MARKETING AND STRATEGY
Winning back lost customers
By understanding lost customers, establishing communication patterns, and setting up reactivation campaigns
It’s tough to see a customer go when you’ve made the first or even the second sale considering the amount of time, energy, and money you spent to acquire him/her. In accounting terms, aside from capital expenditures, building, and employee costs, the single most expensive thing a business will ever do is acquire a new customer. But in reality, every business will lose customers. However, it’s also a lot easier to win back a lost customer than it is to seek out a brand new one.
Understanding the customer
Knowing when a customer is lost
A difficult question to answer is knowing when a customer relationship is over, or more importantly, defining a lost customer. Unless a business runs on a continuity or subscription model, where you receive automatic payments regularly, it can be a challenge to determine when a customer is lost. For example, if someone buys a pair of jeans on January 1st, is that person still considered a customer if they haven’t bought another pair by March 24th or November 11th? What if it’s been years since their last purchase? What about the customer who hasn’t logged in to an iPhone app? Or the one who stopped coming to appointments and now isn’t answering calls?
Despite this challenge, some organizations may continue to spend the same resources to market to a customer from six years ago as they do for the one who bought six days ago. But in reality, a customer is only a customer based on the last time they purchased (i.e. the recency factor) and what the buying cycle or purchasing interval of the average customer looks like. For example, for a restaurant, you might decide through customer analytics that no customer should go longer than three months without a second visit while for an accountant, it might be the annual tax deadline, and for a car dealer, 4 years.
There is no one size fits all answer here and depends on the business model. We will need to look at the history of the business, and consider the purchasing patterns of most of the customers and place a benchmark as to the timeline by which the customer can be deemed as lost. And based on these observed patterns, we can take steps and make action plans to bring back customers and engage in more preventative efforts to retain customers before they’re lost.
Why customers leave businesses
Regardless of how great a product or service is, customers are going to leave as attrition is a natural part of any business. In reality, some customers aren’t worth keeping. In action, there could be four main reasons customers leave a business:
- The business company made a mistake: this is a disappointing way to lose a customer because you’ve messed up. The good news is that you can improve your customer experience and service. The catch is that these customers are often very challenging to win back, if at all.
- An unavoidable external factor caused a customer to stop doing business: it’s just not your fault, customers can move to new jobs or even new countries
- The customer no longer needs the business offering: considering an expecting mother who no longer needs maternity period items
- The customer falls out of habit with the business: meaning, they just forget you completely because their habits and/or underlying consumption trends have altered. This is a dangerous loss because it means that you haven’t done enough to keep in touch regularly and remind them that you’re there. Your marketing plans have been a disaster.
Out of the four reasons, the business has control over two of them (i.e. the mistake made and the customer forgetting them), leaving room for improvement. Therefore, we need to ensure we’re getting in touch regularly with our clients especially during the appropriate buying periods.
Solving attrition problems that can be controlled
First, how to win back the customer after you’ve made a mistake.
- This generally happens when you don’t deliver all that was promised. In this case, the business has the obligation to make it right. Additionally, every lost customer represents a lot more than one lost customer as people talk on social media, which can be very damaging at times. In these circumstances, we need to show the customer that we care in a meaningful way, for example, by making a personal phone call or a gift certificate to a competitor who we know they will be churned from.
Second, winning back customers whose habits have changed.
- Unless your business has not been outdated, customers’ habits change because they aren’t thinking about you at all, and they will likely start thinking about you after they see you, and once they do, they recognize the value they were receiving from your business. Basically, the business wasn’t investing in targeted marketing and communicating a relationship. The best way to mitigate this type of attrition is to stay on the customer’s top of mind regularly and often. And therefore, a business needs to find ways to establish constant and consistent contact such as a monthly newsletter or weekly emails or tips.
Establish communication patterns
Consistency is key
It’s not up to the customer to remember to do business with you, it’s up to you to remind them. And there are two ways you can use reestablish contact with customers.
- Reach out to inactive clients. Make it part of your CRM policy to reach out to inactive customers regularly.
- Let customers know they are missed. When reaching out to customers, first provide value and establish repertoire, and only then try to close the sale. You need to let the customer know that he or she was missed. Try to refresh the customers’ minds about all the great things that are going on in your business or introduce anything new that has been created in their absence.
While you might worry that too much communication can be repelling, the single worst thing you can do is not communicate regularly and consistently as a key reason businesses lose customers is that they simply fall out of the habit of doing business with you. So there’s huge value in getting back in touch to discover what happened to the customer. And even if the customer legitimately doesn’t want to do business with your company ever again, then you’ve got nothing to lose by contacting them. The only cost here is the efforts you put in to communicate.
