Did you know acquiring a new customer can cost 6 to 7 times more than retaining an existing one? This presetnation explores how retailers can apply audience measurement and analytics to successfully win back dormant customers.
Michael introduces Dave and Andrea Notes about Polls, questions, etc. General Rules of the road, format etc.
Hi Folks, my name is Dave Hendricks. I’m Executive Vice President at Datran Media – thanks for joining me and my guest Andrea Gulli. Today we are presenting another in a series of Datran Media webinars designed for you to learn about trends and techniques in interactive and social media marketing. Todays’s webinar was preceded by a presentation Andrea and I gave at Internet Retailer in June. Our case studies and results have been provided by engagements that Datran Media has performed with our clients, and Andrea will be discussing her specific experiences as VP eCommerce at NY & Company. In today’s webinar we are going to focus on customer Winback and reactivation. After our session, you’ll learn to define your dormant customer, how to target them effectively, how to use analytics to improve succcess rates, how to communicate to your different types of customers, hear some practical examples and get some tips for creating or planning your own winback programs.
Think about it. As marketers we spend a tremendous amount of time, effort and treasure to acquire new customers – a very important mission. What about the customers we already have? How much time and effort are we spending to keep them? How much time should we spend trying to keep our existing customers and winning their long-term business and loyalty? Frederick Reichheld, a legendary loyalty expert, estimates that the cost of acquiring a new customer is 6 – 7 times the cost of retaining an existing one. That means that keeping an existing customer can cost 85% less than getting a new one. That’s a pretty good deal.
The much lower ‘cost’ – I prefer the term ‘investment’ – of retaining customers versus acquiring them stands out in stark relief when you realize that most companies are losing as much as 40% of their customers each and every year. Now if your business is not based on repeat sales, this might be an acceptable metric. But what if your business is the kind of enterprise that people never stop buying from, like an electronics retailer, computer manufacturer, department store or sporting goods retailer? Unless you are in the business of making caskets, you probably want and need repeat customers to make your numbers, and importantly to grow.
So let’s get down to the numbers. You’re running your business. You know something about your defection rates. What percentage of your customers do you lose every year? I’ll take a minute here while you answer. Thanks. And the envelope please! ANSWER? Now, some folks never consider a customer to be lost until they’ve received a ‘Dear John
In the strange multilingual argot of modern marketing, one of the more mysterious terms tossed around is “dormant customer.” What does this mean? Dormant is a French word that means “sleeping.” That would make a dormant customer a sleeping customer–not gone, just merely in a state of suspended animation, ready to wake at any time. But are these customers light sleepers? That’s what many marketers hope.
So what is a merchant to do when faced with a dormant customer? The most important thing is to properly define, for your specific business and customer base, all customer segments. Here are several types of customers that you need to define: The ideal repeat customer. This alpha customer drives the highest sales and is the customer to whom you target your retention marketing efforts. These folks are the experts in your products and the ones who share the good and the bad about your brand with friends and relatives. These are folks who write reviews on websites. They also may know and buy from your competitors. They may cost more to service, but they make up for it in repeat purchases and word-of-mouth recommendations. The casually loyal customer. This is often the largest base of your customers and the folks who buy once in a while, somewhat dependably, but not with the same enthusiasm and expertise as your ideal customer. When they are buying in your category, they buy from you. The one-time or infrequent customer. Depending on your segment, this could be a bigger group of customers than the casually loyal. The lapsed customer. A customer who has been in one of the previous three categories, but has not yet been identified as dormant.
The dormant customer. This type of customer makes up perhaps more than 50 percent of your customer list. For some categories of companies, these are referred to as the “the walking dead,” as Wharton marketing professor Peter S. Fader calls them in his interesting study, “Modeling the Evolution of Customers’ Service Portfolios.” “ The walking dead” aside, a dormant customer is one who has fallen out of the regular purchase cycle, is not actively purchasing in the market but has the potential to “wake up” and restore their relationship with you. Message to them the wrong way and they’re gone forever.
