Increased profits from more tailored, and in some cases more frequent, communication with customers is the goal of a good strategy based on an attrition model.
Attrition is Not Just a Marginal Customer Problem
Effective use of an attrition model starts way before determining which customers are marginal, and then sending them win-back offers. It begins with identifying which customers can be contacted profitably before they become marginal, and seeking repeat purchases that will cause them to remain profitable.
The best time to attack attrition is when someone becomes a customer. Seek repeat purchases, increased average orders or purchases of additional product categories quickly while their patronage is fresh.
Example: An offer that accompanies a welcome to a new customer might perform 10 times better than a “we-want-you-back” offer. It would be a shame for customers to get a win-back offer without ever having a welcome offer.
All customers have some likelihood of responding to offers. The challenge is timing the offers, finding the most productive and actionable segmentation. Waiting to create win-back offers for customer segments about to drop below break-even profitability is action that’s too little, too late.
Strategies Must be Tested and Tracked
An attrition model can be used to formulate an initial strategy, but once the marketing efforts change, testing is crucial. While it’s unlikely that customers who spent a small amount two years ago suddenly will respond better than recent buyers of high-ticket items, they may behave differently if given targeted offers geared toward their segments.
Why? For some segments, increasing average order is important, and offers should be created accordingly. For others, response might be low, and offers are geared toward getting another sale. Some segments respond to offers that are non-seasonal, while others may wait for a seasonal offer.
Testing and tracking new results will enable you to learn from the new, segmented offers. That will build on your knowledge gained from the attrition model, and allow for better results in time. Alan Weber is CEO of DataPlus Millennium, a Prairie Village, KS-based provider of marketing database consulting and analytical services. He is the former president of the Kansas City Direct Marketing Association, co-author of “Desktop Database Marketing” and a teacher at Kansas University. You can reach him at (913) 432-8311 ext. 25, email@example.com.