Picking up where we left off discussing Kumar and his associates’ research on recapturing lost customers, let’s look at their three main questions of interest. When you are crafting a recapture strategy, you must consider the following:
How likely is a given customer to come back?
Trying to regain every lost customer can sap your marketing resources. It’s better to be more efficient and effective by focusing on people whose prior behavior suggests they can be more easily convinced to return. Has the departing customer referred others and never complained or only had complaints that were satisfactorily resolved? These are your best bets. Has this customer canceled because of price alone? If so, that customer is more likely to come back than one who left because of poor service. If a departing customer claims your prices are just as bad as your service, don’t bother knocking on their door again. Such types are the least likely of all to return.
How long will a reacquired customer stay, and how much will he or she spend?
You should consider the returning lifetime value of each lost customer. This is usually based on that customers average historical spend multiplied out over the number of years you expect the reacquired customer to stay. You’d probably be surprised to find someone who departs will be more loyal their second time around. In fact, recaptured customers generally stay recaptured longer, and customers who defect because of price and come back for a better deal stay the longest of all. This shows the important upside of win-back strategies.
Which people should get which saving offers?
You should consider the specifics of each customer in relation to your historical experience with others. Don’t use one-size-fits-all “new-deal” incentives. Who gets what recapture offer varies based on your company’s specific facts and circumstances and the reasons the customer left and is willing to consider returning.
You will have to study your customers to work strategically when bringing back your own lost customers. Simply identifying those who are the most likely to sign up again, rather than appealing to every defector, can increase your win-back rates. Considering each lost customer’s average lifetime value can drive how big an offer to make to get them back.
A lot of this data can also be used to develop initial customer acquisition strategies, but that is a topic for another day.
[reminder]What do you know about your own new customer prospects and lost customers and have you thought of hiring us to help you learn more?[/reminder]