The truth is that dormant customers are not light sleepers at all, and, when they do wake up–like many of us–they are a bit groggy. Eventually, they begin shopping again for the things they want and need. However, whether you are Target, Title 9, Vermont Teddy Bear, L.L. Bean, J. Crew, Williams-Sonoma or a hip retail youth brand like Baby Phat or KarmaLoop, they may not remember your brand at all. In fact, it is very likely that when they do begin shopping again, they’ll begin exploring and connecting with new brands in your category, compelled by discounts, price points or other points of attraction that aren’t even on your radar. So, even if you message them frequently, it is unlikely that you are providing them with the type of “wake-up calls” they really need to remember you and shop again. The only way to do this is to pay attention to what your awakened customers are telling you by their actions, and by changing your modus operandi.
If I were a psychiatrist, I might conclude that merchants are insane when it comes to their reactivation processes. By marketing the same way to their dormant customers as to their active customers and expecting them to react the same way, they enact the definition of insanity–doing the same thing over and over and expecting different results. If you speak with any retailer–traditional, multichannel, catalog, Internet or electronic– about their customer file, they can usually tell you a couple of things about their customers, depending on their perspective and marketing approach. If you are an interactive marketer, you should have an astounding amount of information – you might think too much – at your disposal. At the minimum, you’ve got an email address and an prior expression of interest that’s defined on when they signed up, and maybe where they were referred from. You might have postal information, or gender, or category interest – more likely if you are a specialty retailer or site. For prior purchasers, you’ve got SKU data, category data, cart size. And when you take all of this information and look at in the aggregate, you’ve got a great perspective on your database of customers.
So let’s take a look at your audience. Start classifying and stratifying your customers now. Define the various categories of customers based on numbers, not emotion. The most common method for this is using the direct marketing method of RFM (recency, frequency and monetary). For the purposes of this exercise, I’ve broken out a fictional customer audience into 5 basic segments. As they say on tv, results may vary, but this first take on segmentation gives you a base for a first look at your database. Lets consider this to be a ‘latitudinal’ segmentation process. That means it’s a range of values or conditions – but is not overly defined by other elements. If you want to get more in depth – you are going to further break down these customers you are going to want to apply ‘Heuristics’ to the segments above.
Heuristic analysis categories may be based on activity, or they could be based on profitability. They could be based on purchases from a category (i.e. shoes) or time of year (i.e. Holidays). This is where the Art meets the science when it comes to segmenting and reactivating customers. How well do you know your business? How well do you know your customers? Let’s assume you know them pretty well. You’ve already figured out that your average customer – meaning someone on your database - buys .65 times a year. Your most active customers buy 10 times a year. Your best customer, however, buys 3x a year. What’s missing? Your definition of a dormant customer.
Here’s where the work begins. Your customers are often very different from each other. They react at different times, buy different products, at different frequencies. Have you been treating them the same way? Begin treating these customers differently. Create promotion strategies to keep active buyers active–like a loyalty discount or some form of incentive–and other strategies to migrate customers into the active, buying categories.
At this point it becomes imperative to start looking at buying behavior as a clue to how to market to all of your customers. This is one of the most important points to remember. Remember when we created the first 5 segments? With the exception of the first category, recent sign ups, your dormant customers could live in every single one of those categories. Even the ones where there have been no opens, clicks or conversions. This is where heuristics really come in. How often should someone be buying from you? Are you a seasonal retailer? Do you sell a product that involves consumables? Do you have accessories? Do you have a replacement cycle for your product? If you count on repeat purchases to maintain and grow your business, it makes sense to understand what your purchase to purchase latency should look like. But until you’ve decided that your dormants are defined as list members that have not opened, clicked or converted in 120 days, you cannot create a program to win them back.
