Why You Need to Win Back Those “Lost” Customers. But Not All of Them.15 min read
It’s a well-known marketing fact that acquiring new customers is much more expensive than retaining your existing ones.
But what happens to those customers who decide to stop using your product or company?
You can increase your chances by carefully selecting which customers are worth the time and effort.
We’re going to show you how you can use surveys and first-lifetime analysis to win back the right customers.
Why you should bother to re-engage lost customers
- Existing Data: You already have a huge amount of data on customers that have defected. You know when they joined, how long they stayed, first lifetime value, engagement rates, referral rates and how many complaints they made.
This means you can make your campaigns highly personalised.
- Established Need: They have already demonstrated a need or desire for your service or product. You know that unless their circumstances have changed dramatically, they are still your ideal target audience! This means that you don’t need to use a lot of resources to validate a new audience.
- Brand Recognition & Resources: They are completely familiar with your company and your product – there’s no need for lengthy awareness campaigns or a comprehensive brand introduction. This makes them much cheaper to acquire than completely cold leads.
But every company will have ‘defectors’ – lost customers who leave the company or service. Some wireless carriers, for instance, lose 3% of their subscribers each month.
Calculate your customer churn rate
Hold up – what’s churn?
Churn rate (also called attrition rate) is the number of customers that leave a service or company over a specific period. A high churn rate implies that there’s something wrong with your product, offering, pricing or service, whereas a low churn rate is a sign that your product and retention strategy is good!
It’s also closely related to the average customer lifetime. For example, an average annual churn rate of 25% implies an average customer lifetime of four years.
You can calculate your churn rate in several different ways:
- Total number of customers lost during a specific period
- % of customers lost during a specific period
- Recurring business value lost
- % of the recurring value lost
Preventing customers from churning at all is obviously the best-case-scenario, but no company is ever going to achieve a 100% retention rate!
So, you’ve established your churn rate. What do you do with all of those lost customers?
Don’t try to get them all back.
So what should you do with those customers who defected? Should you leave them alone? Should you try to re-engage them all?
No. This is why.
There are downsides of running re-engagement campaigns.
- You might waste money on targeting customers that won’t come back at all
- You might succeed in getting customers back, but they might turn out to be pretty unprofitable
- You might end up with customers who will simply defect again as soon as they get the opportunity
But you can minimise the risk of these scenarios happening to you!
Before you start a re-engagement campaign, you need to think about the following questions:
Second Lifetime Profitability
How profitable will the customer be each month during their second lifetime? For example, it would be better to re-engage a customer that will spend a smaller amount of money, but over a longer period of time than to re-engage a customer who will spend more money, but leave faster.
Likelihood of Reacquisition
How likely is it that the customer will return? Think about the severity of the reason they left in the first place, and how relevant your product still is.
If they do return, how long will they stay? Does your product provide enough ongoing value for the customer?
All three aspects of win-back strategy should be considered together.
Customers defect for many different reasons, but these reasons can generally be grouped into two categories:
- Pricing issues – these are the easiest to win back
- Service issues
Of course, some customers will defect due to a combination of pricing and service issues – these are the trickiest to win back as they were left unsatisfied for multiple reasons.
Find out why your customers left
Why do you need to find out why your customers left?
It’s crucial to know why your customers left. Having this data will allow you to decide which ex-customers to retarget, what strategies to use, and how much of your budget you should devote to your win-back campaign.
For example, if a customer decided to abandon your service because the product prices were too high, this is an indicator that they value savings over quality.
On the other hand, if a customer defects due to issues with the services a company provides, this demonstrates that they value service and high-quality products.
You can also use the customers’ first lifetime experiences to predict how likely it is that they will return.
Of course, the more positive the first-lifetime experience, the higher the likelihood that a customer will return. (Tokman, Davis, & Lemon, 2001.)
Discovering why a customer left is tricky.
Unless a major incident happened that caused your customer to actively reach out and explain why they decided to leave, you’ll often have very little to go on.
Often they’ll end their subscription, stop making purchases or simply vanish into thin air, leaving a whole host of unopened emails lingering in their inbox.
That’s why you need to have a post-cancellation survey set up.
Setting up your survey & scoring your results
The best way to do this is to capture responses as your customer leaves. Think about setting up a “we’re sorry to see you go” message that asks for feedback as your customer cancels. In fact, if you manage this “termination” phase carefully, 60 percent of cancellations can be prevented.
But let’s say you didn’t have anything in place to catch defection reasons as the customer decided to leave.
