Companies spend a huge amount of time and money on customer acquisition.

And why shouldn't they? After all, growing a business significantly is usually best accomplished by growing the number of people who pay for its products and services.

But customer acquisition isn't the be-all and end-all of building a successful business. In fact, examples abound of companies that were quite successful at acquiring customers but not very good at making money.

That's not entirely surprising giving that today, many markets, from retail to financial services, are more competitive than they have ever been, which is reflected in higher-than-ever customer acquisition costs. While savvy companies might be able to outperform their peers by, for instance, building a better digital advertising engine, the reality is that customer acquisition is generally expensive and getting more expensive.

For this reason, customer retention is increasingly critical. How critical? Consider some stats:

  • Increasing customer retention rates by just 5% increases profits by 25% to 95%. (Bain & Co).
  • Attracting a new customer costs five times as much as keeping an existing one. (Lee Resources 2010)
  • Globally, the average value of a lost customer is $243. (KISSmetrics)
  • The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20% (Marketing Metrics)

The good news for companies is that thanks to digital channels, there are more ways than ever to retain customers, including even customers that have gone into hibernation.

An excellent example of the ability to re-engage dormant customers was provided by American retailer Macy's this past holiday shopping season. As detailed by Internet Retailer's April Berthene, Macy's turned to email and developed a strategy for re-engaging shoppers who hadn't opened or clicked on an email recently.

The retailer's "deep activation" campaign employed segmentation; Macy's created five segments, such as shoppers who haven't opened an email in the last 13 months and past Macys.com purchasers who never opened or clicked a link in a promotional email. The emails sent to these segments contained more white space than its normal emails, and contained messages such as "Are you there?" 

Most importantly, instead of trying to go from 0 to 100 real quick and drive sales from its dormant customers, Macy's was simply looking to create some engagement to bring customers out of hibernation. And it largely accomplished that: the campaign, which was executed over a period of six weeks, produced a 6% increase in active email subscribers, a 9% increase in open rate of unique recipients, and a 14% increase in the CTR of unique recipients. 

customer retention illustration

You can't argue with results, or can you?

Those increases were driven, in part, by Macy's use of tactics like send time optimization. As Internet Retailer's Berthene detailed, the company "looked at the average time the consumer opened and clicked on a Macy’s email within the last six months and then sent the consumer an email at that time."

The retailer also employed shrewd but potentially controversial tactics. In an effort to capture the attention of dormant customers, Macy's used transactional subject lines like "Please verify today" and "Confirmation requested". And it sent follow-up emails if a customer didn't take action within a short period of time.

Stephanie Lau, Macy's VP of retention marketing, told attendees at Oracle's Modern Customer Experience conference in Chicago that "it definitely looks like an ex who wants to talk to you, but it works."

Obviously, every company needs to decide how aggressive it wants to be in attempting to reactivate dormant customers, and every company's mileage will vary because their customer bases are unique. But the Macy's effort is not only a reminder of the value of not forgetting about dormant customers, but also of the value of not being afraid to experiment and, where appropriate, experiment boldly.

Preventing customers from going dormant

Of course, by adopting a customer retention mindset, companies have the potential to reduce the number of customers that they have to reactivate from a deep hibernation and this should be an aspirational goal for just about every company. This is where tech really has the potential to help. 

For example, more and more companies are employing predictive analytics to predict customer churn. By identifying the attributes of customers that are likely to be lost or go into hiding, businesses will have the opportunity to engage them sooner than later, which, for obvious reasons, is likely to be more effective.

While predictive analytics isn't exactly new, not every company has had the know-how to put it to use. But with a growing number of third party vendors offering predictive analytics tools, it's becoming more accessible and will likely become a common component in many companies' customer retention toolkits.

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Econsultancy also offers email marketing training.

Patricio Robles

Published 2 May, 2018 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (2)

Pete Austin

Pete Austin, Founder and GDPR Geek at Fresh Relevance

The GDPR makes reactivating dormant customers more challenging.

Consent is not a great basis. If you're relying on consent then, as ICO says, "Consent is likely to degrade over time". For example in the Macy's example, if a brand sends an email that "definitely looks like an ex who wants to talk to you", then they are behaving like they think the relationship is over, and it seems that consent has lapsed. Oops! Also if data subjects only consented to receive product news, then sending fake transactional emails is not clever.

Legitimate interests is a better approach to re-engagement. Here the proof is in the pudding, because you need to do a 3-stage legitimate interests assessment to (1) identify a legitimate interest: easy because your company needs prospects. (2) show that the processing is necessary to achieve it: again easy because it's the only way to contact dormant customers. And (3) balance the brand's vs the individual’s interests, rights and freedoms: this is key and what matters in practice is how well you do it. If data subjects will generally react well, engage positively, and become potential buyers again, then reactivation is in their interest as well as yours. If the opposite is true, and your emails will cause annoyance, then you have no right to contact dormant customers in the first place. So do reactivation well, or not at all.

More information here...
http://content.freshrelevance.com/gdpr-package-permission-pass-service-brochure2

23 days ago

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Matt Lovell, Head of Customer Data, Insight & Analytics at Eurostar International Ltd.

I think there's an interesting point here which is very much around re-engaging customers who have not been active for a long period of time. While I agree with your point around consent degrading over time Pete, it doesn't mean that you shouldn't contact that base at all. Instead actually significantly reducing your communications to customers who haven't engaged but they providing them with timely, relevant content that is seemingly out of the blue (rather than another of the regular, wallpaper-esque pieces that fills their inbox) can actually prove really effective.

21 days ago

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