Recency is an inadequate targeting criteria for win-back campaigns

Client:      

A national distributor of medical supplies

Challenge:     

Win back lapsed customers

Loyalty Builders solution:  

Conventional wisdom is to market to customers who have not purchased in a specified amount of time. But recency is a poor segmentation solution because clients have different purchase cycles.  What’s a long time between purchases for client A may be normal for client B.  Instead we combined results of  several metrics including Purchase Delay (the number of missed purchases for the individual customer) and Risk Score (a proprietary algorithm that looks at customer velocity and other customer behavioral variables).

Results:

Our client only used recency to recognize potential defectors. They considered every customer who had not purchased in 90 days a win-back candidate, and they felt they were doing a respectable job of reactivation.

But Loyalty Builders’ analysis identified more than 1000 reactivation candidates they’d missed.  The response rate from these candidates was 57% greater than from the client’s list and their order size was 63% greater. The bottom line:  our analysis represented an eight times return on their investment in our analysis and is expected to produce incremental revenue of $170,000 in margin dollars this year.