Maximize Customer Value by “Re-Incubating” your “Back from Churn” Customers

Posted in on 7 November 2012 by:

One of the foundations of our customer modeling technology is tracking the movements of customers among lifecycle stages over time. Years of experience has proven to us how valuable it is to compare current customers to others who have shared a similar pattern of lifecycle stage movements.

In order to fully implement this approach, we monitor a lifecycle stage ignored by many marketers and analysts: the stage containing customers who have abandoned the business, and who later returned. We call this stage “Back from Churn” or “FromChurn” for short. Because our approach requires us to isolate this as a distinct lifecycle state, we have been able to glean fascinating insights into customer behavior that would not otherwise be possible.

A Surprising Discovery

One of these insights is surprising in its consistency among companies in different Internet verticals. This is the fact that the future lifetime value predictions for New customers and FromChurn customers tend to be almost identical. In other words, a former customer who returned to the business after a hiatus offers the company very similar economic potential to a recently converted first-time customer. The following graph, generated by our software for an iGaming company, demonstrates this clearly:

The similarity of future value figures in the New and FromChurn groups reflects the fact that these customers tend to change states in a very similar manner. Here is the data on their average state changes from the same period:

An Opportunity Revealed

This insight offers marketers and retention experts an opportunity to increase the spend levels and retention of these FromChurn customers: treat them as you do your “fragile” New customers during their incubation period.

Just as you run marketing campaigns on New customers in order to improve their experience and provide incentives for them to continue spending, do the same for your FromChurn customers. The similarity in future value numbers indicates that these efforts will provide a similar ROI to this group as well.

A Brief Case Study

One of our iGaming clients recently took action based on this insight and created a series of marketing actions (e.g., bonus and incentive offers) aimed specifically at their FromChurn players, similar to those run on New players. The result was impressive: there was a 23.5% improvement in FromChurn players becoming Active players rather than churning once again.

Re-Incubating-Diagram3-1024x467

Takeaway

Across Internet verticals, data shows that former customers who returned to spend money on a website after a significant time away offer very similar economic potential to first-time customers. Marketers can take advantage of this fact by identifying these “back from churn” customers and giving them special treatment (e.g., special offers and bonuses) just like companies commonly do with their new customers. This approach will help improve retention and maximize the customer lifetime value of this valuable segment of customers.

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