a period of inactivity, and hypothesize that the customer is not getting ready to leave—she just has all the product she needs for a while.
- Use data append to gather more information about the customer. Your database marketing partner can add data points to your customer record that will suggest effective reactivation strategies. Demographic, lifestyle and attitudinal data are especially revealing.
- Consider some research, using an outbound telephone call, or a focus group, to gain additional insights into the reasons for the inactivity.
4. Communicate Through Different Channels
Thanks to marketing automation, email communications have become very easy to deploy, and there’s no question that email is effective for current customer communications. But relying entirely on email may annoy lapsed customers, not to mention leave you exposed to possible spam traps. So don’t forget the other options available—telephone, postal mail, mobile, retargeted display advertising, social media, your website — and add them to the mix to broaden your reach and keep your customers interested in your messaging. If your customer records are incomplete, ask your database marketing partner to append additional elements to allow communications through these other channels.
5. Use Proven Offers
Once you’ve determined that the inactivity is not a customer service problem, then the essential tool for reactivation is a motivational offer. Discounts are widely used by marketers today—because they work. But consider additional offers that have proven to be effective in reactivation marketing, such as:
The facts are clear: It costs far less to reactivate a dormant customer than to acquire an entirely new one; recent activity is a powerful indicator of customer lifetime value; and investments in retention marketing deliver the highest ROI of any strategy. But some marketers may still be missing out on some of today’s best practices in reactivation marketing.
As marketing advances, most professionals are well aware by now of the importance of retention and reactivation in optimizing the value of the customer base. The facts are clear: We know that it costs far less to reactivate a dormant customer than to acquire an entirely new one; we know that recent activity is a powerful indicator of customer lifetime value; and we know that investments in retention marketing deliver the highest ROI of any strategy.
But some marketers may still be missing out on some of today’s best practices in reactivation marketing. Let’s review the strategies that are most effective in stimulating a renewed relationship with your dormant customers, and reducing customer defection and churn.
Reactivation marketing applies to all kind of product and services categories, from consumer to business markets. The tactics and tools have been developed and refined to a fine art in the area of subscriptions and replenishment types of marketing. Let us learn from these trailblazers.
If you need backup to justify your investment in customer reactivation, here are some useful stats:
- A five-point decrease in defections can lift per-customer profit by 25 percent to 85 percnt (Reichheld, The Loyalty Effect)
- Retaining an additional 2 percent of customers has the same effect as cutting costs 10 percent (Davidow & Malone, The Virtual Corporation)
- It is 4.8 times cheaper to sell to a pre-existing inquirer than to generate a new lead (Aberdeen Group research)
Reactivation can be viewed as a subset of retention marketing. If a customer has stopped interacting with you, this is very likely an early indicator of upcoming customer loss, or defection. So, it’s essential to identify the signals early, and set up intervention activity to prevent the customer from moving further away.
4 Key Reactivation Questions
Before you can plan your best intervention tactics, you need to develop answers to several key questions:
- How should you determine the definition of inactivity in your business? For many, the end result of inactivity is known as “churn.” The churn rate is derived from dividing the number of customers lost in the period by the number of customers you had at the beginning of the period. But the path to purchase differs with each business. Buying a new car is very different from replenishing your supply of moisturizer. This means identifying the interim metrics that you need to keep an eye on. A car dealer may look at oil changes as an indicator of engagement. A department store will look at the such indicators as product purchase frequency and timing, with interim metrics like email open and click through rates.
- What are the reasons for customer dormancy? It may be that your customers had a problem with your product or service. In which case, you must strive to fix the problem. It may be that they no longer have a need. In which case, you need to determine whether there’s another way to serve them profitably. Or it may be that they have left for a competitor. In which case, you must institute a winback effort. There are many possible reasons. A quick survey by email or phone will help you identify them Each will likely require a different strategic approach.
- Is the customer worth reactivating? Some customers simply cannot be served profitably. For them, it may be a better strategy to let go, instead of investing more in re-engagement. Thus, an assessment of projected customer value will help you determine the appropriate amount of reactivation investment, if any.
- How will you know success when you see it? For many companies, reactivation is measured by conversion to repurchase. A useful metric is the winback rate, calculated as the number of reactivated customers divided by the number of inactives at the beginning of the period. For your business, the success metric may be something different. The point is to identify the most appropriate metric in advance, and track the results of your reactivation program over time.
A version of this article appeared in Biznology, and was excerpted from the white paper “How to Reactivate Dormant Customers.”