Marketing to Desirable Past Customers
How Multichannel Retailers Can Achieve Strong Profits
Every Multichannel Retailer should be pursuing Three Prime Marketing Objectives. Each of the three is important. This article focuses on Objective 2: Effectively Reactivate Desirable Past Customers.
Marketing to Past Customers
Who are these past customers? Many, perhaps most, are customers who were acquired at a loss and never bought again, but have been promoted frequently for 12, 18, 24, or 36 months without generating a 2nd order, thus worsening the initial loss. Others are former good customers who bought multiple times but have lost interest in the merchandise line offered. Some have moved to a new stage of life where the merchandise line is no longer appropriate for them.
Whatever the reason, past customers have not bought from the brand recently. Some may be worth the marketing investment to try to bring them back. Others are not worth the investment. Savvy marketers figure out which past customers fall into which classification. Then they avoid wasting marketing budget on past customers with little or no potential to produce profits for the brand and focus on those that do have such potential.
Marketing to past customers is not a new subject. Most multichannel retailers have "customer reactivation" in their marketing budget, and have had for years. But is the brand's customer reactivation program optimized? Is it producing profits? Do the "reactivated" customers go on to produce good Long-Term Value (LTV)? In many cases the answer is "no". Yet, many brands adopt a simple reactivation strategy such as "market to as many as respond at breakeven or better", or, "just think of them like any prospect, and invest the same amount to reactivate them as we would invest to acquire a new customer". These simple strategies are ok, but they are not optimum because they fail to acknowledge and deal with a very important fact: these past customers are all (every one of them) people whose behavior is the precise opposite of what the brand wanted it to be. The brand wanted them to buy repeatedly and recently. But they didn't do it. Instead, they ignored the brand. This important fact should be a consideration when deciding whether and how much to invest in marketing to past customers.
Typically marketers are limited to the information they have on these customers; purchase activity with the brand. Some multi-title organizations can enhance that with information gleaned across titles. And spend costly amounts to purchase additional data. Often a methodology based on limited data points evolves, regarding the criteria of past customer attributes that are to be selected for reactivation promotions. Wiland uses its massive database of over 2,500 client contributors, thousands of variable combinations, including the client's customer data, and advanced direct response analytics to analyze and rank each customer's propensity to respond to the client's next promotion.
In a general sense, past customers are consumers who have demonstrated a low level of interest in the brand's offers, perhaps for years. Investing in this set of customers is risky. Consumers tend to repeat their behavior, not change behavior. And the behavior of past customers has been opposite of what the brand most needs: loyal customers that produce good LTV. Investing in marketing to past customers should be done with both caution and purpose.
Caution: many (usually most) past customers aren't worth the investment required to reactivate them. Purpose: isolate and invest only in the subset of past customers that, if reactivated, have a reasonably good likelihood of producing good LTV over a specific future timeframe, such as the coming two years.
Few multichannel retailers give enough thought to this topic. They adopt a simple strategy that may cause a brand to perpetually stay in what we call a Weak Customers Failure Loop.
Is your brand caught in a Weak Customers Failure Loop? Many brands are. If a brand wants improved bottom line results in the future it needs to take decisive action to avoid being in a Weak Customers Failure Loop. It isn't easy to do. The temptation to market over and over again to a weak set of past customers is strong because, after all, they are an owned audience that can be utilized without audience rental/exchange cost. But a lot of brands waste a lot of money because they are in a Weak Customers Failure Loop. Want to avoid that? Doing so requires thought and adjustment – and not merely adjustment of customer reactivation strategy. Here's how a brand can avoid being in a Weak Customers Failure Loop:
Step 1: Adjust new customer acquisition tactics so that fewer weak customers are acquired in the first place. This is critical. Investing to acquire weak customers at a loss is simply not a good idea, yet almost all multichannel retail brands do it in every customer acquisition campaign. They spend good money to acquire at a loss a set of new customers who will never buy again or buy so seldom that the initial investment to acquire them is never recovered. Step 1 to avoiding being in a Weak Customers Failure Loop is to never acquire weak customers in the first place. This is thoroughly discussed in New Customer Acquisition for Multichannel Retailers.
Step 2: Adopt methods that cause the brand to invest less in marketing regularly to weak customers. The best way to achieve this is to optimize full customer ranking as discussed in Market Effectively to Profitable Customers. Adopt excellent customer modeling methodologies and use them for every campaign, and adopt associated minimum ROI and contact frequency strategies.
Step 3: Adopt and rigidly adhere to a carefully devised customer reactivation strategy that focuses on reactivating only desirable past customers. Such a strategy is depicted below in the Wiland Customer Reactivation Strategy chart:
The above strategy may look complicated, but it isn't. Wiland can implement it very quickly. And it is almost certain to produce better results than a simplistic customer reactivation strategy. And it will allow the brand to avoid being in a Weak Customers Failure Loop, investing over and over again in the same set of unprofitable customers.
The Wiland Customer Reactivation Strategy requires more thought and excellent execution, but it will deliver substantial benefits: less wasted marketing budget; higher quality active customer base; and, if adhered to over time, an improved bottom line. These benefits are worth the time and attention required to understand and implement it.
Most brands have a lot of "past customers". A brand that has been in business for a long time may have ten or twenty "past customers" for every one customer who has purchased in the last 12 months. That's a lot of past customers. Sadly, not all of the past customers are worth the marketing budget required to reactivate them. Many, even if they did buy again, would then just slip back into inactivity, never delivering good LTV, hurting the brand's bottom line year after year. Multichannel retailers need to give more serious thought to past customer reactivation, and they should implement a sound methodology such as the Wiland Customer Reactivation Strategy discussed above.