Customers typically go through a series of lifecycle phases including prospect, acquisition, cross-sell, fading, churn (a.k.a. attrition), and reactivation (a.k.a. win-back). In subscription-based products like cable TV and magazines, churn is well-defined: if the don’t renew then they churned. With other products the lines are a broad spectrum of grays. If a customer hasn’t used their mobile phone or credit card for three months, then they probably churned but just haven’t bothered telling your billing systems yet. No use in 10 weeks, 9 weeks, 8 weeks… still likely gone. What about no use yesterday?
In retail, every time a customer checks-out, there’s a chance that they have just churned. If the average shopper visits 5 times a year, then why wait 10 weeks to start remarketing to them? Retailers shouldn’t wait but should immediately launch a reactivation campaign, taking into account two key factors: offer and medium.
An offer is what you say to a customer, such as “50% off shoelaces until Thursday!” or “These green laces go well with the boots you bought last weekend.” Media is how you say it. Thanks to cheap broadband data networks, today there is a staggering array of media available to marketing: bang-tails, paper inserts, small ads in statements or bills, letters, postcards, tri-fold brochures, small/small catalogs, Sunday newspaper inserts, inbound/outbound IVR, voice mail, text messaging, kiosks (including ATMs), text/graphical/video email, pod-casts, a wide variety of Web banner ads, inbound/outbound online chat, inbound/outbound call center agents, and face-to-face. Of course, the medium is part of the offer, so much so that 40+ years ago some wiseacre said that the medium is the message. In any case, the medium certainly affects conversion rates. Try selling surgical procedures via voice mail or digital music via paper catalogs.
Matching the offer and medium drives marketing ROI. A large telco increased conversion rates 300% using text messaging to sell text messaging. ABN AMRO has seen 32% conversion rates on targeted cross-selling of short-term insurance at ATMs. Sports Authority used voice mail to create, deliver, and measure campaigns in just a few days. Road Runner Sports increased revenue per email 300% using email to reactivate first-time buyers. The good news is that there are lots of media with different costs to pick from, but the bad news is that, like most interventions, customers get used to them and their effectiveness decrease over time.
Media wear out. Direct mail conversion rates continue to decline nationwide. A broad-line, multi-channel retailer has seen the incremental value of their catalogs nearly reach zero. So be it. Pick another medium and move on. Limited Brands saw email wear out for its youngest customers and quickly moved to text messaging. Large telcos — who have carpet bombed us with direct mail, outbound call center agents, and voice mail for decades — are experimenting with face-to-face, door-to-door customer acquisition and cross-selling. Picture the Fuller Brush Man selling 3G!
To get going, pick a few offers and media to start with. Don’t do winner-take-all, A/B testing, but rather analyze which offer/media pair is best for each individual customer. Test on a subset of customers and get a success story (a.k.a. positive ROI) that you can use to internally sell an expansion of the approach to more offers, media, and customers.