Place a notification system in place
Businesses need to have systems in place to monitor irregular customer behavior and trigger appropriate communications. To do this, they must determine an average customer purchase recency, frequency, and monetary (i.e. RFM) behavior pattern and aim to build notifications thereof. Not every customer will be the same, but if most customers purchase every 90 days, you need an alarm system to show you all the customers who have gone over 90 days without a purchase.
When these notifications are in place, reach out by asking the customer whether they have been experiencing any problems with the business’s products and/or services? A business just needs to be proactive here, starting a conversation with its customers, and learning about what’s going on.
Setting up a reactivation campaign
When you’ve identified a lost customer, you will need to create a reactivation campaign. A reactivation campaign is a process for winning back a lost customer. It’s what we use when retention efforts have failed and reactivation might be the single fastest way to generate short-term profits. To implement a reactivation campaign:
- Logistics and messaging. Consider the logistics, like the number of customers you want to reach. For example, if it’s a small base of customers, you can call them, but if it’s thousands of customers, an email, video, or social media campaign that has more reach might be used. This will need an approach that can scale and be managed effectively, and the messaging needs to connect.
- Start reaching out. Get that email out, print those letters, or make those calls.
- Track results. Be mindful of the efforts you are putting in as you don’t want to bug customers by sending them emails asking them to come back every day.
The messaging
The most important part of making a reactivation system is having built great customer relationships in the first place. Everything hinges on the relationship the customer had with you when he or she was still considered a customer. If they left because they were very unhappy or poorly serviced, it’s more challenging to win them back than if they just fell out of habit. In these cases, the business might be better off fixing its service-related issues and attracting new customers than on bringing lost customers back.
But if a business has a history of building great relationships with its customers, then it can rekindle relationships quite easily. To do this, its message has to indicate that it’s getting in touch with the customer because it cares about the customers’ business and the relationship they have/had. This interaction needs to be meaningful, memorable, and personal.
Channel and frequency of contact
Typically, an activation campaign will require multiple contacts or touchpoints with customers across several channels. While some clients may come back after a single letter or email or phone call, many won’t. As a rule of thumb, aim for 8–10 contacts over three months, because the last thing on this lost customer’s mind is your business, and you will need to come up top of the many messages they receive daily. Also, aim for channels that give you the greatest chance at customizing and personalizing your message.
An activation campaign also needs to have a messaging strategy, with every touchpoint having a specific call to action (CTA). A great way to win a customer back is to get them to reply with a series of small yeses that eventually land them back into the sales funnel. You need a strategy and a reason behind why you’re connecting so frequently with the customer. For example:
- First contact: reestablish contact and tell them you appreciate their business.
- Second contact: show them what’s new or exclusive at your business.
- Third contact: provide them with a promotional offer or a discount.
The key is to add value at every touchpoint, but gradually building the customer up towards a sale.
Tracking efforts
The most important thing to track in a reactivation campaign is who is where in the communication sequence, and what needs to happen next. For example, if you have an eight-step reactivation campaign, and a client comes back after the second contact, you need to ensure that they don’t go through the next six touchpoints. Additionally, tracking allows the campaign managers to know which messages or channels are converting the best.
It is key to have customers feel like they’re in a one-to-one dialogue with the company. From a customer’s perspective, it doesn’t feel authentic if they keep getting emails and calls after they’ve returned doing business with an organization. When a customer re-engages with you, whether they’re making a purchase or letting you know they’re not interested, stop trying to win them back.
Pay attention to when and how most customers come back. For example, you might find that your personal approaches such as a phone call or in-person visits are more successful than technological approaches such as emails. When you find something is working better than others, double down on those efforts. But in effect, you need to have systems in place to make this manageable and effective.
There are several tracking tools in the market including reply.io, Infusionsoft, or Microsoft’s Autopilot, that allow you to build follow-up sequences and campaigns that can be triggered to start and be managed automatically. The important thing with reactivation campaigns is that they should be ongoing, and not a start-and-stop operation or one-time effort. It should become a regular and fluid program that can easily be managed alongside normal daily operations and make winning back customers part of your standard business practices.
Reactivating lost customers isn’t easy because it takes time, energy, and resources away from your new customer acquisition strategies. But it is simple; because we can identify and focus on who left and why. Set realistic targets and expectations for your reactivation campaigns. Aim to measure response and conversion rates, average return customer spends, and the costs of your reactivation campaigns and benchmark them against past or recent reactivation or new customer acquisition campaigns to gauge results and the ROI of your efforts.
