Timing Customer Reactivation Initiatives

Firms operating in non-contractual settings use customer reactivation initiatives to stimulate inactive customers to resume purchasing. Customer reactivation requires these firms to identify which customers have become inactive at what point in time, and then approach them through direct mail or e-mail. Existing approaches struggle to separate active from inactive customers, and do not provide calendar time estimates of when to send a reactivation mailing. Addressing these shortcomings, we develop an approach to target and time the sending of reactivation mailings. 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. Comparing our control chart approach to multiple competing models establishes the improved ability of our chart to predict customer activity. Additionally, a field test in the greetings and gifts industry illustrates that this approach
increases overall activity by 1.9–3.5 percentage points, and leads to incremental activity and revenue gains of 111% and 38%, respectively.