One of the toughest areas of retailing to define is customer value. The reason is because recency and frequency can change radically within a short period of time. When is a customer simply out of the market for your product? When are they in danger of going to a competitor? And when do they need to be reactivated aggressively or “won back?” With new customers tough to come by, many retailers are finding strategies to define and execute these winbacks.
For example, at Johnston & Murphy, a customer may not shop for months after buying a $400 pair of wing tips. But if they go six months, the company starts to send messages to re-engage them with news about new styles. LL Bean is following the holiday lull with a spring winback campaign, but the metrics are based on Web site visits. “Haven’t been to our website for a while?” the email subject line asks. Then it delivers a $10 coupon to convince the customer that a visit is worthwhile.
Winbacks, like all campaigns, are based on a complete profile of purchase data and behavioral preferences. We have compiled five rules for customer winbacks, all of which can only be relevant after the proper data profiles have been completed:
Go For the Save Before the Winback: Customer Development Solutions CEO Vernon Tirey believes that any retailer needs to have an “attrition alert.” This alert would be triggered when a customer starts to show some of the behaviors that, if ignored, will make a winback effort necessary. Some of the things to look for are drops in email metrics, lack of Web site engagement, and a drop in purchase levels. If an attrition alert is triggered off, save programs should also go into effect. Tirey has done work in this area with Johnston & Murphy. If an attrition alert shows that a valuable customer may be leaving the company’s purchase pattern, a series of sequenced customized emails and direct mail pieces go out. If the customer was a dress shoe buyer, the sequence will surround new styles and maybe discounts. If the save doesn’t pick up engagement, it’s time for the winback.
Understand the Gray Areas: “Not all winbacks are created equal,” says Jim Harold at Acxiom. “Don’t just take you’re inactive file and decide you’re going to win them all back.” He recommends segmenting the customers you want to win back and stay between the most valuable and least valuable. Valuable customers should have a different winback subject line, and cross-channel customers should get winback messages at as many touchpoints as possible. “To treat every customer the same is a major mistake,” he says.
Get the Best Ones Back First: Customer data value profiles should define the winback candidates. Value seekers or customers looking for discounts are not generally the most valuable. Yet many winback campaigns extend a discount as the core of their offer. “Winbacks depend on context,” says Bill Franks, managing partner of advanced business analytics for Teradata. “It’s not purely revenue-based. Maybe there’s a group of 100,000 customers that shopped at full-price that have gone quiet. But in extending a winback offer, don’t discount. Play to their sense of value.”
Understand Why They Left: Tirey says his clients have shown three basic reasons for leaving.
- They have a perception problem such as, ‘you’re too expensive.’
- They have had process problems in ordering or returning merchandise.
- They’ve had product problems. Survey customers before executing a winback campaign. At the very least the messaging can relate to the specific problems that caused them to leave. This is why Tirey says that emotional appeals such as ‘we miss you’ don’t work. The customer doesn’t miss you. They had a problem with you. Address it.
Use social media: Social media is bigger than email. A recent Neilsen report showed that the “global active reach” of member communities was 67% in December 2008, up from 61% in December 2007. That’s compared to email, which had a global active reach of 65% in December 2008, up from 63% in 2007. And while the most active users of social networks are between 24 and 38, Gen Y is active and willing to interact with retailers on social networks.
A study of Gen Y email habits comes from the Participatory Marketing Network and Pace University’s Interactive and Direct Marketing Lab. It shows that the majority of Gen Y consumers welcome direct brand interactions through email, but they want more ability to control, organize and manage the interactions. Only 28% of those surveyed believe the email they get from companies is relevant. But they are eager to see “innovative services” that increase that relevance.
Specifically, 62% would communicate directly with retailers about their favorite products in exchange for getting preferential pricing. 44% would subscribe to an email service that collected and summarized multiple offers of interest to them. This opens for the door for group winbacks, and a chance for retailers to set up pages that allow fans or followers to find new engagement points with a brand they might have disconnected from.
Social media provides a chance to start fresh and attract new data. But the other winback strategies are nothing without data. “A very small percentage of customers can actually be won back,” says Merkle’s Lori Connolly. “Be relevant and timely and you have a shot.”