In our final piece on Incentives throughout the customer journey, we take a look at the elusive bunch of customers who have shopped previously but have now gone MIA.
Retailers will define lapsed customers differently, based on things like products offered and the nature of seasonality. For instance, grocery, jewellery and outerwear retailers would all define a lapsed customer very differently. In general, retailers identify a timeframe within which a typical customer would have made a repeat purchase. A lapsed customer is one who hasn't purchased within that time frame.
In our experience, most fashion retailers consider a customer 'lapsed' if they haven't shopped in twelve months and 'at risk' after six months of inactivity. Determining which customers are 'at risk' requires considerations from both a brand and customer perspective:
Sophisticated lapse prevention strategies take personalised factors like these into account, while a top-level understanding of how your best customers buy your product means you can create a baseline strategy for re-engaging 'at-risk' customers - for example, a fashion retailer offering a 25% off reward at five months of inactivity.
Incentives at this stage of the customer lifecycle help brands:
If brands can encourage just 5% of their lapsing customers to repurchase through lapse prevention incentives, the financial rewards can be significant. For example:
If we encourage 5% of 30,000 lapsing customers each year to repurchase. Assuming a redemption ATV of $340 gross and a reward of $20 ($320 net)
= 5% of 30,000 x $340 = $510,000 gross minus $30,000 in reward cost
= NET $480,000 incremental revenue per year
The opportunity to re-engage absentee customers is tied to a basic human trait - people prefer to interact with brands, people and things that are familiar to them. Research suggests that when given a choice of multiple brands, customers are 60% more likely to purchase from a brand they've purchased from before (when the experience was positive) and whose name they have heard at least once before.
As with all stages of customer lifecycles, there's not just one type of lapse prevention incentive or one 'at risk' customer. Understanding your specific customer base means you can determine what sort of reactivation strategies will resonate. It also means you will avoid sending tone-deaf communications and wasting money on incentives your customers don't want.
Create multiple classes of lapsed customers that reflect your customers' loyalty and attitudes, then create strategies tailored to each type:
and outside your typical inactive customer definition timeframe, and create a strategy to recognise and reward them.
Depending on how your incentive program is constructed, these may be customers who never redeem rewards because the reward expires before the customer returns to shop. Consider a test that allows their points to carry over for some extended period and recognise their loyalty.
Consider adding increased service levels in-store, on your website or at your call centre, such as a unique 1-800 number, and POS alerts for in-store recognition of long-term repeat customers by associates, recognition messaging on your website or via email, etc.
Incentivising your customers to give feedback, not only encourages them to reconsider using your product or service, it provides you with powerful insights to both proactively and reactively address reasons for churn.
For example, maybe a user's feedback attributes their subscription cancellation to the absence of a specific product feature, which you've since implemented. Present them with a welcome offer to try it out, and you're well on your way to winning them back.
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Lapse prevention incentives aren't about re-engaging every single customer but are, instead, about identifying people who shop around and are still likely to be loyal to certain retailers, based on their history and potential. These customers do not need to be won back per se; they need to be acknowledged and respected for their interactions to date.
Tess O’Brien
