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Redefining lapsed customers: Should they stay or should they go now?

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5th Apr 2012
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Gavin Wheeler debates the issue of when a customer becomes a lapsed customer and argues our current thinking is too black and white.

So when does a customer become a lapsed customer? It’s an interesting question. Marketers seem all too ready to consign their hard earned customers into the bin after months of inactivity. But isn’t it too black and white to consider customers as either active or lapsed depending on the date of their last purchase? 
If a consumer hasn’t purchased from you for some time, but they’ve been reading your emails, visiting your website and liking you on Facebook, they haven’t necessarily stopped being your customer. If they are engaging with you in this way, is their lack of spending enough for you to give up on them? Also, for a contract-based product such as insurance, just because someone has bought a policy from you for two years, it doesn’t mean that they are engaged with your brand. They may be manacled by the contract and also inertia – not necessarily a route to long term loyalty.
Also bear in mind it can be difficult to use time to define lapsed customers. Every consumer is unique so pinning a time-line of 3, 6, 12, 18, 24 or more months of non-purchasing before calling them lapsed is an outdated approach that doesn’t allow for insight into a customer’s own individual needs. 
It’s also important to understand that consumers are repertoire buyers so 100% loyalty is unlikely. You may have a favourite brand but, when you need a cup of coffee and there isn’t a Cafe Nero around, will you really spurn the Costa Coffee you’re walking past? In truth, many of us just need gentle reminders that we like a particular brand so that, when the next purchase opportunity comes up, that brand jumps out first from the list of brands we’ll consider. 
Essentially, instead of thinking about lapsed and non-lapsed customers, we need to assess customers according to their level of brand engagement. So, rather than using Return on Investment as our measure of success, we should use Return on Engagement to create an understanding of how engaged our customers are with the market, product, brand and offer we are selling. 
Bearing all this in mind, you need to create an holistic single customer view which draws on all available data in order to create an engagement profile for them. This ‘CRM 3.0’ approach is about monitoring and evaluating all conversations with each customer, both inside and outside a brand’s own environment, and integrating this with existing data in real time.
To monitor engagement, cookies and web analytics are invaluable to identify who visits your website, what pages they look at, what they clicked on, products they looked at and if they get a quote, etc. There are also now a number of tools that enable you to identify and measure brand engagement activity from social media sites such as Twitter and Facebook. Use an ‘engagement warehouse’ to integrate this with transactional data as well as responses to more traditional communications and you can then start to make informed judgements on whether someone is truly lapsed, or whether they are engaged with your brand but not buying at the moment.
It’s also important to identify changes in behaviour as a potential trigger for a new brand message. So, for instance, if a regular customer stops buying ‘couples’ holidays then it’s possible that they may either now have children, or they could have separated/divorced. In order to evaluate the significance of behavioural change you can apply external data to your database to provide insight on the reason for any profile shifts. Bounty baby data, for instance, is a great data file to use to identify new parents.
We have also found that surveys are invaluable for gathering more in-depth demographic and attitudinal customer data so you can better qualify the reason for any behavioural change. They are also a great engagement tool for you to show a non-purchasing customer your appreciation of their business, giving you an excuse to get in touch.  
Having created your 360 degree engagement view of your customers you can then start to identify the true potential of each customer, understand where it’s worth investing your budget and create personalised communications programmes that make a difference. You will find pockets of customers that do not engage with you, and no longer purchase your product or in your marketplace – and that’s fine. Don’t throw good money after bad. But where there is engagement there is opportunity and you need to seize it.
Gavin Wheeler is CEO at direct response and relationship marketing agency WDMP.

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