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How to win back lapsed customers

How to win back lapsed customers

By Richard Higginbotham, Marketing Manager at Transactis.

Where to start

Winning back customers is not a straightforward task, especially in today’s world of consumer choice. The starting point should always be to actually know which lapsed customers are actually worth seeking to win back.

Actual data

The key is to take all available customer data, to understand the individual’s behaviour and then use that information to inform the targeting, the message and the offer in the communications. And the best data to enable this is transactional data, which can indicate when buying patterns are changing. Other data, such as customer satisfaction data, can be used, but it is not the most credible or reliable information to use.

To really understand a customer’s behaviour and relationship with a product or a supplier it is necessary to have a 360° view that takes in all of the knowledge a company has about the customer.

The best way to achieve this is by setting up a single customer view (SCV) database that brings together data from all departments including orders, deliveries, marketing, customer services, CRM, etc, and holding it in one place.

Single Customer View

This ensures marketers are operating with up-to-date information and are not sending  conflicting messages from different parts of the company. For instance, without an SCV database, one part of an organisation might contact an ex-customer that it wants to win back and treat them like a new customer, rather than acknowledging the fact they used to be a customer. Instead an SCV can help inform a fresh approach to get the customer to come back.

It can also help marketers avoid viewing customer behaviour in isolation. Taking home shopping as an example, viewing a customer purely as a catalogue customer and not viewing all interactions the customer has with the organisation could result in the customer’s online activity being ignored. As a result, marketers could fail to communicate with the customer in the best possible way that maximises ROI.

For instance, a customer might be very happy ordering through a catalogue or over the phone, but finds online ordering not very user friendly. Viewed purely as an online customer a marketer might ignore them as being of little value but by viewing the customer’s entire interactions with the firm it might be discovered that, with a little help and encouragement, they could turn into a very profitable online customer.

An SCV database can also help organisations avoid making assumptions about customers and, instead, provide a detailed picture of every customer.

It is too easy for marketers to make assumptions about customer behaviour based on demographic profiles – something that was highlighted in our recently published Online Retail Index report, which showed that typically loyal middle-aged home shoppers who tend to be very loyal to their catalogues are actually more promiscuous when they shop online.

Since the greatest growth in online shopping activity was found to be coming from 35 to 54-year olds this sort of information is invaluable in informing marketing strategies.

Finally, having a single, secure database also makes data safer and easier to manage, with a team overseeing what data can be used and what cannot.

When to start win-back activity

Aside from identifying customers for win-back it is essential to establish the point at which win-back activity should be initiated. Data on recency and frequency of purchase is crucial for managing retention and switching customers to win-back.

If a customer is on a contract that is coming to an end changes in their behaviour can highlight a risk of churn. Repeat transactions start to look different.

For mail order firms and retailers there is no contract and therefore no obligation on the customer’s part to keep buying. This makes it more difficult to identify a point at which a customer should be considered as lapsed. If a customer hasn’t made a purchase for a long time it is unlikely they will do so soon. But how long should this period of inactivity last before the customer is classed as lapsed?

Some firms still count customers in their customerbase even if they haven’t made a purchase for three years. This is mainly because of the impact it would have on internal reporting – classing a customer as lapsed or churned would reduce the volume of the customerbase and not make a good impression on the board.

Instead, firms should start a 6-month pending lapsed stream to account for customers whose change in behaviour suggests they might be about to jump ship. These customers can then be targeted with communications and offers designed to keep them spending rather than looking for better deals elsewhere.

Pre-emptive strike

Finally, cohort analysis can help identify points in the customer journey where pre-emptive action can be initiated. By taking customers who have joined in the last week and comparing them to customer who joined in another week, the customer journey can be mapped to provide a view of what is likely to happen 2, 3 or 6 months on.

For example, a telecoms provider has invited people to switch to them. Analysis of the customer journey shows that some get cold feet after they receive the welcome pack, regret the decision to switch and cancel the contract.

Others cancel after receiving the first bill when it transpires they aren’t getting exactly what was promised. As churn or a drop in activity is shown to occur at particular times the telecoms provider can pinpoint steps in the customer journey that need attention.

Conclusion

The most important thing for firms to remember when embarking upon win-back campaigns is to carefully analyse customer data and look beyond top-line conclusions in order to be able to communicate with ex-customers, or those who look likely to lapse, in a personalised and targeted fashion based on purchasing histories and other available data.

AJR
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