Customer win-back comes from a 'single view'
Earning undying customer loyalty is every retailer's ideal marketing goal, but sometimes customers simply defect, necessitating an effective 'customer win-back' strategy. But winning back lost customers is not always a straightforward task, and can only be done cost-effectively if you know which ones are actually worth trying to win back, according to Richard Higginbotham, marketing manager for Transactis.
There are a number of challenges involved in winning back customers, including how best to make use of existing customer and purchase data, compiling a single view of the customer, knowing when to start win-back activities, and knowing when - and how - to take pre-emptive action before defection actually takes place.
The key, according to Higginbotham, is to take all of the available customer data, to try to understand the individual's behaviour, and then to use that information to support and inform the appropriate targeting, message content, and the offer in all communications.
The best data for this is transactional data, which can indicate when buying patterns are changing. Other data, such as customer satisfaction data, can also be used but it is not always the most credible or reliable information to use.
To truly understand a customer's behaviour and relationship with a product or a brand, it is necessary to have a single '360-degree' view that takes into account all of the knowledge the company has about the customer.
The obvious 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 and so on, and holding it all in one place.
This ensures that the marketing team is working with up-to-date information and that they are not sending conflicting messages from different parts of the company. For example, 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 develop a fresh, unified approach to help get the customer to come back.
The SCV also helps marketers to avoid viewing customer behaviour in isolation. Looking at home shopping as an example, viewing a customer purely as a catalogue customer and not viewing all interactions the customer has with the rest of the organisation could result in the customer's online activity being ignored. As a result, marketers could fail to communicate with the customer in ways that maximise ROI. For example, a customer might be very happy ordering through a catalogue or by telephone, but finds online ordering cumbersome, unfriendly, or impersonal. Viewed purely as an online customer, a marketer might ignore them as being of little value but, by viewing all of the customer's interactions with the firm, it might be discovered that with a little encouragement or education they could become 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 which was highlighted in the recent 'Online Retail Index' report which found that typically loyal middle-aged home shoppers who tend to be very loyal to catalogues are actually more promiscuous when they shop online). Since the greatest growth in online shopping activity was found to be coming from 35-54 year-olds, this kind of information can be invaluable in informing marketing strategies.
Finally, having a single, secure database also makes data safer and easier to manage, with a team overseeing which data can be used and which cannot, and under which circumstances data can be accessed.
Apart from identifying customers for win-back, it is also essential to establish the point at which win-back activity should be initiated. Data for recency and frequency of purchases 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 customer base 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.
Finally, 'cohort analysis' can also help to identify points in the customer journey where pre-emptive action can or should be initiated. By taking customers who have joined in the past week and comparing them to customers 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 after becoming a customer.
For example, a telecoms provider invites consumers to switch to their service. An analysis of the customer journey shows that some get cold feet after they receive the welcome pack, regret the decision to switch, and subsequently cancel the new contract. Others cancel the contract after receiving the first bill (when it transpires they aren't getting exactly what was promised). But, as churn - or even a drop in activity - is shown to occur at particular times, the company can easily pinpoint the various steps in the customer journey that need greater attention.
The most important thing for marketers to remember when setting up win-back campaigns is to carefully analyse their 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 more personalised and targeted way, and that has to be based on purchasing histories and all other available data.