The Sum of the Parts, Part 6: Reactivation E-mails

Welcome to the sixth article in our series “The Sum of the Parts,” in which consultant Rob Galkoff discusses the elements critical to successful e-mail marketing.
 
How much does it cost you to recruit a new customer? Let’s say $50, as it’s a nice easy number. Do you ever put a value on the cost of losing a client?
 
Let’s step back a minute and consider the implications. We recruit 1,000 customers at a cost of $50,000. Their average order value (AOV) is $100, so turnover is $100,000. Our cost of goods sold (COGS) is $50,000. In effect we’ve broken even, but there might be other costs of running the business, which means the activity has made a loss. We know, however, that we’ll make this money back on second and subsequent promotions.
 
In the olden days we might have relied on mailing our catalog every month or so in order to obtain those subsequent orders. On average, our house file might have responded at 10%. We were probably pleased with this—but what about the other 90%?
 
Over a period of 10 mailings, perhaps we saw 50% of customers buying within the year. That’s not bad, but all the same it meant that half of our customers decided not to buy.
 
We talked about segmentation in the previous article (“Using the Data You Have”)  and how it’s possible to slice and dice your database as much as you want. If you’re sending out catalogs it’s expensive to make print changes to try different promotions, but once you start thinking about e-mail, the possibilities multiply to dazzling effect.
 
E-mail allows you to make as many changes as we want. We know many customers decide, for whatever reason, not to respond to marketing. It could be because
 
1) the product doesn’t appeal
2) the brand doesn’t appeal (perhaps they bought in the first place only because we had a particular product at the right price)
3) the price isn’t right
4) they’re not in the mood to buy
5) your message doesn’t stand out
6) the promotion is not strong enough to make them buy.
 
Think about it logically. Let’s assume you are engaged with an e-mail service provider and already have a program up and running. The cost of segmenting the e-mail, then, is going to be virtually nil. So, provided your offer is not outrageous, you can still make money out of your existing database. And once you’ve engaged with them for the second and third time they are more likely to continue to buy from you in the future, as they have a greater affinity with your brand and products.
 
If you look at your database you can start to do some trials to see what makes the customer buy again. Where does the communication or promotion need to be pitched? Try to find out what made the customer buy in the first place: Was it through a full-price promotion or a discounted campaign? You might find that people who buy from you for the first time during a sale period might respond only to discounted merchandise. So try sending relevant e-mails to reactivate them (if you have stock you need to clear, you might be able to sell it to these customers at a higher price than you would at your end-of-season clearance).
 
For one of my clients, we drive people to its Website from a whole host of places. Some of them buy early on, others just register their names. For these prospects we want to find a way of reengaging with the brand. To that end we send them a “killer” offer every month. It’s an additional marketing spend, but it pays off, as the response rate is high. These buyers then go into our normal e-mail campaign program of newsletters that come out every two weeks. Every three months we then throw in another series of “killer” offers to reactivate them again (though these are rarely as good as the promotion they originally got). This is a small client, and its database is not large enough to segment it in too many ways, but with the work we do we have start seeing much higher response rates, as we’re hitting the customer with relevant and enticing messages.
 
The next step is to look at older customers, who haven’t bought from you for more than 12 or 24 months. They’ve previously engaged with you, so they know who you are and hopefully had a good experience with you, but for whatever reason they’ve not shopped again recently. Send them some messages that are promotions or simply along the lines of “Sorry, have we done something to upset you?” You’ll probably be amazed with the results. The length of time between the purchase and the “sorry” e-mail is totally dependent on the product you’re selling.  
 
In conclusion, treat reactivation e-mails as their own campaigns. Segment your database, then start sending each group them different types of messages and promotions to see where they are most responsive. Remember, the cost of doing this activity is relatively low, so the return on investment is generally high. Oh, the hours of coming up with different promotions and tests might be long, but your response rates will start climbing as will your sales. Thank goodness for email!
 
Next time we’ll be focusing on welcome campaigns. If you have some examples to send me then please feel free to share them (rob@thebusinessconsultants.co.uk) and I’ll include them in the article. And feel free to drop me an e-mail if you have any questions or comments.
 
Rob Galkoff is CEO of the Business Consultants. He was previously marketing director at multititle UK mailer Findel.