Is chasing a lapsed customer worth it? The win-back math
A lapsed customer feels worth chasing — you already won them once. But "worth chasing" is a number, not a feeling, and it comes from five figures you likely already know: what they used to spend per order, how often they bought, your margin on that revenue, how long you expect to keep them if they come back, and what the win-back offer costs you to run.
The method
Start from revenue, not profit — revenue isn't what a customer is worth to you, the margin on it is. Annual revenue = average order value × orders per year. Annual gross profit = annual revenue × margin ÷ 100. Multiply that by how many years you expect to keep them back and you get lifetime gross profit. Subtract the campaign cost and you get what's actually left. Divide the campaign cost by monthly gross profit (annual gross profit ÷ 12) and you get the payback period in months — how long the win-back takes to pay for itself.
A worked example: a real win
A shop's lapsed customers used to spend $60 an order, 6 times a year, at a 40% gross margin. The shop expects two years back if the win-back works, and the campaign — a discount code plus the email send — costs $40 per customer.
- Annual revenue:
$60 × 6 = $360. - Annual gross profit:
$360 × 40 ÷ 100 = $144. - Lifetime gross profit over 2 years:
$144 × 2 = $288. - Profit after the offer cost:
$288 − $40 = $248. - Monthly gross profit:
$144 ÷ 12 = $12. Payback:$40 ÷ $12 ≈ 3.3 months.
The campaign pays for itself in about 3.3 months and returns $288 ÷ $40 = 7.2x the money spent on it over the two years — a clear yes, assuming the customer actually comes back and stays the two years you're projecting.
A worked example: a campaign that isn't worth it
A different segment: these customers only spent $40 an order, twice a year, at a thinner 25% margin, and the shop is realistic that they'll likely lapse again within a year. The campaign still costs $50 per customer — the same postcard-and-discount package used elsewhere.
- Annual revenue:
$40 × 2 = $80. - Annual gross profit:
$80 × 25 ÷ 100 = $20. - Lifetime gross profit over 1 year:
$20 × 1 = $20. - Profit after the offer cost:
$20 − $50 = −$30.
This one loses money: the campaign costs $50 to run and the customer is only projected to generate $20 in gross profit before lapsing again. The payback period would be $50 ÷ ($20 ÷ 12) = 30 months — two and a half years to break even on a customer expected to stick around for one. Spending $50 to chase a $20 customer is the mistake this calculation exists to catch before the campaign goes out, not after.
Why margin, not revenue
It's tempting to compare the campaign cost to the order value instead of the profit — "they spend $60 an order, the campaign only costs $40, easy win." But if fulfillment, support and delivery already eat most of that revenue, the campaign can cost more than the customer will ever net you. Using gross margin forces the honest number into the comparison instead of the flattering one.
What this doesn't include
This is the arithmetic on the five numbers you enter — nothing else. It doesn't know your actual win-back rate (not every lapsed customer responds), doesn't model a customer who returns and lapses again mid-projection, and doesn't include costs already folded outside your margin figure, like the time spent building the campaign. If fulfilment or support costs aren't already inside the margin percentage you use, lower it before running the numbers.
Run your own numbers
The free Customer Win-Back Value tool runs this instantly for your own five figures, entirely on your device.