It’s easy to focus on acquiring new customers, but what about the ones you’ve already lost? If you’re frustrated with losing customers, winning back a dormant customer is one of the easiest things to fix. It can also have a dramatic impact on your business – according to Bain & Company, a 5% increase in customer retention can boost profits by 25 – 95%.
Keep in mind, that in almost any business, there are more “lost” existing customers than there are active ones (often 25-50% more). In addition, depending on the study, it’s been proven to be 5-25 times cheaper to retain an existing customer than to acquire a new one. With an inactive customer, you’ve already made the pricey acquisition investment, and it’s going to be dramatically easier (and cheaper) to get them back than it is to go out and find a new customer.
What are the reasons for losing customers?
Often, you’ll find you lose customers through no fault of your own. They are often not unhappy customers and instead could have stopped purchasing for any variety of reasons. Marketing legend Jay Abraham states that “80% of lost customers leave for a reason that can be fixed.”
In this blog post, we’ll discuss a five-step process to reactivate dormant customers and get them back into the fold. Most small businesses continue chasing more potential customers and miss a massive opportunity.
Step 1: Find Inactive Customers
This process starts with reviewing your database to identify customers and clients who haven’t purchased within a certain period of time. To start, you can go with lost clients who haven’t purchased in 2 months or more.
You’ll want to consider doing this in a systematic and coordinated way with your CRM. Ideally it’s worth trying to automate the majority of this process (minimizing manual steps) to make sure this gets done consistently going forward.
Another tip on how to think about the overall process – consider putting extra special care into customer reactivation strategies for your “top” customers. Said another way: we should ramp up reactivation efforts for your customers with the highest lifetime value.
Step 2: Get in Touch with Dormant Customers
To maximize the effectiveness of this step, your best bet is to do this in a structured sequence using multiple mediums.
You can make this as simple or elaborate as you’d like to, but think about having multiple touchpoints over a given time period.
Here’s an example to make this real:
- 2 Month Mark: send a letter, ideally with hand-written addresses & normal stamp. It’s critical to make this look like personal mail, not a marketing piece.
- 5 Days After Letter Is Sent: follow-up with a phone call, either by you or someone on your team. This is an important step and will most likely be more effective than the letter. You could consider automating this step using ringless voicemail.
- 3 Month Mark: Send postcard
- 6 Month Mark: Begin a 3 step email sequence
Step 3: Limited Time Offer
Make a special limited-time offer with a reason why you are offering it (it could be as simple as you miss them). You’ll want to consider restricting the offer to a certain time period to create a sense of urgency. For example: the customer needs to act within 2 weeks from receiving the communication.
The important thing here is to make the offer something compelling that will get them excited, something too good to pass up. The more irresistible it is, the higher the response rate you’ll see and more successful the campaign will be.
When you consider how sizable to make your offer, you’ll want to pay attention to your numbers for customer lifetime value (LTV) and customer acquisition cost (CAC). As long as your customer lifetime value exceeds the money spent to acquire an average customer, it’s a no-brainer to at least test higher incentives.
Step 4: Phone Call Follow-Up
I highly recommend following up with a phone call as long as you have phone numbers on file. The call is very simple: you’d simply ask if they received your letter and see if they have any questions. It only takes 2 minutes but will really differentiate you since barely anyone else does this.
During this call if they tell us we did something wrong – the best thing we can do is to find a way to fix it immediately. Often just by doing this and showing them you care, you can win back a dissatisfied customer.
As an alternative option, you could systematize this and send a ringless voicemail to those you’ve sent letters to. As with anything, there are tradeoffs to this approach (less personal touch but broader reach).
Step 5: Ongoing Communication for Customer Retention
Once these people become active customers again and are back in the fold, focus on continually communicating (sharing what’s new and fresh from your business) and making a sequence of ongoing offers to them.
Remember there is no such thing as communicating too often as long as you’re providing value and don’t bore your customers. In building relationships in business, consistency breeds trust. A couple quick ideas on this:
1. Hire a college student (or any part-time employee). Create scripts for them and have them call your best customers. Make these customers specific offers over the phone that only these customers receive – and make sure they know it. They’ll appreciate being on the VIP list and there’s a good chance they’ll spend more with you as a result.
2. Send out handwritten thank you notes to past clients for their purchases. Along those same lines, make periodic calls to your customers just to check in and see “how things are going.” This is not a sales call in any way, you are just calling to say hi and see if there’s anything your business can do better. As you might imagine, this sort of approach builds massive goodwill and is far beyond customer expectations.
One final note: If any inactive customers express dissatisfaction with a past experience, see if you can do something special at no charge or little charge. A great approach to remember when dealing with any inactive, dissatisfied client is: “…if you only take advantage of our make good offer but never do business with us again, it’s important to us that your last transaction with our company be a positive experience. So please give us this chance to see that that happens for you.”
Do this and almost no one can continue to hold a grudge. And even the few who still do will likely tell their friends about your gracious gesture to make up for the problem. Ironically, this approach will often generate referrals from the very people who left you and never intended on returning.
Finally, when you make contact with past customers who are inactive because they have no further need or use for your product or service (maybe they moved out of the area), don’t write them off. Instead, thank them for all their past loyalty and patronage. Then diplomatically look to them for quality referrals. I’m sure many will be happy to help you if you really communicate appreciation from the heart and request for referrals.
To wrap up, if you’re struggling to acquire new prospective customers or simply want to see a higher return on your current customer base, take a step back and look at your inactive customer list. Odds are good that there are plenty of people who have bought from you in the past but just aren’t doing so right now for one reason or another.
Implementing these five steps is going to be significantly easier (and more affordable) than finding new customers, so why not give them a try? Building this into your sales process one of the easiest and most effective things you can do for your small business.
If you found this helpful, I have a separate post that includes reactivation email templates you can use word-for-word.
Let me know how it goes for you in the comments below.