How to reactivate dormant customer?
Before thinking of re-activating dormant customer, it is useful to know if you have one and if you do – how to find him. Itis therefore important to first define what is meant by dormant accounts. Dormancy is typically defined as accounts that were previously active but now have a zero balance, with no transactional or financial movement within a specified period of time.
Typical behavioural customer segments are:
•The repeat customer. This is the customer that drives the highest sales and is the customer to whom you award with loyalty points and target him with retention marketing efforts, if his repetitive behavior start to change, or decline. They know your products and have a strong opinion (most likely positive) about your brand and your product and services.
•The casually loyal customer. This is often the largest base of your clients who buys occasionally. They do buy but not with the same enthusiasm and expertise as your ideal consumer. The one-time, infrequent or dormant customer. What makes this segment unique is uncertainty in terms of purchasing behavior. It is not clear if and when he will make another purchase and he still doesn’t satisfy criteria that would classify him as a lapsed customer.
•The lapsed customer. A customer who has been in one of the previous three categories and has passed certain business criteria that make him “former” or lapsed customer.
In regards to dormant customers - it is unlikely that they have been given effective “wake up” call, otherwise they would not be dormant, and whatever previous marketing effort had been spent on them – clearly wasn’t effective! The good news is that there is still chance to be awaken with the right marketing stimuli. Key is to try to understand specific dormancy drivers. Before organizations implement strategies to reactivate accounts, they should establish the reasons or causes of the dormancies.
Dormancy may often be the result of customer service issues, unhappiness with product/service quality and price, or the fact that the client might have received a better offer elsewhere. Apart from understanding dormancy drivers, it is important to understand different ways of how dormancy is expressed, and further segmenting dormant customers can be helpful.
Criteria that can be used to segment dormant accounts include the number of months the account has been on the portfolio, the number of months since last active, account type and behaviour or risk score. Once the reasons for dormancy have been identified and dormancy better understood, the organization can commence designing appropriate reactivation campaign. Well, not so fast!
Firstly, there is a segment of dormant base that no matters what – will not be reactivated. This segment needs to be found and taken out from further re-activation efforts. These are lapsed customers and any further marketing “resuscitation” efforts will only result in marketing waste. These customers have expired buying potential which can be found with the appropriate mathematical model. Key component of these models is the presence of target variable that indicates historical customers that were non-responders to similar past re-activation campaigns, as well as lapsed customers who are no longer on books. These types of customers can have a binary indicator of “1” and other type of customers are those who do exhibit purchasing behavior and are neither dormant nor lapsed.
There could be few variations of this approach but the idea is to produce the model that will “differentiate” between these two customer groups in terms of other “input” variables that can be all but “usage” and “spend” type of variables that are very likely used in business rules that determine customer activity or lack of it.
When such model is deployed on dormant base it will produce “similarity” score with past known customers that company could not re-activate. While this is not “exact science” it does reduce dormant base to those that still have some purchasing potential left.
Next question is how to realize this potential by having an effective cross-selling model. What is the likely product, or service that a client is likely to respond to? Main output of this cross-selling model is the propensity of purchase of a specific product. That can be then used to create an appropriate re-activation campaign. If this is done successfully response rates should be greater than response rates that were returned by standard re-activation campaigns.
However, it requires more than just good quality analytical model! Dormancy drivers need to be addressed, marketing offer needed to re-activate the client must be effective and valuable (marketing gimmicks just don’t work). Think about your unique audience and develop content to appeal to them. If you are targeting affluent subscribers, use compelling and engaging creative and messaging that highlights luxury products. And lastly, if a subscriber fails to re-engage with you maybe it is a communications channel that doesn’t interest them, not your products or services.