During a recent conversation between our Business Development Manager, Peter Luxford and Andy Mulcahy from IMRG, we delved into the world of acquiring new e-commerce customers and explored the strategic role of Direct Mail in customer retention and reactivation efforts. Here is what transpired...
What is the role of direct mail in a customer retention and reactivation strategy?
In today's competitive landscape, customer loyalty is crucial, as the next alternative is just a swipe away. While acquiring new customers and getting them to make their first purchase is important, it's equally essential to keep them engaged, encourage repeat purchases, and minimise churn.
When it comes to customer retention, email remains the preferred channel due to its immediacy, cost-effectiveness, and personalisation capabilities. However, as time passes without a response from a prospect, the chances of re-engagement decreases. After a year of ignoring offers and incentives, that customer effectively drops out of the email pool of prospects.
Many companies tend to write off these customers as lost causes, but that's where Epsilon and Direct Mail come in.
Direct Mail can help identify and reactivate a highly profitable and incremental audience for your email campaign - customers who still fit your target market but have stopped buying from you for some reason.
The response rates for lapsed customers are typically 4-5 times higher than cold acquisition campaigns, while still showing higher average order values (AOVs) and lifetime values. By mailing and recruiting these high-value customers, you can significantly boost campaign revenue and offset acquisition costs.
Why does direct mail work when email fails for customers who haven't made a purchase in over a year?
Direct mail succeeds in areas where email falls short due to its ability to cut through the clutter, establish a connection, and generate consideration from recipients.
In the digital age, adults in the UK spend approximately 24 hours a week online, exposed to hundreds or even thousands of ads and emails each day. In contrast, traditional post like bank statements and bills are now primarily received online, resulting in customers receiving only a few physical mail items per day or week. As a result, almost 100% of direct mail is seen and handled by the customer.
Furthermore, the majority of personal email addresses are accessed via smartphones, leading to less visibility for subject lines and a simple swipe-to-delete action. The average lifespan of an email is now approximately 17 seconds. On the other hand, research by JICMAIL reveals that direct mail stays in the home for an average of 8 days, with 40% of it still present after a month. This provides numerous opportunities for recipients to engage with the mail.
Direct mail also creates a physical and emotional connection with recipients. It requires them to pick it up, providing a tactile experience with movement, and may even have a distinct smell. These sensory triggers have a 49% stronger impact on long-term encoding in the brain compared to email, as shown by marketreach research. Consequently, brand, product, and pricing information are more likely to be locked in memory, making other branding activities more effective in reminding prospects why they initially chose your brand and increasing their likelihood of making another purchase.
Additionally, according to Kantar, 72% of people often read and review their mail at a time when they can give it their full attention, even after opening it. This means customers make a personal appointment to engage with your marketing materials.
Considering these factors, it's no wonder that reactivated long-term lapsed customers contribute greater order values and lifetime values compared to cold prospects.
Does direct mail work across all sectors?
Yes, direct mail is effective across all sectors, particularly in industries that experienced rapid growth during the COVID-19 lockdowns. Sectors such as fashion, homeware and furniture, gifts, and food and drink saw significant growth during that period, followed by a decrease in customers as the world returned to normal. However, even though customer numbers may have dropped, businesses still have a valuable dataset of customers that, if utilised correctly, can greatly impact their bottom line.
This is particularly relevant in the subscription market, where food and drinks brands dominate. Many of these brands experienced unprecedented growth rates. However, as people were released back into the "wild" after lockdowns, churn became inevitable. Subscription brands typically launch win-back email campaigns when a customer cancels, but the effectiveness of that email window is often shorter than previously described - around 6-9 months. Therefore, utilising direct mail a little earlier for reactivation is advisable in this scenario.
It's important to note that the majority of these customers are still purchasing goods and services elsewhere; they haven't completely dropped out of the market. The key is to differentiate between those who still fit your best customer profile and can be profitable and those who were convenience customers unlikely to return.
Epsilon offers a comprehensive solution by matching your best active customers to all their transactions with the 260 other member brands. This allows them to build a comprehensive profile based on buying behaviours and patterns, including what customers are spending, who they are spending it with, and when they are spending it. This is further enhanced by leveraging CACI Lifestyle and demographic data.
In terms of acquisition, we would then conduct a search for lookalike customers in the Abacus Alliance database. However, in the case of customer retention and reactivation, we take it a step further by profiling all your lapsed customers and identifying lookalikes within that dataset.
By identifying those lapsed customers who still demonstrate similar purchasing behaviors as your best customers, it enables us to optimise the efficiency of your campaign. You can then tailor your direct mail efforts to target these prospects and effectively reengage them.We have successfully implemented this approach with great results. Since this transactional data is updated on a monthly basis, we are able to continuously identify which of these lapsed customers are still active in the market.
Below is a quick snapshot of questions that members can answer by leveraging Abacus Alliance data:
- Are they loyal to my brand, or are they also engaging with other brands in my industry?
- Are there other product categories that might pique their interest?
- These customers have been inactive for some time. Are they still interested in purchasing my product?
- These individuals received one of our products as a gift. Are they actively making purchases in this category?
- These customers have recently made their first purchase from us. How much should I invest in nurturing their relationship? What is their potential lifetime value?
Economic turbulence doesn't need to wipe out years of valuable gains with consumers. Surviving the financial downturn starts with understanding your customers. Answering the questions above will help you to improve your activation, reactivation, and cross-sell efforts and add great value to your brand.
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References: ONS Data, IRI Report, PwC