April 1, 2009
Retail TouchPoints: Re-Courting Customers for Winback Strategies Requires Right Access to Data
By John Gaffney
Through a special arrangement,
presented here for discussion is an excerpt of a current article from the Retail
TouchPoints website.
When is a customer simply out of the market
for your product? When are they in danger of going to a competitor? And
when do they need to be reactivated aggressively or “won back?” With
new customers tough to come by, many retailers are finding strategies to
define and execute these winbacks.
We have compiled five rules for customer
winbacks, all of which can only be relevant after the proper data profiles
have been completed:
Go for the Save Before the Winback: Customer Development Solutions
CEO Vernon Tirey believes that any retailer needs to have an “attrition
alert.” Some of
the things to look for are drops in email metrics, lack of web site engagement,
and a drop in purchase levels. If an attrition alert shows that a valuable
customer may be leaving the company’s purchase pattern, a series of sequenced
customized emails and direct mail pieces go out.
Understand the Gray Areas: Jim Harold at Acxiom, recommends segmenting the customers
you want to win back and stay between the most valuable and least valuable.
Valuable customers should have a different winback subject line, and cross-channel
customers should get winback messages at as many touchpoints as possible.
Get the Best Ones Back First: Value seekers or customers looking
for discounts are not generally the most valuable. Yet many winback campaigns
extend a discount as the core of their offer. “Winbacks depend on context,” said
Bill Franks, managing partner of advanced business analytics for Teradata.
“Maybe there’s a group of 100,000 customers that shopped at full-price
that have gone quiet. But in extending a winback offer, don’t discount. Play
to their sense of value.”
Understand Why They Left: Mr. Tirey said his clients have shown three basic reasons
for leaving.
1. They have a perception problem
such as, ‘you’re too expensive.’
2. They have had process problems
in ordering or returning merchandise.
3. They’ve had product problems.
Survey customers before executing a winback
campaign. At the very least the messaging can relate to the specific problems
that caused them to leave. This is why Mr. Tirey said that emotional appeals
such as ‘we miss you’ don’t work. The customer doesn’t miss you. They had
a problem with you. Address it.
Use social media: Social
media is bigger than email. A recent Neilsen report showed that the “global
active reach” of member communities was 67 percent in December 2008,
up from 61 percent in December 2007. And while the most active users of
social networks are between 24 and 38, Gen Y is active and willing to interact
with retailers on social networks.
Social media provides a chance to start fresh
and attract new data. But the other winback strategies are nothing without
data. “A very small percentage of customers can actually be won back,” said
Merkle’s Lori Connolly. “Be relevant and timely and you have a shot.”
Discussion Questions: What would be your
core rules for driving customer winbacks? Of those mentioned in the article,
which do you think are most critical and have proved most successful?
BrainTrust
Recent Discussions
Discussion Questions
Poll
The core rule for driving winbacks is to treat customers with respect. Whether reaching them through direct mail, email or social networking, retailers should acknowledge their customers’ current circumstances and present reasons (value and quality) for returning. Just dropping prices will not work. Customers need an emotional connection.
The easiest customer to win back is the one you never lost. I think the most important point, which is inferred here but not explicitly stated, is that holding onto your customers is most important—-and can be less costly than trying to win them back once they’ve left. Jim Harold of Acxiom is spot-on; retailers need to segment their customers and they must identify customers to grow on. Rather than trying to cater to all customers, unprofitable and highly transactional customer relationships should be re-assessed during a downturn.
It all comes back to managing costs while trying to increase revenue, and there needs to be a highly targeted approach to expense management. If retailers start cutting costs across the board, they’re going to lose customers, because service levels will take a hit. Whether we’re talking about a big-box retailer or a high-end luxury chain, service leaders will have a head start in customer retention.
Too many retailers don’t have a customer strategy beyond “put the merch in the store, and heck, they’ll come.” Grocery retailers, for instance, who can gross thousands of dollars a year from a single customer, generally don’t have an attrition policy. If you’re a retailer, send me a note and ask for a copy of RightNow’s customer scorecard to see how well you stack up.
It has been reasonably well documented, especially by Tim Gokey at McKinsey, that managing smaller changes in customer behavior (i.e., customer migration) is more impactful than managing outright retention and winback.
Understanding smaller changes in customer behavior that lead to churn and the ability to react to these changes (and preempt churn) also goes in tandem with the idea of understanding why customers ultimately defect. Most companies focus too much on winback without understanding the why behind the defection in the first place, much less working to pro-actively preempt churn.
Remember the expression, “An ounce of prevention is worth a pound of cure?” It applies well here. It makes more sense to manage the entire customer service experience from the get go than to try to discover what went wrong. That means attending to every detail of the customer experience in every channel. But even the most customer-centric companies with the best service strategies experience attrition from time to time. Finding out why they left, fix it, and prove to them that it’s fixed is the answer. How do you do that? Talk to your customers and act on what you hear!
