Timing Customer Reactivation Initiatives
Firms operating in non-contractual settings use customer reactivation initiatives to stimulate customers that have ceased purchasing to resume purchasing. Customer reactivation requires these firms to identify which customers have become inactive at which point in time, and approach them with a marketing message. Existing approaches struggle to separate active from inactive customers, and do not provide calendar time estimates of when to send a reactivation message. Addressing these shortcomings, we develop an approach to target and time the sending of reactivation messages. Building on control chart methods, we introduce a gamma-gamma control chart, modeling the average customer interpurchase time and the variation therein to determine inactivity boundaries. Crossing these boundaries generates an inactivity signal, which should trigger reactivation. A field-test in the greetings and gifts industry illustrates that this approach increases activity by 1.9 - 3.5 percentage points. Additionally, our approach increases incremental activity by 111% and incremental revenue by 38%. Finally, timely targeting is important, as targeting customers earlier than their expected purchase time reduces their activity compared to customers targeted on time.
Keywords: customer reactivation, control chart, customer-base analysis, field test, non-contractual setting
More information on Dr. Niels Holtrop can be found at: https://www.maastrichtuniversity.nl/n.holtrop