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Even if you have a great retention strategy in place, a certain percentage of your customers will churn as a matter of course. They will leave you either in favor of the competition or for any number of reasons: they no longer require what you have to offer, they’ve moved house, or perhaps you’ve simply slipped out of their mind.
This repository of customers is probably sitting quietly in your churned customers database. But not all of them are gone for good. Some will show up again, either organically or through your retention efforts aimed at churned customers (we do hope that you’re communicating with your churned customers!)
Customers returning from churn are termed Reactivated customers, and they are in a class of their own. On the one hand, they have formerly shown strong loyalty, they know your brand and have chosen to reengage with it. On the other hand, they have many traits in common with New customers, who need to be carefully nurtured to become Active customers again.
Reactivated customers pose a huge potential for your brand: although their starting position is the same as that of New customers, the fact that they have already converted and that you have rich historical data about them makes their potential future lifetime value double that of New customers. And, given the cost of acquisition, the ROI from reactivating them is much higher than that of acquiring a new customer.
In the natural course of business, more than 50% of reactivated customers will end up churning two weeks after reactivation. However, by treating them as a separate entity based on their historical data you can decrease churn rates by 20% and generate more loyal, long term customers.
To better understand this customer group, here are the main angles you should consider:
Highest Achieved Segment – To gauge the potential future income from reactivated customers, it’s very important to group them by their highest achieved customer tier or segment. A reactivated high-spending customer should be treated differently than the average reactivated customer. You will want to use different methods of communication for the different customer tiers.
Reactivation Source – There is a substantial difference between customers who reactivated organically (without any impetus from you) and those who reactivated reactively (by responding to a specific campaign or promotion). Customers who reactivated organically will usually migrate to the Active lifecycle in much higher ratios than reactive customers. To keep reactive customers active, you will probably need to court them more enthusiastically by sending promotions and incentives.
Number of Times Churned – Every B2C business experiences the zig-zag phenomenon of customers who zig-zag between the Active and Churn lifecycle stages. Whereas only 18% of customers who churned once before will end up Active (after having reactivated for the first time), more than 50% of the zig-zag customers will become Active customers again in the future. Understanding and tracking this behavior will help guide your promotion plan and your decisions as to which customers should receive the most attractive offers. First-time-churn customers should receive stronger incentives since they are more likely to churn again. Multi-time churn customers are more likely to churn and return again (51%), and hence should receive lower-value promotions.
Past/Present Activity – The ratio between the Reactivated customer’s past activity with your brand and her current activity post-reactivation is another parameter which should influence your communications. This parameter should be monitored on a daily basis to help you determine your retention strategy. For example, a customer with high past activity and low present activity should receive stronger incentives than a customer with low past and present activity.
Your goal with reactivated customers is to increase the percentage of those who migrate to the Active lifecycle stage. By viewing the customers in this group through the four-faceted prism suggested above, you will be able to offer each one the content and promotion that will maximize their conversion rate into Active customers.
Consider a customer who has reactivated organically after visiting the Churn lifecycle stage only once. This customer had high former activity and is now exhibiting only low activity. This is typically a high-potential customer for you brand with proven brand affinity, and so his post reactivation campaign can consist of the following sequence:
On the other hand, a customer who reactivated through a campaign after churning many times, with a record of low activity and current low activity, is probably a low-potential customer and may receive a sequence consisting of:
In order to rebuild brand awareness within the reactivated segment, reduce churn rates and convert more reactivated customers into long-time customers, marketers must gain a good understanding of the different parameters which shape these customers’ experiences. Promotions and offers should also be tailored according to individual characteristics. Interacting with reactivated customers based on their data in an emotionally intelligent way, is sure to yield impressive results.