What You Need to Know to Win Back Lapsed Customers
First you notice that you’re losing revenue. Then you see a decline in same-store sales and traffic. Your board and shareholders start asking questions and you begin to wonder what caused this problem and how you’re going to fix it.
Well, there’s good news and bad news.
The bad news is that a number of guests probably stopped coming in. These lapsed customers impact traffic and same-store sales. The good news is that winning them back can dramatically improve your financial situation. They are your lowest-hanging fruit and the segment of guests most likely to help drive incremental revenue. But before we get to what you should do, there is an important concept to understand.
Key concept: “Lapsed” is not a simple black-and-white state—there are shades of gray.
Let’s start with the basics—how exactly do you define a lapsed guest? You know it’s a guest who has stopped coming in, but how do you identify when that has happened?
The reality is that, on an individual level, guests are quite unpredictable. To illustrate this, we took a sample of roughly 3,000 customers at a casual-dining restaurant, each of whom visited exactly 12 times during the year.
On average, these high-value guests visited the concept every 27 days.
We then looked at how those guests spread out their visits throughout the year. Of the 3,000 customers, none had spaced their visits exactly evenly (e.g., visited every 28 days). Assessing this variability in visit frequency, we found that an average guest may have a visit pattern that looks something like this:
The first blue dot along this line is the first visit by the guest during the year, and then each subsequent visit is plotted based on how many days have passed since the previous visit. There were two instances when this guest made two visits in the span of three days and another instance when 83 days passed between visits.
Suppose that 60 days into the long gap, you thought that this guest had lapsed and therefore sent an offer to entice a return. You may have unnecessarily discounted the next visit.
When we look across the whole of the 3,000 customers in the sample, we see how common it is for there to be long gaps between visits:
This chart shows that more than 75 percent of the customers in the sample had at least one gap of 60 days or more. If you enforced a rule that said “Send a ‘we miss you’ offer to customers if they don’t visit for 60 days,” then 75 percent of this sample group would have received the offer at some point during the year.
On the other hand, if you waited for 120 days, only about 8 percent of these customers would have received an offer.
Deciding when to send a lapsed offer involves weighing several factors. Send too early and you risk a lot of cannibalization, but you do get to address more customers. Wait too long and there is a chance that you will have lost savable customers.
This same variation is found whether it’s fine-dining or quick-service concepts, and it also holds true for guests with different average visit frequencies. The point is, just because a guest hasn’t visited for a little longer than normal doesn't mean it's necessarily time to sound the alarms and send a “we miss you” offer. Declaring a guest lapsed shortly after an expected visit is missed could result in sending that guest too rich of an offer when he or she would have come back anyway.