Implement dialogue marketing approaches to drive a conversation with each customer. They should be based on where they are on the customer continuum. Think about your dialogue with your customers. Is it on their schedule? Or yours? Your dormants may be dormant solely because of the time and day that you are mailing them. For example, if you are marketing to busy moms, would you e-mail them at 10:00 a.m.? If they are busy working moms, they are probably not checking their e-mail at this time. When, then, are they going to be receptive to your pitch? When the kids are in bed and the dishes have been washed (hopefully by someone else!). The working mom may not even get to her personal e-mail account during the week, and it may not be until Saturday morning, when the kids are outside playing or watching TV, that she can get to her e-mail account. In that case, if you sent your marketing appeal on Tuesday at 10:00 a.m., four days earlier, your message will be buried at the bottom of her inbox. She might not get to it at all. Purchase time is critical to marketing time. If your customer has been purchasing on Saturdays, why send on Tuesdays? As a 21st-century electronic retailer and marketer, you have the knowledge and the tools at your disposal to market correctly to your customers. Why live in the past? Harness what you know about your customers, market to them when they purchase or open, and you will have a chance to convert those dormant “zombie customers” to active, profitable, satisfied customers.
Over the last year Datran worked with a number of household name retailers and using these methods. We had some stunning results. With one large department store chain, we reactivated 450,000
Waking Up Dormant Customers
Waking Up Dormant Customers Best Practices for Defining , Messaging , and Reactivating Customers with Email presents featuring…
DAVE HENDRICKS EXECUTIVE VP, STRATEGIC SALES & PLANNING www.datranmedia.com Introductions ANDREA L. GULLI VICE PRESIDENT, E-COMMERCE www.nyandcompany.com
What You Will Learn Today: <ul><li>How to define a dormant customer </li></ul><ul><li>How to better target your customers </li></ul><ul><li>How to leverage analytics to your advantage </li></ul><ul><li>How to communicate to different audience segments </li></ul><ul><li>How other retailers have won back dormant customers </li></ul><ul><li>Tips for creating your own win back programs </li></ul>
Did You Know Acquiring a New Customer Can Cost 6 to 7 times more than Retaining an Existing One?* * Frederick Reichheld of Bain & Company $
Did You Know The Average U.S. Company Loses Between 20 & 40% of its Customers Every Year?* * Frederick Reichheld of Bain & Company
DO YOU KNOW HOW MANY CUSTOMERS YOU LOSE PER YEAR? a) 0-15% b) 15-30% c) 30-45% d) 45%+ e) What customers? ---POLL QUESTION #1---
When Should You Consider a Customer to be Dormant? After 6 Months? After 18 Months? After 3 Years?
Do You Believe These Customers Are Lost Forever ?
They’re Not! ONLY THE PEOPLE ON THE ISLAND ARE TRULY…
dor·mant (dôr m nt) adj. 1. Lying asleep or as if asleep; inactive. 2. Latent but capable of being activated 3. Temporarily quiescent 4. In a condition of biological rest or inactivity characterized by cessation of growth or development and the suspension of many metabolic processes.
DO YOU HAVE AN OFFICAL DEFINITION OF A DORMANT CUSTOMER? a) Yes b) No c) Not sure ---POLL QUESTION #2---
Classifying Your Customers The ideal repeat customer. The casually loyal customer. The one-time or infrequent customer.
Classifying Your Customers The dormant customer. “ The walking dead,” as Wharton marketing professor Peter S. Fader calls them in his interesting study, “Modeling the Evolution of Customers’ Service Portfolios.”
It is unlikely that you are providing these customers with the type of “wake-up calls” they really need to remember you and shop again .
DO YOU MARKET DIFFERENTLY TO DORMANT CUSTOMERS? a) Yes b) No c) Not sure ---POLL QUESTION #3---
Simply sending more email is not the answer. You need to be smart and strategic when engaging dormant customers.
GROUP 1: NEW LIST MEMBERS GROUP 2: OPENS, NO CLICKS OR CONVERSIONS GROUP 3: OPENS & CLICKS, BUT NO CONVERSIONS GROUP 4: OPENS CLICKS, & CONVERSIONS GROUP 5: NO OPENS CLICKS, OR CONVERSIONS Segment Your Audience
But are not being used to define and reactivate dormant customers . Analytics are driving today’s marketing decisions.
Active customer Inbox Dormant customer Inbox Tailor Messages Accordingly…
Analyze Shopping Behaviors When do they open? What type of offers do they open? When was the last time they opened? When was the last time they bought? What is the average number of transactions for ‘best customers’? What does the ‘most profitable customer look like’ What does the non-buyer look like?
