How to Use Data Driven Marketing for Customer Reactivation - dummies

How to Use Data Driven Marketing for Customer Reactivation

By David Semmelroth

Sometimes, despite your best retention efforts, customers do leave you, but data driven marketing can help you with customer reactivation. Customers may decide to try a competitor’s product. They may no longer have need of your product. They may have had a bad experience with you.

But these lapsed customers have a history with you, and you have some knowledge about them. That means that you may be able to recover their business. It certainly makes them more likely prospects than people who have never done business with you.

When identifying which customers are active and which are lapsed, you need to be careful about the time period you look at. Different businesses have different purchase cycles. A credit-card company might consider a customer to be lapsed if they haven’t done any transactions for six months. But an auto dealer wouldn’t flag a customer as lapsed a year after they signed a two-year lease.

When designing a reactivation campaign, it’s important to try to understand why a customer has lapsed. If it’s a service or quality issue, you may communicate to them about improvements that have been made in that regard. Automobile companies often take this approach after recalls, for example.

It’s also important to understand what your lapsed customers were doing before they lapsed. Clues to why they stopped doing business with you may be found in their previous purchase history.

Some customers, called transactors, do a lot of transactions and pay off their balances every month. Other customers, called revolvers, carry large balances over every month. Still others don’t do much at all.

This last group of inactive cardholders can be divided into two subgroups. First you have the truly inactive cardholders — those who have never used their cards at all. The other subgroup is your lapsed cardholders. These customers have used their card in the past but have since stopped.

Now, suppose you’re asked to design a reactivation campaign targeted at these lapsed cardholders. A critical piece of information for you is which category these cardholders fell into when they were active. In other words, you need to know which ones were transactors and which ones were revolvers.

Their previous behavior offers strong clues about why they left. The transactor didn’t leave you to take advantage of a low-interest balance transfer. He didn’t have a balance. But the revolver may well have done just that.

This line of thought leads to two different reactivation strategies. You focus on usage with one group and balances with the other. You offer cash back or other rewards to the lapsed transactors, for example. And you offer low-interest balance transfers to the lapsed revolvers.

The success of your reactivation campaigns depends heavily on your understanding of why your customers lapsed in the first place. As the preceding example illustrates, previous purchase history can sometimes tell you quite a bit. But understanding why customers lapse is also a popular subject for survey research. You can gain a lot of insight by just asking some of these customers where they went and why.