Offering Customers Incentives to Return - dummies

By Shannon Belew, Joel Elad

Whatever the reason for your online business customers’ departure, your objective is to win them back. Enticing customers to return means showing them that you’ve changed. You listened to their critiques and paid attention to what went wrong, and, most importantly, you’re ready to make amends.

Many marketing experts use the lifetime value (LTV) concept to quantify what a customer represents to your company. You may also see this concept referred to as the customer lifetime value (CLTV). Basically, to calculate a customer’s relative value, you determine how much money the customer spent with you over a certain period and then factor in expenses and other considerations.

You need to understand why it’s worthwhile to invest in winning back your customers, regardless of the dollar value of that effort. Winning back customers is worthwhile for these reasons:

  • Cost: If it costs you $100 to get back a former customer, it would cost at least $500 to win a brand-new customer.

  • Profit: Existing customers often account for more than three-fourths of a site’s revenues.

  • Familiarity: Educating former customers on the benefits of your site takes less time. They’re already familiar with your business, your products, and your service.

  • Upselling: After you win back a customer, you’re more likely to increase the average value of his or her purchase or to upsell to another level of product or service. On the other hand, it takes more time to achieve the same result with a new customer.

  • Referrals: When you regain the value of a customer, you also net the value of all other customers that this one refers to you.

  • Brand strength: Loyal customers increase the strength and value of your overall brand.

To find out how to calculate a customer’s LTV, check out the Customer Lifetime Value Calculator from Harvard Business School Publishing. In addition to detailed information about CLTV, they have an online tool you can use.


A tailor-made offer

Inviting a lost customer to do business with you again involves far more than simply offering an apology for messing up the first time. More often than not, you just have to connect with your customer’s needs again. What better way to do that than to present a personalized offer?

Being able to make this type of offer assumes that you have a database of good historical data that details the customer’s preferences. (If you’ve built that database, this task isn’t difficult.)

Most e-commerce shopping cart software now includes database functions for storing and acting on customer data. You can extend that capability by importing the data into a more powerful database (or customizing your own). Better yet, your e-commerce platform may also integrate with a third-party customer relationship management (CRM) program that your business can use to manage the customer experience, such as Salesforce or SugarCRM.

To customize an offer, start by looking at your customer’s buying history. Review the products or services the customer bought most recently and frequently. If the data is available, you also want to find out which offers he or she responded to most often.

Some examples are a percentage-off coupon code, an offer to buy one and get one free, a limited-time offer, the option to purchase on a deferred-payment plan, and the opportunity for free shipping. When you have this information, you’re ready to create an offer tailored to the consumer’s preferences!

For the best results, create the offer after you survey to determine the customer’s reason for leaving. This way, the enticing offer you construct appeals to the person’s present interests or needs and isn’t based solely on old (and changed or outdated) buying habits.

A targeted offer

Customizing an offer for every departed customer might appear excessive. However, you can create ready-made targeted offers, such as these examples:

  • Deep discounts: An offer of a deep discount on the next purchase gives your customer a chance to experience the product or service again. You can include a coupon code to buy one item and get one for free or half the price.

  • A reasonable discount on the next purchase: Consider a 10 to 15 percent discount on the next purchase, depending on the price point of the product or service you sell.

  • A gift card or free gift: Offer cash up front with no strings attached — a $10 gift card, for example. Or send a small product as a gift to show a customer that you’re serious about winning him or her back.

  • Invitation to participate in an event: For example, if you offer customers a special podcast or an informational webinar related to your site or product, they might just buy something from you.