The Potential Value In Churned Email Customers
Written by Rob Lane.
Churned customers, those who’ve purchased something from your store and then casually strolled away, are more valuable to your enterprise than you might think. They represent hard earned money walking out the door… or an easy, feel-good way to increase profits, if you can retain your VIP customers.
2. Customer Churn For Ecommerce Retailers
This is especially true in the volatile realm of ecommerce retail, where choice abounds in the digital marketplace, switching costs are often non-existent, and competition for consumer attention is fierce:
“The average ecommerce store generates 43% of its revenue from repeat purchases. At best-in-class companies, that number nears 80%. Repeat purchases are the bread and butter of many online stores, both easier and cheaper to come by than first time purchases. But, while many ecommerce retailers are great at customer acquisition, fewer have mastered the fine arts of customer retention”
Most retailers are aware of this dilemma at some level. In the last few years, a plethora of loyalty programs, customer outreach and retention incentives have mushroomed across the consumer landscape… how many points accounts do you have kicking around?
3. Getting Big Gains
The retail industry is catching on to the fact the a small increase in customer retention can have a huge impact on their bottom line:
“According to Bain and Co., a 5% increase in customer retention can increase a company’s profitability by 75% [in some cases 95%]…. And if those numbers don’t impress you, Gartner Group statistics tell us that 80% of your company’s future revenue will come from just 20% of your existing customers.”
That 20% of your existing customer base, that will drive your future revenue, is a key segment to keep an eye on. When these VIP customers churn, profits suffer.
Most large enterprises know that churn rate is a key customer metric they should pay attention to: “at the heart of customer level metrics is churn rate: the measurement of the likelihood of your customer to become an ex-customer.” Shopify
Churn rate may sound simple to calculate, but can be challenging for even large retailers dealing with complexities of scale, customer segmentation or a massive number of SKUs. Many smaller retailers, with limited technical resources, have even less of a handle on churn rate, or how to plug the holes in the dam.
4. Cookie Cutter Retention Efforts
Many large retailers, working with reams of data, predictive analytics technology and significant marketing resources do have at least some idea of how long a customer has been out of touch and their likelihood to churn. They then proceed to pour huge amounts of resources into blanket campaigns that try to bring those customers back into the store, be it digital, bricks and mortar or both. This is where the strategic wheels start to fall off the bus.
According to noted Harvard Business Professor, Sunil Gumpta, in a working paper co-published in late 2013 with Aurelie Lemmens, Managing Churn to Maximize Profits:
“Profit from targeting a customer depends on not only a customer’s propensity to churn, but also on her spend or value, her probability of responding to retention offers, as well as the cost of these offers.”
5. Value Your VIPs
In order to increase, or in some cases achieve, profits from retention offers, marketing efforts should be aimed at high value customers, who appear to be churning. These valuable customers represent the biggest potential for loss or gain to your business.
Knowing who these customers are, which segments they belong to and their shopping preferences will also provide insights as to which specific offers, incentives or products are most likely to regain their attention and bring them back into your store. At this point you can become reacquainted, and possibly even improve their experience with your brand, gently ushering them from the churn isle to the VIP lounge where they belong.
Rare.io makes it easy to start using automated email campaigns for common challenges like: Welcome Series, Abandoned Carts, Order Follow-up emails and more! You can learn more about our powerful email marketing automation features here or go ahead and get started right away by using Rare.io for FREE.
And if you’re one of the thousands of merchants who are already using Rare’s Smart Email Marketing software and want to see how our Customer Success Team can work with your brand to grow your revenue – feel free to book a call at your convenience here.