Increase lifetime value by recontacting and reactivating dormant customers

Last week we noticed that win-back strategies consist of identifying which customers have been lost or are about to terminate their relationships, reasons for losing high-value customers, effective methods for recontacting lost customers and reactivating them. This week we review recontacting and reactivating the lost accounts. 

Customers come and go, that is the nature of any business. However, that doesn’t mean you have to accept that all those that have left are gone forever.
By implementing a series of key customer strategies, you can reduce the number leaving and reactivate more of those that have already left.

In an independent survey of senior managers from 10 large companies in Sri Lanka, managers were asked, “How often do you contact lost customers?” One-half of the respondents said that they either never contacted lost customers or only contacted them once or twice. While it seems that recontacting lost customers should be a key element of any win-back strategy, obviously, it is not at the forefront in many of our companies.
 

Approaches
Recontacting may be as simple as telephoning the lost account. The call may begin with a question to determine why the customer stopped buying. It may be something like, “Our records show that you recently cancelled your account with us. We are very sorry to be losing your business. May I ask why you made your decision to close your account with us?” If a problem with the brand or company is indicated and the sales person can offer a solution to it, the contact sales person then attempts to re-establish the lost account.

In some companies a designated cast of salespeople with good communication skills is assembled into a win-back team to perform the recontact and reactivation tasks.
This approach can be effective if the lost customer group contains people who are of high value to the company and if the company is still learning how to prevent lost customers. However, win-back teams can be costly if the company loses its best salespeople to talking with unhappy former customers all day every day.

Depending on the sophistication of the customer and the nature of the product being sold, there may be some scripted material for various scenarios. When a customer gives a particular reason for defection, the contact salesperson enters this information into a computer. Either the customer relationship management (CRM) system or a higher-up officer then provides a situational script containing a CD presentation or talking points for the contact salesperson. In essence, a situational script is written by marketing experts in a conversational style to allow for less experienced employees to provide a clear and concise response to the customer. 

If it becomes clear that the customer has made the decision to keep on buying from a competitor, the sales person should let the customer know that the company has appreciated the customer’s past business and that at any future time the company is ready to earn back the business. Typically, the proven principles of personal selling apply in the recontact situation. For example, it is a good idea for every recontacted lost customer to receive a follow-up thank you letter or an e-mail expressing appreciation for the time spent talking with the company.

Provide a reactivation offer
If you have a customer database (or records of some sort) then you will be able to find out exactly which customers have become inactive. Draw up a list of customers who you think are particularly good targets – perhaps they’ve bought from you on more than one occasion?

The first step is to define what makes a dead customer from your perspective. Is it someone who hasn’t bought from you in over one, three, six or 12 months? This will inform you of who sits within the audience segment you want to target.

Additionally, using a model like RFM, what characteristics do churning customers share? For example, is it a group that spends 30 percent less month-on-month relative to your customer population? Once you know this, you can pick out the customers who have fallen into that cycle.

Before contacting your target customers, try to discover internally why they stopped buying from you in the first place. Speak to the account handler and examine their last purchases.
Finally, be clear with what you want them to do. This will then dictate how you approach them and what you ask them to do. You’ll also be able to benchmark success for future campaigns. Once you know who they are and what you want them to do, you can start to do something about it!
 

Stop them before they are agitated!
Apply an on-boarding strategy. User on-boarding is the idea that successful customers are happy customers and happy customers stay with you longer and spend more. In a nutshell, your challenge is to do everything you can to make it as easy as possible for your customers to get set up and use your product and then become a success.
 

Target new, inactive signups
The customers who haven’t bought anything during the last three to six months need attention. Of course the time limit depends on the type of your business. The longer someone leaves it to buy, the less likely they are to do so.
 

Reactivating dead customers
There are a couple of steps you need to take before you get started communicating with your agitated segment:

(1) Make sure you are using their history to inform all your marketing. Using historical transactional and behavioural data will result in far more effective marketing than one size fits all messages/offers.
(2) Create a control group to measure how successful your actions are. Take a sample of 10 percent and don’t send them any marketing. You can then compare this group with your action group to see if there is any difference.
 

Go back to square one
Stop thinking of these people as your customers and start treating them in the same way you do with cold prospects. In all your marketing, remind them of all the key USPs and UVPs that attracted them in the first place.
 

Educate them
A percentage of your customers may have agitated because they didn’t understand how to successfully use your product or how it can benefit them. Creating educational content on how to become successful in their field (using your product) will help draw people back.
 

Incentivise, but not too often
Special offers are always the most effective, the more aggressive the better. You are trying to change their behaviour so it has to be worth their while. Go beyond a one off discount and create an offer that requires repeat consumption to start building a habit.

For example, if you are a snack company you can target a dormant customer regularly with various offers to reactivate him. These range from a free box, discounted multiple boxes or his second and fourth box free of a five-box order. However, the trap you might fall into is sending him offers too regularly and he now expects them and in fact waits for them. It should be a one or two-shot deal and you should not allow it to turn into a habit.
 

Plan ahead
Reactivating inactive customers takes time, so spread out your calls and aim to contact only a small number each week, giving you the time to develop the appropriate relationship with the customer.
(Lionel Wijesiri, a corporate director with over 25 years’ senior managerial experience, can be contacted at [email protected])