PREVENT DORMANT CUSTOMERS <ul><li>BEGIN WITH THE END IN MIND—DEVELOP COMMUNICATION & CONTACT STRATEGIES FOR ALL PHASES OF ENGAGEMENT, TO PREVENT CUSTOMERS FROM BECOMING INACTIVE: </li></ul><ul><ul><li>ATTRACT —WELCOME EMAIL STRATEGY </li></ul></ul><ul><ul><li>INTEREST —CUSTOMER-CENTRIC SEGMENTATION (GEO, PRICE POINT, RFM SEGMENT, TRADE AREA, CHANNEL PREFERENCE, PRODUCT/SIZE, ETC. </li></ul></ul><ul><ul><li>TRANSACT —ENCOURAGE CUSTOMER TO BUY BASED ON WHAT YOU KNOW ABOUT HER </li></ul></ul><ul><ul><li>COMEBACK —LEVERAGE THANK YOU EMAILS, FOLLOW UP EMAILS SPECIFIC TO PURCHASE, GO-WITH ITEMS, UPCOMING PROMOTIONS </li></ul></ul><ul><li>DEVELOP TESTING & IMPLEMENTATION STRATEGY TO SUPPORT THIS </li></ul>
IDENTIFY & RE-ENGAGE DORMANT CUSTOMERS <ul><li>IDENTIFY THE POINT OF NO RETURN—BEYOND WHICH CUSTOMER GOES INACTIVE </li></ul><ul><li>1) BEYOND FREQUENCY, LEVERAGE EXISTING SEGMENTATION TO UNDERSTAND CUSTOMER BEHAVIOR </li></ul><ul><ul><ul><li>1X BUYERS/MULTIS/SINGLE CHANNEL/MULTI CHANNEL/LOYALTY </li></ul></ul></ul><ul><ul><li>2) OVERLAY AVAILABLE EMAIL/WEBSITE BEHAVIORAL DATA </li></ul></ul><ul><ul><ul><li>OPENS/CLICKS/CONVERSIONS </li></ul></ul></ul><ul><ul><ul><li>SITE ACTIVITY/OFFLINE ACTIVITY </li></ul></ul></ul>
<ul><li>LIST </li></ul><ul><li>IDEALLY A CROSS SECTION OF ENTIRE DORMANT FILE </li></ul><ul><li>ALTERNATIVELY, SEGMENTS MOST LIKELY TO RESPOND </li></ul>TEST, TEST & RE-TEST <ul><li>OFFER </li></ul><ul><li>GO WITH THE MOST AGGRESSIVE OFFER YOU ARE ABLE TO FUND </li></ul><ul><li>ALTERNATIVELY, A/B TEST AGGRESSIVE OFFER VS. PROVEN WINNER </li></ul><ul><li>CREATIVE </li></ul><ul><li>KEEP CREATIVE SIMPLE </li></ul><ul><li>LET SUBJECT LINE DO THE HEAVY LIFTING </li></ul><ul><li>TEST, TEST & RE-TEST SUBJECT LINES </li></ul>
CONSIDER EXTERNAL PARTNERS <ul><li>ONCE YOUR ONGOING INTERNAL REACTIVATION CAMPAIGN PROGRAM HAS BEEN IMPLEMENTED </li></ul><ul><li>-PARTNER WITH YOUR ESP, CHANGE OF ADDRESS, CRM, EMAIL APPEND VENDORS TO LEVERAGE OTHER DATA ABOUT YOUR DORMANT CUSTOMERS AND BUYING PATTERNS </li></ul>
The Win Back Take Away… <ul><li>DON’T DISREGARD YOUR DORMANT CUSTOMER FILE </li></ul><ul><li>TAILOR MESSAGES TO THEIR NEEDS </li></ul><ul><li>TIMING IS EVERYTHING </li></ul><ul><li>UNDERSTAND THEIR CURRENT PURCHASE BEHAVIOR </li></ul><ul><li>DO NOT SNED THEM THE SAME MESSAGE YOU WOULD SEND A RECENT CUSTOMER </li></ul>
Thank You! ? ! Q and A s Copyright 2009, Datran Media Corp. All Rights Reserved
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