The numbers don’t lie.
It’s been said time and time again—turning a first time visitor into a loyal customer is the ultimate win for any business. They spend more money, are more likely to become a brand ambassador, and are less costly to retain.
And Harvard Business Review says increasing customer retention rates by just 5% increases profits by 25% to 95%.
Yet, according to Zenreach data, 70% of customers that visit a retail business once never return for a second visit. Making an effort to retain customers should be a priority. But only 30-40% of businesses report being committed to lost customer strategies.
Sometimes customers disappear even when they have a good experience. So you need to be able to target them and bring them back. That leads to better return on ad spend, increased customer lifetime value and a boost to your bottom line. Here’s how.
A cookie for the real world
There’s a lot we can learn from ecommerce. Ecommerce businesses are able to use targeted marketing to re-engage customers who have visited their site by collecting customer data via the pixel and cookie. The pixel and cookie reveal who visits and when, time since last visit, pages and products viewed, items put into a shopping cart, and other useful data points.
But there is no pixel or cookie in the real world. So the challenge is first identifying lapsed customers, and then targeting them with the appropriate message to bring them back.
Although there is no cookie for a brick and mortar store, in-store systems can be used to track both visits and transactions.
Point of sale (POS) systems have served as massive customer databases for some time. They track visits along with purchase histories. If you know how much customers are spending, you can make better decisions about how much to spend on ads and other programs.
Guest WiFi is another way to collect new customer contacts and track when customers are visiting. In exchange for access to free WiFi, customers opt-in to receive marketing messages by entering their email address. The email address is associated with the MAC address of the device. When the customer returns with that device, the WiFi router notes the visit.
With the POS and WiFI, you can collect an enormous amount of customer contacts and data. The systems combined show you who has come into your store, when they’ve lapsed and how much money they’ve spent.
Segmenting customers by visit history and lifetime value is a useful way to manage reactivation campaigns. Simply pulling a list of customers who haven’t been in for 1-2x the average visit cycle lets you isolate a lapsed customer list that can be targeted through digital advertising.
A popular west coast coffee chain was able to do just that.
In under two years they collected more than 800,000 contacts. Because Zenreach shows you how often a customer comes in, they were able to segment their lost customers by identifying anyone who had not visited within a certain amount of time. In this case, they chose 30 days or more.
Using this data they were able to create audiences of lapsed customers to run their first campaign with Zenreach Attract. And they went a few steps further. They chose to target only people within a few miles of each of their stores. And their budget was weighted based on the value of each of their customer. For example, more money to those who had visited 10x or more, less to those who had visited 2-3x. This meant they could focus their ad spend on their most valuable lost customers who were in close proximity to each of their locations.
Consider the offers and a tiered approach
Another important factor to consider is the offer. In the above example, they chose not to include an incentive. And it turns out it wasn’t necessary. Customers who returned simply needed a reminder.
But there are times when an offer may be necessary. For example, if a customer hasn’t come in for a longer period of time. This may look like 80-90 days for some businesses or even longer. Starting with a small offer earlier on, then moving to a larger offer to increase likelihood of return is a best practice.
Paytronix, a customer loyalty app, recently spoke about their recommendations during a joint webinar with us.
Based on a study they conducted, it was shown that matching the type of incentive to the amount of time that has lapsed between visits results in a higher return. They suggest the first offer be sent at a point that’s between two and three times the average visit frequency. For instance, if your guests visit about every 30 days, your first lapsed offer should occur between 60 and 90 days of inactivity. And the first offer should be valued at roughly 33 percent of the average per-person spend. So if your guests typically spend $12, make the offer worth around $4.
Then think about sending a second offer at a point that’s between four and fives times the average visit frequency. This offer should be larger, valued at 50 percent or more of the average per-person spend.
Something to keep in mind, and may seem obvious but it’s worth mentioning, is you can’t successfully execute on any loyalty program without the proper measurement in place. When it comes to brick-and-mortars, it’s critical you measure and optimize for in-store visits and transactions, not clicks. Using the Walk-Through Rate is the best approach. We do a deeper dive into this topic in our white paper, Adapting Digital Marketing for Real-World Results, if you’d like to learn more.
Winning back lost customers should be an important part of any business’ strategy. Up until now, it’s been difficult for brick-and-mortars to effectively and efficiently use digital marketing to bring back lapsed customers. But taking lessons from ecommerce and incorporating new technologies, it’s now possible. The ket is to focus on three important things to retarget the right customers and bring them back: customer data, messaging and offers.
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