I believe the strategy for winning customers back is extremely challenging. First off, you’re not just trying to win them back…you’re trying to unglue them from another company or brand. How much of a grip has the competition got?
In order to develop tactics there has to be a fundamental understanding of the decision behavior and the motivating variables. Time can be of the essence…unless it’s a long term and intermittent process, let’s say, for durables. If your homework hasn’t been done, you’re starting from scratch and it can take months to figure out what you should have known all along.
Unfortunately, I’m seeing too much of the old business ways of “let’s throw it on the wall and see what sticks.” Just because the fees associated with the internet, social media, etc, seem to be low, doesn’t mean the costs and missed opportunities can’t be very costly indeed.
There’s a key rule missing from this list: Know who you *don’t* want to win back.
During the long-distance price wars (remember those?) of the ’80s and ’90s, Sprint was able to dramatically improve its bottom line through the simple insight that a significant number of its customers had a net negative impact on its business. By letting many of those customers defect and by *not* trying to win them back, Sprint saved more than enough money to fund its entire CRM investment many times over. Fast forward to today, and Sprint is successfully repeating the strategy in its mobile business.
The same situation holds true in retail. In grocery, for example, the bottom 75% of customers often account for 25% or less of sales, and generate little or no profit. By actively cultivating your best customers, and by firing your worst, retailers can increase sales per customer and overall profits, even if total revenues dip somewhat.
The challenge is that you need both the data and the tools to make this type of analysis possible. Retailers have made great strides in collecting the data, but many lack the tools to make this type of data-driven decision making widespread.
It’s all about consistency and not in a negative way. Customer loyalty must be earned over time and having the right data is essential for any winback strategy.
One thing I like to see is a margin consideration on any winback campaign. “Get the Best Ones Back First” has to be the primary objective. Create promos or value that build margin and basket. Offering a few loss leaders is not an effective way of building loyalty as these shoppers have no loyalty and are looking for loss leaders. Think margin…think margin….
Speed is of the essence! Car dealerships are the world’s worst on this scenario which could be applied to retail. Go in to buy a car, this is the money, deal, etc. The all-too-sure-of-himself sales guy stays smug and almost rude, then has the nerve to call you back three months later. By then, another car has been bought and put in the garage.
Also, incentive is a key. Send an apology with a 10% (or more) off your next purchase. At this point, all you can make me do is feel good and incent me to come back.
I like the “find out why they left” suggestion the best, because if you holistically fix those issues, you’ll catch a lot more shoppers–like the ones about to decide to leave. I’ve preached a lot about understanding the why behind the buy, but it’s just as critical to understand the why behind the goodbye! And to remember that for every one about to leave, there are probably five to ten that are starting to think about it.
The point in the article is dead-on: their decision to stop coming has nothing to do with simply forgetting about you. They got tired of dealing with something about you. Fix it, prove to them you’ve fixed it, and ask them to give you one more chance. Then, don’t blow it when they give you that chance.
That’s not as simple or as easy as it sounds.
Some decent advice, but have we forgotten this is a retail site read by retailers? While it might be nice to have the ability to classify “valuable” clients from “not valuable” ones, most retailers do not have that luxury.
For market-specific retailers such as shoe stores, I would recommend they leverage their web site as a key marketing tool for keeping tabs on clients. Encourage clients to visit the site and opt in to a mailing list. Then regularly send out coupons, vouchers and special promotions through email.
It is then easy to track who comes in and who doesn’t through unique coding. Custom email programs can then be developed.
And of course, make sure their in-store experience is a great one.
Understanding your customer, and acknowledging your shortcomings are the vital rules. Efforts to win back a dissatisfied customer will only end in tears if you have not fixed the reason the customer left in the first place. Understand the reason, and maybe admit that your service is crap or your product is unreliable, then aim to fix or alter these reasons before going back to customers. A customer who has shopped with you in the past and left is worth fighting for; they are familiar with you and have left for a reason…find it.
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The core rule for driving winbacks is to treat customers with respect. Whether reaching them through direct mail, email or social networking, retailers should acknowledge their customers’ current circumstances and present reasons (value and quality) for returning. Just dropping prices will not work. Customers need an emotional connection.
The easiest customer to win back is the one you never lost. I think the most important point, which is inferred here but not explicitly stated, is that holding onto your customers is most important—-and can be less costly than trying to win them back once they’ve left. Jim Harold of Acxiom is spot-on; retailers need to segment their customers and they must identify customers to grow on. Rather than trying to cater to all customers, unprofitable and highly transactional customer relationships should be re-assessed during a downturn.
It all comes back to managing costs while trying to increase revenue, and there needs to be a highly targeted approach to expense management. If retailers start cutting costs across the board, they’re going to lose customers, because service levels will take a hit. Whether we’re talking about a big-box retailer or a high-end luxury chain, service leaders will have a head start in customer retention.