The next way is to reach out is with a feedback survey to:
- Customers who actively left your company
- Customers who haven’t made a purchase in a while, but are engaging with marketing emails
- Customers who are completely disengaged
Here’s a good example survey you can use for inspiration.
The responses to this survey can be the first step towards scoring your ex-customers
For each of your possible responses, assign a score between 1-5, with 5 being the easiest to recover and 1 being the hardest.
This is how we’ve scored these questions, and why. Depending on your product and your budget for win-back campaigns, you might score your own questions differently, but this is a good guide.
Q: “What is the single biggest reason you no longer use our product”?
A: Too expensive for me 😟
5 – Customers who can’t afford the product can easily be re-targeted with long and short-term discounts.
Reason for leaving category: Price-based
A: The product isn’t good value for money 💸
4 – Customers who don’t believe the product is good value for money can be re-targeted with discounts and additional features or offers to raise value.
Reason for leaving category: Price-based
A: There was an issue with customer service 🙅♀️
4 – This means that they liked your product, but there was an issue with customer service. You could offer them more of a “personal touch” service to redress the balance.
Reason for leaving category: Service-based
A: There was an issue with the product 👎
3 – Depending on the severity of the issue, these customers could be won back with free trials or premium service at a reduced price.
Reason for leaving category: Service-based
A: I found another product I prefer 😇
2 – Customers who have found another product they prefer will be tricky to win back. One strategy could include offering a premium service for a standard price.
Reason for leaving category: Competitor-based
A: I don’t need the product anymore 🙂
1 – These customers are right at the bottom of the list. They liked your product, they found it useful, and they simply don’t have a need for it anymore. BUT don’t forget about them completely. Needs come and go, so reach out again in another 6 months to see if circumstances have changed.
Reason for leaving category: Need-based
The next question prompts the customer to leave an overall star-rating out of 5.
This is pretty self – explanatory. The more stars they award you, the better the chance you’ll be able to get them back.
Score this response accordingly too – 1 star = 1 point and 5 stars = 5 points.
The final question is a bit sneaky. Instead of directly asking “would you use us again”, we have chosen to ask the customer if they might “recommend us to a friend or colleague”.
When leaving a service, customers are very likely to hit “no” if we ask them if they will return or not. But asking this question will give us a good idea about their overall satisfaction levels.
For ‘Yes’, give a score of 5. For ‘No’, give a score of 0.
Combine the scores from all three questions to give the overall re-engagement score for each customer.
What do you do once you’ve got your results?
Now you’ve collected the data, it’s time to dive into an analysis.
These are the different ways you can group your customers:
- Using the scoring system
Using your scoring system, assign each customer a “re-targeting score”. The higher the score, the higher priority they should be for your retargeting campaigns.
- Cross-reference with the “reason” categories
From here, you can develop targeted re-engagement campaigns based on the main reason that customers gave for leaving.
Profiling your ex-customers
Overall, this customer is very satisfied. They see a strong value in your product or service, and they would be happy to recommend you to a friend. The only trouble they had was with their ability to afford the product.
This customer would be tricky to win back. They no longer need the product, don’t think their friends or colleagues would see any value in it either, and are generally indifferent to your product.
But how can you measure this if you don’t have specific data?
Customers that referred other people during their first lifetime demonstrate a strong relationship with the brand. The more people they referred during their first lifetime, the higher the chances of reacquisition.
We know that complaints are never a good sign. Subpar experiences are the main reason why people abandon companies. Customer complaints indicate a loss of trust. The higher the number of complaints in the first lifetime, the lower the chance of reacquisition. The more negative the experience they have had, the less likely they will be to trust in a reacquisition offer.
Be able to track your customer complaints. If you have a feedback form on your website, integrate this with your lead scoring and your CRM.
With Hubspot’s Service Hub, for example, you can track all of your customer feedback, assign NPS (Net Promoter Scores) and track conversations and open tickets. This will provide you with lots of data points to analyse and help you target the right ex-customers.
You can also use the data gathered from customer support software, such as freshdesk.com to see what the main issues were for individual customers.
Previous recovery efforts
Sometimes a company will present a customer with a recovery offer to make up for bad service. If a customer accepted a recovery offer and still decided to abandon the service, that’s a pretty negative sign.
You have the lowest chance of winning these customers back, or of the customers being profitable and long-lasting. Before you attempt to re-engage any customers, double-check to see if they have participated in a failed recovery effort. If so – avoid them!
