Winning Back Lost Customers
For any service company that bills on a recurring basis, a key variable is the rate of churn: How many customers cancel? Firms with high churn spend a lot trying to replace defectors with new customers. New research by Georgia State University's V. Kumar shows that they might be better served by smart strategies aimed at getting the right former customers to come back. Working with data on more than 53,000 customers who left a telecom company, Kumar and his colleagues found that companies can benefit by answering four questions on the basis of customers' prior behavior and their reasons for leaving. How likely is a given customer to come back? How long will a reacquired customer stay, and how much will he or she spend? Which people should get which incentives to return? And which win-back strategy is the most profitable and will be best for the company overall? By targeting their offers accordingly, companies can significantly increase their win-back rates.