New customer acquisition is always a top priority for businesses of all sizes. But while acquiring new customers, companies should not forget about existing dormant customers. There’s nothing wrong with new acquisitions, but ignoring your dormant customers can add more financial strain to your business. After all, you have already spent money on current customers, but acquiring new ones is a fresh expense.
As Tal Klein, chief marketing officer of Relay Network, writes in his article for Destination CRM, “Dormant customers have already been bought, and allowing them to remain disengaged siphons away much of the customer lifetime value on which businesses counted while acquiring them.”
Re-engaging such customers requires a commitment to doing so, as well as a strategy. You need to identify dormant customers and look at the reasons they became inactive – then apply techniques to encourage them to again do business with your company.
The Importance of Identifying Dormant Customers
Brand loyalty is something businesses should not take for granted, as it always comes at a premium. Customers are quick to go elsewhere if they have a bad experience, or if other circumstances – such as the COVID-19 pandemic – significantly change their buying patterns. A recent study by McKinsey & Company found that more than 75% of consumers changed their buying habits in the last two years – that is, since 2020, the start of the pandemic. In addition, 39% of consumers have either switched brands or retailers, and almost 90% plan to explore new options in the future.
According to data published in MarketingPlatform, while the possibility of selling to a new prospect is around 5-20%, the probability shoots up to 60-70% for existing customers. Furthermore, 80% of your profit comes from your existing 20% customers. Also, 65% of your business comes from existing customers. Moreover, repeat customers spend more (33%) than new customers.
That is why businesses need to explore all their segments. And when we talk of exploring all the categories, dormant customers form a significant class.
However, to reactivate your dormant customers, you first need to identify them from those who have decided not to re-engage. That is why it is vital to understand the difference between the two. As Klein explains, dormant customers are those who have made a purchase or registered their information with a company but haven’t moved beyond that point. The similarity between disengaged customers and dormant customers is that disengaged customers also have engaged with a company at one point but have pulled back their interest. The main difference between them is that a passively disengaged customer can turn dormant, but actively disengaged customers intentionally choose to stay away from company communications and purposefully decide not to re-engage.
Knowing the difference between dormant and disengaged customers is critical, as marketers and customer experience experts are well aware of the importance of existing customers to an organization’s plans. After you have identified your dormant customers, you need to carefully tailor a strategy to target and reactivate them.
Reasons Customers Become Inactive
There are many reasons customers become inactive. Any customer who has stopped buying from you can fall under the category of a dormant customer. Every company needs to analyze and segment dormant customers depending on their purchase history. Scanning CRM software can give you a fair enough idea about your inactive customers and the insight you need to make them active again.
For example, if your regular customers suddenly stop buying from you, there must be a specific reason – which may have to do with liking or disliking your brand. The reason could range from demographic and geographic to behavioral and psychographic. Segmenting your customers and analyzing them from these perspectives can give you an insight into why customers stop buying from you.
Another factor to consider is the impact of changing consumer behavior. The growing competition has made consumers’ purchasing behavior more volatile. Also, customer loyalty is not easy to earn. You need to have strategies in place to nurture customer loyalty. Dormant customers can especially become a severe problem if your business is e-commerce.
Keeping a tab on your demographic, geographic, behavioral and psychographic changes can help you tailor new strategies to target your dormant customers.
Techniques to Reawaken Dormant Customers
Reactivating dormant customers can save you money. Once you have identified your dormant customers, it is vital to focus on techniques to reawaken them.
The first thing you need to do is focus on segmentation. Segmenting your customers can help you identify your dormant customers. CRM software can help you identify these customers pretty easily. From their interests to buying habits, your CRM solution can provide you with the insights you need to reactivate them.
But how can you use CRM data to reawaken and re-engage your customers?
You need to follow the principles of relationship intelligence to make your dormant customer active. Relationship intelligence is data stored in your CRM that provides meaningful insights into your existing customers. After all, you need information beyond phone numbers and emails to know your customers. Relationship intelligence data are valuable customer information that brings you closer to them. It comes from company interactions and customer-facing communications. Using this information correctly can keep your reactivated customers active and perhaps prevent customers from losing interest in the first place. Our blog post – “Using CRM to Build Intelligent Relationships” – covers how to build and maintain a strong relationship with your customers, and keep them engaged. Once you group them, you can send targeted messages and marketing campaigns.
Next, to reactivate your dormant customers, you can use progressive scenarios. The idea is to limit the cost of reactivation campaigns. To begin with, you can send an email to get in touch with the customer again without spelling out any promotional offers. If there is no response, you can send another mail with a promotional offer. If your customer still doesn’t respond, you can send a third email with a more lucrative offer.
Don’t worry if some inactive customers don’t wake up. There will be some customers who will not respond to your solicitations. You will have to let these customers go. After repeated tries, you can consider them to be lost customers. You no longer need to spend time, energy and resources on them. Repeated reminders can tarnish your brand image, which you cannot risk. You need to accept that all dormant customers will not become active, despite your efforts.
Next on the list of techniques is sending your dormant customers a satisfaction survey. Ask them the reason they have become inactive. Have your prices increased beyond what they are able or willing to spend? Have they noticed a decline in quality? Did COVID-19 affect their buying habits? Are your products or services no longer relevant to them? Are they dissatisfied with your customer service? Identifying their reasons for inactivity can provide the vital information you need to course-correct and better meet their needs. Of course, if they no longer need what your business offers, you can’t change that fact, but you will get a better picture of other dormant customers who may be in the same demographic group.
In regards to the inevitability of accepting that some inactive customers will never again become active, your final effort may be to send an email asking if they want to end their business relationship. For example, send an email with the subject line “Would You Like to Unsubscribe?” or “Is it Time to Say Farewell?” It may provide the opportunity for an inactive customer who had simply forgotten about your business to reconnect, or formally remove themself from your list. Either way, you will know for certain, and can move forward accordingly.
It is crucial to reawaken your dormant customers correctly. If you follow the wrong strategy, you might turn your inactive customer into an actively disengaged customer. Hence, make sure you develop relevant content relating to their specific needs and issues. To create meaningful engagement, trust and customer loyalty, you don’t just need to personalize your content, but you need to make your communication personal to catch up with them at their stage in their customer life cycle.
Generally, personalized content is not specific to a single audience – it appeals to a larger demographic. But personal content addresses your customer’s needs and wants directly based on relevant data that exists in your CRM. When you address your customer’s needs, the chances of reactivating your dormant customer increase.
By offering your customers the right solutions and incentives, they are more likely to stay engaged and active. To develop long-term customer relationships, you need to adopt the correct strategies. However, to implement customer-centric strategies, you must use the right CRM solution.
If you’re considering a CRM solution for your business, we invite you to learn what eZnet CRM has to offer. Our industry-leading cloud-based system allows easy, seamless management of every aspect of the customer experience. We’re here to make sure you don’t fall behind in this increasingly competitive business environment.