Recovery efforts should be tracked as a distinct product in your CRM.
Journey analytics tools such as these can be a great way to visualise the customer journey and really pinpoint those friction points.
You can use these points to tailor your messaging and reach out to them on their preferred channel to try to get them back on board.
Once you’ve found those obstacle points, you can take remedial steps to improve slow processes and reduce friction, helping you to reduce churn in the future.
The Recovery Effort
If you have data like this about your ex-customers’ first lifetimes, you can start to segment these customers into groups and design tailored re-engagement offerings for them.
But remember – winning back customers is fine, but it’s the company’s responsibility to ensure that the customers who return are:
- Will spend enough to recoup the cost of re-acquisition
For customers who are considering returning to a service, risk is a big deal.
Think about how you feel when you switch internet provider – it’s a lot of hassle and a big risk too. When you’re offered a win-back deal, you have to consider taking that risk all over again – and you need to remember that there’s a reason why you left the service provider in the first place.
This is how your customers feel.
People are also much more reliant on their own experiences over external information. You’ll need to work on rebuilding trust if you want to win them back, rather than bombarding them with reviews or testimonies like you would with a brand new customer.
Successful Win-Back Strategy Inspiration
Grammarly’s “Wrinkle In Time” Badge email campaign.
Who are they targeting?
Grammarly are targeting users that installed the Grammarly browser extension, then stopped using it.
Why does it work?
One of Grammarly’s key features is the gamification of writing. The badges you can earn include ‘Great Expectations’ after one week of activity, ‘Tolstoy-Like’ after 7 and ‘Herculean’ after 12. The ‘Wrinkle in Time Badge’ is a tongue-in-cheek reference to their own badge scheme. And check out that irresistible ‘GO!’ button.
Skillshare’s Discount Email Campaign
Who are they targeting?
Users who trialled Skillshare Premium and then gave up.
Why does it work?
Skillshare is all about learning and upskilling, so they’ve used an action-shot artsy background to inspire the reader – and they’re tempting them in for just $0.99 – positioned as a little gift for the customer. Who wouldn’t want to renew their subscription and learn new creative skills for such a small price?
Urban Outfitters “Breaking up” Campaign
Who are they targeting?
Disengaged shoppers. This email was sent out around GDPR time, with the dual aim of re-engaging shoppers and clearing their mailing list to conform with new EU data=protection laws.
Why does it work?
UO’s target audience is teens and people in their twenties – the exact generation who spend so much time on mobile devices. Using witty copy and attention to detail (look how reassuring that 96% battery is), they’ve created a win-back campaign that’s lighthearted and entertaining – but interesting relies on the inherent value of the brand over flashy discounts or new products.
Different Strategies for Different Leaving Reasons
The two easiest customer categories to win back are those that left for price-based reasons, followed by those that left for service-based reasons. Focus on these two categories first.
Tailor your win-back campaigns accordingly.
Price-based offers both increase the value and decrease the risk of returning. These offers are more attractive because there is less at stake for the customer – less risk.
Service-based offers increase the value of returning to your company.
If a customer accepts a win-back offer, this is where their second-lifetime begins.
Once you’ve got them back, they’ll stay if they think they’ll get a lot of value out of committing to your company.
The perceived value in your company is what will get them to stay – and spend.
You can also use your first-lifetime data to predict how they will behave if they do return, and how churn from their second-lifetime can be limited!
By identifying what they valued in during their first lifetime, why they left and what caused them to return to your company, you can make predictions about which retention efforts will be the most successful.
Use all of the data you’ve gathered to make sure they don’t leave again!
The final step? Track your results!
Don’t let all of your hard work go to waste. For every retargeting campaign you launch, track every success and every fail.
See which campaigns have the best immediate re-engagement results, and continue to track the second-lifetime retention and churn rates.
Measure which returning customers provide you with the highest lifetime value, and see which ones stick around for longest.
Once you have this data, you’ll have a better understanding of which lost customers are worth your retargeting efforts, and how you can best re-engage them.
And most importantly, you’ll understand the profiles that simply aren’t worth your time.
Just started a new job? Here’s what I learned from my first month at Growth Tribe!read more
Technology has already taken over 90% of the jobs that humans used to do.read more
25% of what you know now won’t be relevant in 2 years.read more
Always be Learning! Stay in the Know with the Latest from Growth Tribe!
Sign-up for the latest on growth marketing, artificial intelligence, blockchain and digital skills!