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Multichannel Fashion Retailer Uses Churn Prevention Strategies to Help Retain Customers During COVID-19

Tamara Gruzbarg
Tamara Gruzbarg

Head of Insights and Strategy

Inside You’ll Learn:

  • Smart approaches for maximizing customer engagement during the COVID-19 crisis
  • Why your CDP and AI are ideal for deploying personalized churn reduction strategies
  • How these strategies help increase purchase rate and preserve revenue and margin

With the onset of the COVID-19 crisis, retailers have placed heightened focus on existing customer engagement and retention strategies.

One such retailer is a multi-channel specialty fashion company with a significant online presence and boutique stores located throughout the United States. The retailer offers highly personalized shopping experiences in both its digital and physical channels as well as a high touch in-store customer experience.

Historically, the retailer paid particular attention to in-store customers because store-only and store-first shoppers were typically its most valuable clientele.

Then, the COVID-19 crisis broke. The physical retail channel disappeared practically overnight. With the top 20% of the retailer’s customers responsible for over 60% of net margin dollars, it was imperative to find new ways to keep its best customers engaged.

Customer Retention During the COVID-19 Crisis

The retailer knew it was up against a difficult challenge. In the current climate, the sales and product-centric promotional of the past could come across as tone deaf or inappropriate. And for customers whose primary connection with the brand was its physical stores, the retailer couldn’t be certain which channels, if any—email, social, web, app, mail or phone—would be most effective for reengaging customers.

To find the optimal paths to success, the retailer sought to deploy a series of tests aimed at developing, iterating, optimizing and ultimately launching personalized engagement and retention campaigns that would:

  • Reach its most valuable customers at the right time, with the right message and over the optimal channel to initiate re-engagement with the brand
  • Ensure best customers remain engaged with the brand throughout the crisis, maintaining an authentic brand connection until physical stores are ready to reopen
  • Provide special attention to those customers who previously shopped mostly or only in physical stores—educating them about online shopping and motivating them to try it 

Had the crisis hit just 12 months earlier, developing and deploying these strategies in time to make an impact on customer retention would have been nearly impossible. Fortunately, prior to the COVID-19 crisis, customer retention had already been one of the retailer’s key areas of focus.

In just the past year, the retailer had made a significant investment of time and resources into crafting churn prevention strategies. These strategies would prove crucial to achieving success retaining customers during the COVID-19 crisis.

Identifying and Reducing Churn in Retail

While various robust techniques exist to measure customer churn for subscription businesses, defining churn in the retail industry has never been a straightforward task. Subscriptions have a known term of engagement between an existing customer and their chosen product or service: if a loyal customer cancels before the term is complete or doesn’t renew after the term is over, they have churned.

In retail, however, the timeframes are more arbitrary. A retailer might define a customer who hasn’t shopped in 3 months as “inactive,” in 6 months as “lapsed,” and in 12 months as “churned.” This type of approach—while perhaps somewhat aligned to the retailer’s seasons—can be grossly out of tune with actual, meaningful customer behavior.

For instance, if a loyal customer typically purchases something from you weekly, but now hasn’t engaged with your brand in two months, they wouldn’t come close to satisfying the retailer’s condition for “churned,” much less “inactive.” But based on their individual behavioral trends, they have very likely disengaged, and a targeted outreach is warranted to ensure that you do not lose them as a customer.

The Challenge of Building Personalized Churn Reduction

While one retail customer may be at risk if they have not made a purchase in a month, another may only be at risk after three, six or even nine months. This challenge of 1) understanding each customer’s individual shopping cycle, 2) gaining deep behavioral insights into at-risk customers and 3) delivering enticing offers that will keep them coming back, was exactly what our multichannel fashion retailer had set out to tackle just months before the COVID-19 crisis hit.

Early in their efforts it became abundantly clear they would not be able to rely on out-of the box customer churn models. And compounding their challenges was the fact that the retailer didn’t have the internal data science resources to develop necessary intelligence applications to understand individual purchasing behavior patterns

Leveraging the Customer Data Platform and AI

To achieve its goals, the retailer needed to implement modern marketing technology that would support the agile-data centric processes it would require to deploy personalized customer retention and churn reduction strategies.

After a market evaluation, the retailer chose the ActionIQ Customer Data Platform (CDP) for its ability to bring together and analyze fully detailed customer behavior data from every channel, the ease and efficiency of its business user self-service interfaces, and its flexible and intuitive AI capabilities.

Working with ActionIQ, the retailer developed an AI-centric solution tailored specifically to their business. The solution took into account each individual customer’s historical purchasing behavior and preferred channel(s) of interaction. With this fully personalized approach, the retailer was enabled to tailor customer-specific messages and deploy them across the optimal channels.

Personalization Yields Results—Efficiently 

To measure success, the retailer worked with AIQ to implement a robust test design that would enable them to measure the incremental impact of the model.

After two weeks of testing, the retailer saw impressive results including:

  • A 15% increase in purchase rate among high value customers
  • $2MM projected increase in annually preserved net margin
  • A 20% decrease in customer churn rate

With the success of the test, the retailer went on to launch a full scale omni-channel reengagement campaign—all fully automated using ActionIQ’s customer journey orchestration capabilities.

Keeping Customers Engaged During COVID-19

Fast-forwarding back to the present: the retailer is now using its powerful foundation of AI-driven churn prevention techniques as well as its broader CDP platform—in addition to best practices for migrating store-only shoppers online—to test, iterate and deploy new customer engagement and retention programs that reflect the current realities of the COVID-19 crisis.

Already the retailer has made successful use of its personalized retention campaigns. The new campaigns span social media, virtual shopping experiences, online channels and offline channels (leveraging the great relationships between store associates and customers). Thus far, previously store-only and store-first customers are staying remarkably engaged. The retailer is fully enabled to measure and monitor changes in customer behavior all along the way, and react swiftly to take actions that maximize retention.

Additionally, the retailer has also seen success in launching and converting on 1:1 promotions, where appropriate, that are helping to bring a sense of normalcy and comfort to their customers, while driving revenue to help ensure the ongoing success of the business.

As the curve flattens, the retailer will also look to leverage its centralized customer intelligence and personalized customer communications techniques to safely and successfully execute a data-driven store reopening strategy. 

Double Down on Your Customer Retention Strategy

The ActionIQ team and our industry leading CDP have helped dozens of brands achieve greater success in engaging and retaining customers. If you’re looking to do the same, we’re ready to help. Contact us today for a complimentary consultation with one of our experts.

Tamara Gruzbarg

Written By

Tamara Gruzbarg
Author's LinkedIn Profile

Head of Insights and Strategy

Expert analytics executive with 20+ years of experience, guiding organizations through rapid data transformation and growth. Designed and implemented ML-powered solutions in areas of Customer Acquisition, Personalization, CRM and Campaign Management across Financial Services, Omnichannel Retail and Media.

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