A recent study from the Harvard Business Review found that customer relationships are now more important than traditional brand assets (trademarks, logos, etc).
With the overload of advertising and information in the digital marketplace, loyal customers provide valuable data, opportunities for cross-selling, and referrals to bring in new business. Not to mention that 80% of a successful business’s revenue usually comes from 20% of its customers.
Given customers’ value, businesses of any size should be closely monitoring their customers’ habits to make sure these customers don’t become lapsed users. Unfortunately, many small businesses still rely on intuition or simplistic rules to define customer inactivity, which makes for imprecise targeting and lapsed users slipping through the cracks. A more rigorous approach will help your small business better track customers and keep them in the fold.
Step One: Identifying Lapsed Users
The simplest approach to identifying a lapsed user is to track the time since their last purchase. If they haven’t made a purchase in a certain number of days, then they count as lapsed. This approach is easy to implement, but far from ideal.
On the one hand, some valuable customers might choose to make large purchases spaced apart, so defining them as lapsed after a certain period of time could be misleading. On the other hand, if a customer that used to make a small purchase every few days hasn’t had any activity for three weeks, it might be time to include them in a re-engagement campaign.
A more sophisticated approach is to use RFM analysis (Recency, Frequency, Monetary). RFM classifies customers into tiers based on the date of their last purchase, the average frequency of their purchases, and the total amount they spend.
Originally created to help non-profits identify their top tier of donors to target with follow-up requests, RFM can also be extremely useful for small businesses to identify lapsed users that need to be brought back into the fold.
Signpost customer profiles can add a level of depth to an RFM analysis by automatically collecting data for every call, email and even spending behavior of every customer. Tracking these interactions can give you more information about a customer’s preferences, why their activity has declined, and how involved they still are with your business. The software also allows data to be cross-referenced in an automated customer relationship management platform to form comprehensive customer profiles.
Step Two: Regaining Customer Engagement
If data is important when it comes to identifying lapsed customers, it’s even more vital when it comes to targeting them for re-engagement. Knowing their past preferences will help you target them with tempting deals for products and services they might be interested in. Furthermore, advanced analytics can help you understand why those loyal customers left in the first place.
On top of data that’s been previously gathered, don’t be afraid to ask for more information. Encourage lapsed customers to leave feedback or take surveys regarding their experience. You can even offer special deals as an incentive to take these surveys.
The best way to carry out these campaigns is through a marketing automation system like Signpost. The right software can analyze the collected data to decide when a customer has lapsed, pick the right deals and means of communication (text, e-mail, social media) to target them, and create a holistic engagement profile. In the long run, this will reveal trends and habits between loyal customers who stay and those who leave.
Re-engaging lapsed customers can be an extremely effective way to drive growth on a limited budget. It costs between 4 and 10 times more to acquire a new customer than to retain an existing customer, which makes your lapsed customers a valuable target market. Take advantage of a marketing automation system like Signpost to make sure you don’t lose these customers for good.