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How to optimize your customer win-back strategy

Posted January 15, 2019
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Everyone knows it’s cheaper to retain an existing customer than win a new one. But what about trying to get an old customer back?

In just about every industry, there is an expected rate of churn where customers switch to a competitor or otherwise jump ship. Some industries, like cable TV providers, can lose up to three percent of customers every month. Your frontline customer support team is tasked with resolving complaints, one-by-one, as they come rolling in, but customer retention is not a perfect science.

Is it more cost effective or beneficial to try to replace them with new customers, or to try to win the defectors back? If only there was a simple answer. As it stands, there are significant benefits and drawbacks to both. Chief among the drawbacks of replacing customers is the outsized marketing spend required to build awareness — and loyalty — among a new set of potential consumers.

The challenge of trying to win customers back is that not every lost customer is created equally. Some may have left because they found a better deal elsewhere, while others just didn’t need the service anymore. Others may have been frustrated by technical difficulties, poor service or any number of other inconveniences. Your task as a company is to find solutions for each of these kinds of customers.

Keys to a smart win-back strategy

This is why a thoughtful, multi-faceted win-back strategy that reflects the diversity of your customers is critical. When executed properly, a win-back strategy is not only a cost-effective approach to growing business, but it can go a long way toward creating more of the kind of customers that serve as vocal advocates for your brand.

Here are five things to consider when trying to win customers back:

  1. Focus on customers who have shown a predisposition to coming back. According to Harvard Business Review, “Reasons for leaving are also predictive: Customers who canceled because of price are more likely to come back than those who left because of poor service, and people who cited both reasons for quitting are the least likely of all to return.”
  2. Utilize data and analytics to determine who will be most profitable to win back. “Winning back any customer should not be the goal,” says V. Kumar, marketing professor at Georgia State’s J. Mack Robinson College of Business who has published widely cited research on customer win-back strategies. “Winning back profitable customers should be the goal of each firm.” To do that, Kumar recommends companies first understand the reason for defection and act within the first 30 to 60 days to offset that reason. “Typically, customers leave for price, service quality or both,” says Kumar.
  3. Structure a win-back offer for maximum conversion, and maximum profitability — and make sure to test several options before launching. Kumar suggests trying to sweeten the offer based on the reason for defection. For example, if someone left for service quality (e.g. poor internet speed), then increase the speed at the same price they were paying before, for a trial period of three to six months. “Invariably, the customers stick to the better product or service and are typically willing to pay what the firm charges,” says Kumar.
  4. Understand that some customers will never be satisfied. “Some customers keep playing the game of quitting just to get better offers,” Kumar says. Through his research, Kumar says these types of customers can be consistently identified by looking at their lifetime behavior, the reason for defection and the offer requested by the customer.
  5. Above all, strive to delight customers. The benefits of doing some additional legwork or reducing customer effort in the short-term will pay off in spades over time.

A new model for delighting customers in the digital realm

Rather than relying on complex win-back strategies, marketing experts like Richard Reisman, founder of Teleshuttle Corporation, recommend a more self-service approach. For instance, Reisman has developed a concept called FairPay, a philosophy and strategy aimed at creating win-win relationships between companies and customers, particularly in the digital realm.

Both retaining and winning back customers require a strong overall customer experience strategy. Reisman argues companies can achieve greater customer lifetime value by offering customers a greater level of empowerment and increasing customer-company dialogue.

For instance, instead of blanket flat-rate pricing, FairPay would enable customers to essentially own individualized pricing, leading them to become more loyal customers over time. “Most current win-back strategies simply offer discounts commensurate with the customer’s value, but then jump them back up to full price and hope they remain satisfied enough to not complain again,” says Reisman.

However, some groups of customers just won’t be happy with a particular value proposition, especially with digital content and products. Though a discount could temporarily change that, Reisman argues that what is needed “is a more relevant ongoing value proposition: Either lower price or higher value.”

Flat-rate subscriptions in particular, Reisman argues, “are often a poor value proposition for light to moderate activity users.” So the logic goes, even acknowledged digital successes like theThe New York Times, Netflix and Spotify are leaving money on the table by having such prescriptive pricing models.

An ongoing conversation and relationship about pricing and customer experience builds loyalty, argues Reisman.

Though Reisman’s FairPay model is new and unlikely to be widely adopted, its core principles of customer empowerment and engagement are sure bets for customer retention and win-back strategies. In the end, winning back lost customers and engaging current customers require the same level of commitment. And it’s that commitment to the customer experience that is likely to separate the winners from the losers.

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