Re: Bringing lapsed consumers/users back into the fold

From: Jim Novo <jimnovo_at_sprintmail.com>
Date: Fri 25 May 2001 09:24:43 -0500

HARLEY UNGAR <harley_at_vindigo.com> WROTE:

> Has anyone had experience using email to target lapsed
> consumers/users and encourage them to give your product/
> site another try? In particular, I'd love to hear of any
> cases where you've analyzed your user activity, figured
> out who's been inactive for a while, then emailed them
> a "this is what's new" type of message and tracked
> conversion. Thanks!

Yes. You will generally see response rates fall as a
function of Recency - the number of days or weeks since
the last interaction with the customer. This relationship
is a very smooth curve and quite predictable once you
establish the "slope" of it for your business. It will
look something like this:

 Time elapsed = 1 week, response rate = 40%
 Time elapsed = 2 weeks, response rate = 20%
 Time elapsed = 3 weeks, response rate = 8%
 Time elapsed = 4 weeks, response rate = 2%

Again, the "absolute" response rates will be different
depending on the business and offer, but the "relative"
response rates will follow a decelerating curve as shown
above, that is, the less. Recent the customer, the more
dramatic a drop in response rate you will get.

In terms of using this information for promotions, you will
find some point along the curve where you will get
"breakeven", meaning the cost of the campaign will equal
the benefit generated. For example, let's say you offer
a discount or gift in your retention / lapsed customer
campaign and need a response rate of 8% to pay back the cost
of the campaign. The implication using the above information
would be don't bother to promote to any customer who hasn't
had any contact in over 3 weeks, because you're wasting your
money; response will be too low to pay back the cost of the
campaign.

This effect is very stable over time, allowing you to predict
in advance what response to a campaign will be, once you do
an "establishing" campaign to see what your response rate
curve is for any particular offer at each Recency level.

Given that a more Recent customer is more likely to respond,
Recency can also be used to compare the future value of
groups of visitors, for example, visitors clicking on two
different ads or first-time customers purchasing two different
products. Anyone interested in how this works can read an
article about the technique on my site at:

http://www.jimnovo.com/Recency-Model.htm

Jim
---------------------------------------------------------
Jim Novo mailto:jim_at_jimnovo.com
Author:Turning Customer Data into Profits
Learn the techniques and models used in
profitable customer-focused marketing at:
http://www.jimnovo.com



Received on Fri May 25 2001 - 09:24:43 CDT