July 18, 2016

The Reactivation Narrative

The reactivation narrative is sometimes filled with lizard logic.


Let's discuss some of the problems with the reactivation narrative.

Issue #1 = There Are Riches In Reactivated Customers!
  • For most of us, there aren't riches to be had when reactivating customers. I got to work at Lands' End, Eddie Bauer, and Nordstrom. When you have between four million and ten million twelve-month buyers, you also have an equal number of 13-60 month customers. So yes, there are riches to be had when working at Lands' End, Eddie Bauer, and Nordstrom.
  • But you don't work for Lands' End, Eddie Bauer, or Nordstrom. You work for Widget World. You have 250,000 13-60 month buyers. And only 10% of that audience is going to purchase again this year, if you are lucky. That's 25,000 buyers. When a vendor tells you that they have reactivation magic that improves reactivated buyer counts by 10% (and 10% is a big improvement, friends, this means your vendor did a good job), you increase your buyer count by 25,000 * 0.10 = 2,500 buyers ... your twelve-month buyer file might increase by 1% or 2%, that's it. At a $100 AOV, that's $250,000 demand. Do you want $250,000 demand? Absolutely! Did you achieve "riches" by mining your reactivation file for gold? Hardly. After expenses, you're lucky to take home $25,000 profit. Your vendor, however, takes home more profit than that.
Issue #2 = How Vendors Make Money.
  • For you, improved reactivation yields minor benefits.
  • For your vendor, a reactivation product is a major product ... this is how the vendor puts cheddar on the hamburger.
  • As a result, the vendor hypes the living daylights out of reactivation, and for good reason ... it's much more important to the vendor than it is to you!
  • When you run a p&l on reactivation tactics, it is common for the vendor to make more profit on the reactivation tactic than you make. Seriously! Run a p&l sometime and see for yourself. This is the problem with vendor hype ... the tactic is far more important to the health of the vendor than it is to you. That social media overlay pays dividends for the company offering the social media overlay.
  • Why should a vendor make more money off of your reactivation activities than you make? Seriously. Offer me a credible answer to that question.
Issue #3 = You're Already Speaking To Many Reactivation Candidates.
  • It isn't like your reactivation audience is ignoring you.
  • Half of the reactivation audience is on your email file, and you are "engaging" this audience four times a week, every week, all year long, 200 times per year.
  • If you are a cataloger, then you are engaging the rest of the reactivation audience "X" times per year with your beloved catalog.
  • There's a reason that a customer says no to 200 emails per year and 4 catalog per year, every year ... the customer doesn't want to buy from you!!!
Issue #4 = Discounts / Promotions
  • Some vendors demand that you use discounts / promotions in combination with their solution. They do this for a good reason ... it increases the likelihood that their solution appears to be successful. This is a lie told on behalf of the vendor. It means that you cannot separate the impact of their solution from the impact of the discount / promotion ... the vendor gets credit for reactivation purchases that are actually caused by discounts / promotions. You get a reduced gross margin percentage, and your merchandising team gets a smaller bonus payout as a consequence.
  • Worse, which customer is treated better ... the loyal buyer who visits your site and is not given a promotion to purchase, or the 44 month buyer who visits your site and is immediately given a 30% off plus free shipping offer to "tickle her buying bone"??
  • I've yet to run across a project where a customer is given a promotion and then becomes less likely to need promotions in the future. When you give a discount to a customer, the customer becomes more likely to purchase via discounts in the future. Congratulations! Your reactivation strategy just mucked-up the future profitability of your brand.
Issue #5 = Where To Spend Your Time
  • Repeatedly, I watch companies spend disproportionate time trying to convert lapsed buyers.
  • The biggest short-term payback comes from your 0-12 month file.
  • The biggest long-term payback comes from focusing on first-time buyers.
  • The biggest overall payback comes from having a robust merchandising assortment that causes customers to purchase.
  • Lapsed buyers represent the smallest short-term and smallest long-term payback.
  • In my simulations, the math always aligns with finding a new buyer. Always. Why? If you spend your incremental dollars finding new buyers, then you have a new 0-12 month buyer and you have your lapsed buyer that you are already emailing 200 times a year and sending 6 catalogs a year to ... it's not like you aren't speaking to the 30 month buyer ... you are already pummeling the living daylights out of that customer!
  • Always default to adding an incremental new buyer with your incremental time and incremental advertising dollars. My simulations repeatedly show that this is where you get the biggest bang for your buck.
I'm not saying you shouldn't work hard to reactivate lapsed buyers.

I am saying that you should ignore vendor-hyped lizard logic. Your lapsed buyer file isn't full of riches (unless you are a billion-dollar brand ... if you are, then vendor-hyped lizard logic works great for you, no doubt about it).

Now, if your vendor has a credible reactivation strategy and they are humble about what they bring to the table and both parties equally share in the profit of the situation, then by all means cling to that vendor like grim death!!!