How to Win Back Lapsed Customers

September 27, 2018CCG Retail Marketing Blog

Breakthrough retail loyalty study provides insights on how to re-engage inactive customers.

By Sandra Gudat, President/CEO

You’ve identified the lapsed customers in your client base and shifted them to a separate marketing stream. Or perhaps booted them out of your marketing plan altogether. But wait: Are you sure they’re truly disengaged?

The 2018 Retail Customer Loyalty Study from customer.com shows that what you’ve defined as a lapsed customer may simply be what we’ve defined as a Roamer. Fully one-third of consumers fall into this category of people who typically shop around — yet still identify specific retailers they tend to shop exclusively for particular needs. So before you start downgrading inactive customers, consider these vital facts and insights that could help you reinvent your customer reactivation strategies.

3 Consumer Shopping Personalities

Defining 3 consumer shopping personalities

Source: 2018 Retail Customer Loyalty Study, customer.com

Redefining lapsed customers.

Retailers define lapsed customers differently, based on such factors as products offered or the impact of seasonality. For instance, grocery, jewelry and outerwear retailers would all define a lapsed customer very differently. In general, retailers identify a timeframe within which a typical customer would have made a repeat purchase. A lapsed or inactive customer is one who hasn’t made a purchase within that timeframe.

However, our study showed that at least some of these customers who legitimately fit a retailer’s definition of inactive actually consider themselves highly loyal to that same retailer.

There are many reasons besides disengagement that customers might shop with a particular retailer less frequently than a typical customer. For instance:

  • A customer may love Nordstrom’s shoe department, but only shops there every 18 months because the closest store is 30 miles away and she never buys shoes online.
  • A customer might adore Apple products, but due to budgetary reasons can only afford to upgrade his computer every six years.
  • A customer may prefer the products at grocery store A, but finds it too busy on weekends, so often opts for the less-crowded grocery store B.
  • A customer may purchase career pants exclusively from a particular fashion retailer — but will only shop that retailer when it’s time to repurchase career pants, about every 28 months.

The list could go on and on. The point is this: Your customer reactivation strategies can’t be tone deaf to the true nature of your customers’ loyalty and motivations. It’s crucial to understand, through research and analysis, the various types of lapsed customers in your client base and the reasons behind their inactivity.

Otherwise, the communications you send these “inactive” customers will strike the wrong note, potentially frustrating them rather than encouraging a repeat visit. In these customers’ minds, they are not “lost.” They’re merely “hibernating” until the conditions are right to come shop with you again.

How do Roamers fit into the lapsed customer picture?

As we noted earlier, our customer loyalty study found that one-third of any retailer’s customers are likely to be Roamers. They may shop around, but they also profess strong loyalty to certain retailers. Understanding the underlying attitudes and motivations of this particular group is especially crucial. These customers do not need to be won back per se, but rather need to be acknowledged and respected for their loyalty.

Roamers possess some interesting characteristics. For instance, customers are more likely to swing toward the Roamer shopping personality during different stages of life, such as:

  • During their early years of shopping, from ages 13-18, when the experience of shopping is new and novel
  • From ages 35-45, which, for many consumers, are the more budget-conscious years while raising a family
  • From ages 65-75, as consumers are settling into retirement and living on a fixed income
Life stage affects customer loyalty

Source: 2018 Retail Customer Loyalty Study, customer.com

Overall, households with children living at home are more likely to be Roamers. This may be because they find it more important to shop around for the best deals in order to make their dollars stretch to care for a growing family.

In addition, women are more likely than men to be Roamers. Interestingly, more-educated consumers tend to be less loyal. And, not surprisingly, the lower a consumer’s income, the more likely that person is to always shop around before making a purchase.

What drives Roamers to be loyal?

In the customer.com study, Roamers reported unique factors that drive their loyalty. Taking these into account can help you craft strategies to increase this group’s shopping frequency and encourage consolidation of category purchases. For instance, Roamers reported that being given VIP benefits and experiences, status and incentives positively affected their loyalty much more so than these factors impact Loyalists.

Roamers also cited an informative website and the ability to look up past purchases online, at POS or in an app as important drivers of their loyalty.

Not surprisingly, “lowest price” was the number one listed loyalty driver for Roamers. However, when price, access and products were identical between two different retailers, then the factors mentioned above, plus those following were critical in prompting a Roamer to choose one retailer over another:

  • Customer service
  • Perceived fair treatment
  • Ability to make easy returns
  • Feeling the retailer is socially responsible

Which retailers make Roamers loyal?

While the average retailer’s customer base consists of 35 percent Roamers, some retailers do an especially good job of attracting and retaining these customers. For instance, Walmart, Amazon and Target attract and retain a disproportionate percentage of Roamers at 39, 42 and 43 percent respectively. In the highly competitive field of electronics retailing, Best Buy retains the loyalty of Roamers better than any other retailer overall, an exceptional feat.

Food Lion also attracts a disproportionate share of Roamers. But it also attracts a disproportionate share of Loyalists at 45 percent (compared to the overall retailer average of 35 percent). Yet, they have an extremely small Neutral customer percentage at just 10 percent.

Best Buy

75

Dollar General

63

Gap

58

eBay

58

Home Depot

53

Lowe’s

50

Newegg.com

50

Sam’s Club

48

Nike

46

Source: 2018 Retail Customer Loyalty Study, customer.com

Key Takeaways

The Roamers in your customer base may be a bit more elusive than a typical lapsed customer. But strategies to retain their loyalty and perhaps increase their shopping frequency can be a highly effective component to an overall win-back strategy.

Simply understanding that there is not one type of lapsed customer can help you create multiple customer reactivation strategies that resonate with each group. For instance:

  • Create multiple classes of lapsed customers that better reflect your customers’ loyalty and attitudes, and create strategies tailored to each class.
  • Look for repeat buyers over the years and outside your typical inactive customer definition timeframe, and create a strategy to recognize and reward them.
  • Test a long-term repeat-buyer strategy. Depending on how your loyalty program is constructed, these may be customers who never earn rewards because the reward expires before the customer returns to shop. Consider a test that allows their points to carry over for some extended period of time in recognition of their loyalty.
  • Make sure you have VIP benefits and experiences in place that are specifically attractive to the Roamer group in your customer base.
  • Since customer service and status are also triggers for Roamer loyalty, consider adding increased service levels in-store, on your website or at your call center, such as a special 1-800 number, POS alerts for in-store recognition of long-term repeat customers by associates, recognition messaging on your website or via email, etc.

With at least one-third of an average retailer’s customers identifying as Roamers — and, in many cases, even more — this is an important group to understand. Building specific strategies to retain and engage them is critical if you want to avoid the risk of disenfranchising this important segment with your win-back efforts.

Our 2018 Retail Customer Loyalty Study is giving us great new insights and perspectives on what it truly means to be a loyal customer — and the factors driving loyalty. Our retail marketing consultants can help you leverage this information to improve your customer loyalty and retention initiatives. Schedule a free consultation today.