Waking the dormant

Nov 01, 2006 10:30 PM  By

Looking to grow your active-buyer file? Consider focusing less on prospecting and more on reactivating dormant customers.

Targeting inactive customers is a mailer’s best opportunity for growth, according to Linda Pickering, a senior vice president of MeritDirect, a business-to-business list services firm based in White Plains, NY.

“More times than not, mailers forget to reactivate inactive customers,” says Pickering. “But reactivating names is a vital part of building your house file.”

Although his company primarily helps clients acquire new customers, Tom Fleming, vice president, account management for New York-based direct media firm ParadyszMatera, says he advises his clients to reactivate their older names as well.

“We’ve seen studies that have shown it can be five times cheaper to reactivate old customers than it is to invest in and acquire new customers,” Fleming says. “When you reactivate, you don’t have to pay for list rental. If the name is already on file, you just have to pay for the catalog and the postage.”

When and how a multichannel merchant should try to reactivate its customers varies, of course, depending on the nature of the business, the market segment, and the customer, as well as factors such as seasonality and frequency of customer contacts. That said, here are some reactivation suggestions and strategies from experts in the field.

Check your inactives against the co-ops

Inactive records on your house file could be active on a cooperative database, indicating that you have a fighting chance at winning back their business. “If a customer is buying from your competitor, it means they are still buying,” MeritDirect’s Pickering says.

Flagging these names so that you can mail to them is a service that the co-ops take pride in, says ParadyszMatera’s Fleming. The cost averages about $20/M. In comparison, co-ops will typically charge $50/M-$60/M for prospect names.

Practice model hygiene

Customers may have ceased to respond to your mailings because they no longer receive your mailings. “Besides tactics such as National Change of Address [NCOA], nixie [an address deemed undeliverable by the U.S. Postal Service], and deceased-file processing, statistic-based predictive models can determine which customers are unlikely to be receiving your promotions,” says Jim Wheaton, cofounder/principal of Chicago-based consultancy Wheaton Group. “The idea is to read into the model all of the variables that correspond to a customer’s having moved to another location.”

B-to-b marketers can even have their contact center reps call to update the contact information for inactive files. They can also overlay a file of companies that have gone out of business on top of their dormant records. Many b-to-b compilers, Pickering adds, have a process to flag mailers’ house files with an out-of-business indicator when applicable.

Replace the name of an inactive b-to-b buyer record with a title, such as “attn: marketing manager” or “attn: buyer”

Employees leave, get promoted, or take on different responsibilities. And the mailroom could make the wrong decision as to who should receive your mailing.

“Mail to the names one time, and if the response is poor, mail to the titles,” Pickering suggests. “It’s not like you can’t set up different game plans based on their response, and the mail will still reach someone in the group.”

Consider adding “or current resident” to the address

Stan Madyda, senior vice president of New Rochelle, NY-based list services firm Estee Marketing Group, likens replacing a business buyer’s name with a title to using “or current resident” in b-to-c mailings — a basic that he says many mailers seem to neglect today. Looking at the catalogs on his desk, Madyda says only about one in four contains the “or current resident” line on a regular basis.

Adding “or current resident” won’t help you reactivate a previous buyer, but it can enable you to reactivate the address and win a new name.

Time it right

Use the first order date as a trigger and try to reactivate during that same time of year. An inactive buyer from a children’s apparel catalog, for instance, could be someone who hasn’t purchased from you since July of two years ago, and who buys children’s clothing only every July because that’s her niece’s birthday. If that’s the case, sending this buyer a catalog in February would be a waste.

On the b-to-b side, the inactive customer could be with a government agency or another institution that, based on its budget, does all its ordering during one specific time each year. If you sell office supplies, for example, you know that educational institutions will make an annual purchase some time in the summer for the upcoming school year, says Pickering.

But this gets complicated if you sell computers or other capital items that are replaced only every two or three years or even longer. In that case, a 13- to 24-month buyer is not necessarily an inactive customer; for that matter, a 25- to 36-month customer might even still be considered active, based on the product’s cyclical nature.

No matter what, “trying to reactivate a 24- to 48-month buyer is going to be easier that trying to reactivate a 60-month buyer,” Pickering says. “That’s like trying to raise the dead.”

