Companies often fail to tap into and benefit from the data they possess. Possibly the single most ignored information pool is that about a company’s ex-customers. Such data, if used properly, could lead to the acquisition of a significant number of customers and the generation of significant revenues.

There is a better chance of winning back a former customer that signing up a new one.

Companies typically lose 50% of their customers every 5 years.

Companies have a 5 – 20% chance of turning a prospect into a customer.

Companies have a 20 – 40% chance of winning back an ex-customer.

The facts speak for themselves. What’s baffling is that most companies do not actively address these facts. Sure, many companies have some formal type of retention effort in place, trying to actively reduce churn, but how many actively try to win back customers? It is a company few and far between that has employees dedicated solely to winning back customers. In light of the above facts, one wonders why.

But, Why? – It’s relatively easy and relatively cost-effective. Whereas acquiring new customers involves significant media spend to get their attention, winning back lost customers could be as easy and cost-effective as making a few phone calls or sending a few emails. Further (depending on the sector in question), new customers need to be on-boarded, with numerous additional interactions to sign contracts, inform them about products and policies, etc. Lost customers that return, on the other hand, can usually be brought up to speed in a much quicker manner due to their familiarity with the company and its offerings and methods.

So, How? – Winning back customers is essentially an art that needs to be fine-tuned through a trial and error process. Three factors that need to be tested:

Audience – Not all customers can be won back, or should you want to win back. In defining the customer segment to tackle through win-back efforts, the lost customer’s information completeness (their contact information, their product / service preferences, their reason for leaving in the past) and past / potential profitability need to be considered.

Those customers who cost more to service than the revenues they generate should automatically be excluded from the win-back effort, as should those customers you have little to no information about. Logic dictates that the more information the better, so that when the pitch is made, it can be tailored to that specific lost customer’s preferences and reasons for leaving.

Trial and error efforts will ultimately determine what information is a must have in trying to win back customers, with the win-back ratio (% of customers pitched to who accept the offer) then deciding the specific segment(s) of customers to focus on.

Contact Method – Customers will have a different reaction and acceptance rate based on the channel used to make the win-back pitch. Traditionally, four methods have been used to try to woo lost customers – face-to-face, phone, mail, and email. In a given company’s specific situation, lack of customer contact information may dictate the method used. Depending on the pitch itself and the audience, different success rates will be realized through different channels. It is important to test as many variations as possible to ensure the most effective (cost and win-back ratio-wise) method is used before ramping up the win-back effort from a pilot to a full-scale engagement.

Those companies lacking information about their lost customers must immediately begin addressing this fact. With no way to get in touch with the lost customer, a win-back effort is almost impossible to conduct. Lost customer information is traditionally on file (or should be captured when the customer is churning – at a minimum, contact info like mobile phone number and email address). Sectors like retail and energy rely on loyalty programs to not only capture customer information but to also track their purchasing patterns.

Offer – This is most often the most difficult part of the win-back effort to design and get right. The offer plays possibly the biggest role in determining your success rate. It needs to address both the reason why the customer left in the first place, as well as offer them something not traditionally given to any average existing customer. For example, if the reason the customer churned was due to poor customer service, the pitch could possibly include some type of apology as well as the offering of a highly trained and dedicated customer service representative. If it was due to price, on the other hand, it could include some type of discount for a given amount of time.

When the churn reason is unknown, analyzing the customer’s product / service usage patterns is one way to customize the offer. For example, a customer who churned from a bank who conducted money transfers at least 4 times a month can be won back with an offer to give up to 5 free money transfers a month for a year.

The more fine-tuned the offer is to the needs of the lost customer, the higher likelihood he or she will accept it. Again, a trial and error effort will go a long way to determining the right offer to each customer segment.

A lost customer should never be viewed as foregone revenues – any type of profit generated from such a customer is acceptable. Not to say that the offer should be such that the company barely breaks even with the won back customer, but giving back generously to lost customers will ultimately be worth it.

Other factors to consider include timing and frequency. Depending on how long it has been since a customer churned, different results may be realized in the win-back effort. Based on the trials, the ideal length of time following the churn event to reach out to the customer with a win-back offer should be identified (i.e. 3 months after churning a win-back offer should be presented to the customer). In regards to frequency, the customer may reject the initial offer – a follow up a few months later should be considered. However, there’s no sense in beating a dead horse, and thus, if a customer rejects two to three offers to return, he or she should be considered as “unwinnable,” with no further effort spent pursuing the win-back.

Finally, it is critical to incorporate win-back efforts into a “business as usual” model, with targets set and premiums offered to the various agents who will contact the lost customers. Just as there are targets around acquisition and retention, so should there be around win-back efforts. The more the activities are considered and treated like a part of everyday business, the more successful the efforts will be.

What Next? – Using existing data about lost customers, a company can quickly increase their revenues as well as their overall customer base. Marketing and Sales need to work hand-in-hand to tackle this worthwhile effort, as both have an important view on the issue – Marketing is used by the expert in finding out what the customer would like, as well as conducting trials. Sales are used in the pitch. Such an effort can be designed and rolled into a test phase within weeks and can pay for itself within days. SSA

Arthur KleinAbout the Author:
Arthur Klein is the president of Match Marketing Group. With over 20 years of experience in marketing (both traditional & ecommerce) for the luxury industry, Arthur has consistently increased profits & market share for his clients in developing and implementing creative ideas that grow businesses and build brands. He can create a financially responsible communications platform that is right for your business, and manage it all from strategy and concept to campaign execution. You can contact him directly at 201-693-2364 or [email protected] for any further questions.