We at Relativity6 are in constant pursuit of understanding the lapsed customer. In fact, we designed our algorithms with Da Vinci’s Vitruvian Man in mind. Da Vinci believed only in what he could actually observe, and to that end, he dissected dead bodies in order to understand the living. After analyzing hundreds of millions of transactions and purchasing behaviors, here’s what we’ve learned about lapsed customers:
There are multiple definitions of “lapsed”
Companies typically create a rule that if a customer hasn’t purchased in X number of months or years, they should be considered lapsed/dead. In reality, there are several definitions of lapsed that depend on the observed purchasing behavior and category of purchase relative to all other customers.
They have multiple lifetimes
Lapsed customers have multiple lifetimes. Instead of looking at customers with one lifetime value, we have observed defined periods of activity and inactivity. These periods of activity/inactivity can last months or years, depending on the industry and individual customer.
They can come back, even after a long time
Just because someone hasn’t purchased in years does not mean that they won’t come back eventually. We have seen many instances where customers who have been gone for years come back to make a purchase. Interestingly, these customers typically don’t purchase the same product/service from their past life. This suggests that the same customer in a new life should be re-sold to in a different manner.
When they come back they spend more and stay longer
When a lapsed customer returns, we observe a substantially longer period of activity than the last time they were active. These customers also spend more, typically 1.5x more, than when they were previously a customer.
The dead unlock the secrets of the living
Like Da Vinci, we’ve been able to find key attributes of active customers by first focusing on the inactive customers. These include:
- Triggers or key variables that lead to defection
- A holistic understanding of the behaviors that indicate an active customer as highly profitable.
- Identification of the optimal net new customer
At Relativity6, we think of customers in 3’s: potential, current, and lapsed. We have seen that customers can run through this cycle many times and we are dedicated to providing the kind of insights that help sales and marketing associates maximize recurring revenue, shorten the sales cycle, save marketing dollars, and target the right customer.