Think like a customer

Bill Singleton, president of Algonquin, IL-based consultancy Singleton Marketing, says many reactivation offers he’s seen are “push” offers. The company has a lot of something or can get a lot of something cheap and pushes that at you as if it were a great deal. Such offers place the company’s wants and needs ahead of the customers’. What’s more, they asume that all inactive buyers are alike, or at least have stopped buying for the same reason.

It’s far more effective, Singleton says, to segment your inactive buyers in the same way you do your active buyers. “Segment the reactivation mailing or promotion via e-mail or special Web landing page by at least the monetary value, if not all of RFM [recency/frequency/monetary value],” Singleton says. “Five bucks off a consumer electronics item is not enough to get me moving if my original purchase was several hundred dollars. But $5 off on a scented candle might make me pick up the phone.”

Another way to segment your reactivation offers is by product. “Look at the average life of the products the customers bought, especially household durables, and promote replacements at a discount or with other special terms to encourage the customer to purchase a replacement of the same type or brand,” Singleton says.

Use RFM to determine how aggressively you should market to various inactives

Fleming advises creating an RFM grid, with the most recent and highest-dollar names in the upper left of the grid and the older, least lucrative names at the bottom right. From this, you should can set up reactivation test cells, with more modeling required on the older, lower-dollar names.

For example, Fleming says, 25- to 36-month, $100-plus buyers could probably just be mailed periodically with no further segmentation required. But you’ll want to invest less money in trying to reactive the 37- to 48-month, $50-$99.99 customers. For starters, if you’re mailing your more-recent inactives every quarter, you might want to mail these older names just once or twice a year.

“These buyers have not made a purchase in three to four years and did not spend a lot when they did buy,” Fleming says. But trying to reactivate them can still be more cost-effective than renting new names.

To requalify these older, less valuable names, you could — in addition to seeing if they have recent mail order activity in a co-op database, as mentioned above — run the names through a household-level model that helps predict which names are more likely to reactivate. “This model would help identify certain characteristics of those customers that are more likely to buy again,” Fleming explains.

Whack ‘em — or rather, dot-whack ‘em

Placing dot-whack on the catalog cover or adding an ink-jet message to remind the buyer that you haven’t heard from him in a while has been known to boost response among inactives.

The older the buyer, the stronger the message, Fleming says. “With a 13- to 24-month inactive, try ink-jetting, ‘Where have you been lately?’ For a 25- to 36-month inactive, ask, ‘Why haven’t we heard from you?’” As for a 37- to 48-month inactive, get strict: “We may have to stop mailing you.”

But if you’re going to offer the consumer a dot-whack deal, make it something worth the customer’s time. A dot-whack offering $5 off the entire purchase is not a great idea if you are a high-end retailer, Fleming says.

Offer something different

Sometimes customers who are receiving your promotions will reactivate if you treat them differently, says Wheaton. This is especially true if they stopped buying from you because their needs or situation changed. A woman who used to buy from your plus-size apparel catalog, for instance, may have become inactive after losing weight and dropping several dress sizes. In that case, you may be able to reactivate her by mailing her a catalog of misses’ clothing.

Consider changing the look of the promotion itself — say, sending a smaller catalog, with the hope that promotional costs will decline less than response rates.

Don’t give up

Sometimes it takes more than one, two, or a half-dozen mailings to reactivate a customer. If it makes financial sense to stay in touch with an inactive customer for several years, consider doing so.

“It’s really about knowing your buyer and his or her habits,” says Estee Marketing Group’s Madyda. “One of my clients will see that a customer might have made a large home-improvement purchase a few years ago. They may not be ready to make another major renovation on their home for a few more years. But if you continue mailing to some of these older buyers, they’ll still be loyal, although they may not need the merchandise right away.”

Don’t take them for granted

Hooray — you’re efforts have paid off. Whether it was by segmenting your file differently, offering an incentive, or sending a modified version of your standard catalog, you managed to reactivate a former customer. Now all you have to do is keep him active.

“Tension arises whenever extraordinary methods must be employed to reactivate customers who, subsequent to reactivation, will be treated the same as other customers,” Wheaton says. To put it another way, if you wooed them with caviar, don’t think you can keep them by dishing up tuna-salad sandwiches.