Too many retailers don’t have a customer strategy beyond “put the merch in the store, and heck, they’ll come.” Grocery retailers, for instance, who can gross thousands of dollars a year from a single customer, generally don’t have an attrition policy. If you’re a retailer, send me a note and ask for a copy of RightNow’s customer scorecard to see how well you stack up.
It has been reasonably well documented, especially by Tim Gokey at McKinsey, that managing smaller changes in customer behavior (i.e., customer migration) is more impactful than managing outright retention and winback.
Understanding smaller changes in customer behavior that lead to churn and the ability to react to these changes (and preempt churn) also goes in tandem with the idea of understanding why customers ultimately defect. Most companies focus too much on winback without understanding the why behind the defection in the first place, much less working to pro-actively preempt churn.
Remember the expression, “An ounce of prevention is worth a pound of cure?” It applies well here. It makes more sense to manage the entire customer service experience from the get go than to try to discover what went wrong. That means attending to every detail of the customer experience in every channel. But even the most customer-centric companies with the best service strategies experience attrition from time to time. Finding out why they left, fix it, and prove to them that it’s fixed is the answer. How do you do that? Talk to your customers and act on what you hear!
I believe the strategy for winning customers back is extremely challenging. First off, you’re not just trying to win them back…you’re trying to unglue them from another company or brand. How much of a grip has the competition got?
In order to develop tactics there has to be a fundamental understanding of the decision behavior and the motivating variables. Time can be of the essence…unless it’s a long term and intermittent process, let’s say, for durables. If your homework hasn’t been done, you’re starting from scratch and it can take months to figure out what you should have known all along.
Unfortunately, I’m seeing too much of the old business ways of “let’s throw it on the wall and see what sticks.” Just because the fees associated with the internet, social media, etc, seem to be low, doesn’t mean the costs and missed opportunities can’t be very costly indeed.
There’s a key rule missing from this list: Know who you *don’t* want to win back.
During the long-distance price wars (remember those?) of the ’80s and ’90s, Sprint was able to dramatically improve its bottom line through the simple insight that a significant number of its customers had a net negative impact on its business. By letting many of those customers defect and by *not* trying to win them back, Sprint saved more than enough money to fund its entire CRM investment many times over. Fast forward to today, and Sprint is successfully repeating the strategy in its mobile business.
The same situation holds true in retail. In grocery, for example, the bottom 75% of customers often account for 25% or less of sales, and generate little or no profit. By actively cultivating your best customers, and by firing your worst, retailers can increase sales per customer and overall profits, even if total revenues dip somewhat.
The challenge is that you need both the data and the tools to make this type of analysis possible. Retailers have made great strides in collecting the data, but many lack the tools to make this type of data-driven decision making widespread.
It’s all about consistency and not in a negative way. Customer loyalty must be earned over time and having the right data is essential for any winback strategy.
One thing I like to see is a margin consideration on any winback campaign. “Get the Best Ones Back First” has to be the primary objective. Create promos or value that build margin and basket. Offering a few loss leaders is not an effective way of building loyalty as these shoppers have no loyalty and are looking for loss leaders. Think margin…think margin….
Speed is of the essence! Car dealerships are the world’s worst on this scenario which could be applied to retail. Go in to buy a car, this is the money, deal, etc. The all-too-sure-of-himself sales guy stays smug and almost rude, then has the nerve to call you back three months later. By then, another car has been bought and put in the garage.
Also, incentive is a key. Send an apology with a 10% (or more) off your next purchase. At this point, all you can make me do is feel good and incent me to come back.
I like the “find out why they left” suggestion the best, because if you holistically fix those issues, you’ll catch a lot more shoppers–like the ones about to decide to leave. I’ve preached a lot about understanding the why behind the buy, but it’s just as critical to understand the why behind the goodbye! And to remember that for every one about to leave, there are probably five to ten that are starting to think about it.
The point in the article is dead-on: their decision to stop coming has nothing to do with simply forgetting about you. They got tired of dealing with something about you. Fix it, prove to them you’ve fixed it, and ask them to give you one more chance. Then, don’t blow it when they give you that chance.
That’s not as simple or as easy as it sounds.
Some decent advice, but have we forgotten this is a retail site read by retailers? While it might be nice to have the ability to classify “valuable” clients from “not valuable” ones, most retailers do not have that luxury.
For market-specific retailers such as shoe stores, I would recommend they leverage their web site as a key marketing tool for keeping tabs on clients. Encourage clients to visit the site and opt in to a mailing list. Then regularly send out coupons, vouchers and special promotions through email.
It is then easy to track who comes in and who doesn’t through unique coding. Custom email programs can then be developed.
And of course, make sure their in-store experience is a great one.
Understanding your customer, and acknowledging your shortcomings are the vital rules. Efforts to win back a dissatisfied customer will only end in tears if you have not fixed the reason the customer left in the first place. Understand the reason, and maybe admit that your service is crap or your product is unreliable, then aim to fix or alter these reasons before going back to customers. A customer who has shopped with you in the past and left is worth fighting for; they are familiar with you and have left for a reason…find it.