The customer life cycle is traditionally used to map the different stages a customer goes through from first considering a product, service or solution to the actual purchase and, equally, if not more importantly, the post-purchase stages where customer retention, loyalty and advocacy come in. Tracking this process is increasingly used by marketing and management teams to optimise the customer experience.
The Customer Lifetime Value (CLV) is a prediction of the total value (usually expressed in net profit) generated by a customer from a marketing perspective, to improve a customer experience with the focus on building long-term customer relationships. (Customer lifetime value) It is not rocket science to understand the importance, and much more cost effective, to keep an existing customer happy than to continually attract new ones!
Using the customer life cycle and customer lifetime value offers several benefits including budgeting, segmentation, priorities and where a business is in some circumstances, the “health” of the organisation can be forecasted – and improved.
To assess the actions, we can take to engage with our customers and clients through the customer life cycle, we must understand these stages, or cycles:
- Reach: trying to get the attention of the people we want to reach.
- Acquisition: attracting and bringing the reached person into the influence sphere of our organization.
- Conversion: when the people we reach or have a more established relationship with, decide to buy something from us.
- Retention: trying to keep the customers and trying to sell them more (cross-selling, up-selling).
- Loyalty: we would like the customer to become more than a customer: a loyal partner and even a ‘brand advocate’
Of course, we must acknowledge that what used to work i.e. the interaction and buying patterns, as well as conversion paths, are ever more complex in a multi-channel world and that customer pace and needs is ever-evolving. Certainly, with the advent of social media, people have more choice and power. Now they are in the influence sphere of your business, next they are not! It’s nearly impossible to fully monitor buying journeys and decisions, but using e-commerce and social media metrics can certainly help.
And what about existing customers? Do you know them well enough? Are you sure there isn’t a customer with an extremely high buying potential that sits there in your small accounts because he is not properly engaged with your company – perhaps he only buys when your competitor is out of stock? How you can you capture his business?
It’s important to understand your prospects and customers throughout their entire journey and life cycle, and, at least, to know what happens with them through all contact moments and touchpoints between them and your company (and the people working for and in it).
The customer life cycle hasn’t changed that much but the ways to achieve reach, acquisition, conversion, retention, loyalty, advocacy have. There are more options for both customers and for business owners and marketers this presents more challenges.
If you would like to really discover who your customer is and who could be your customer, talk to us for some fresh ideas. Perhaps we can demonstrate how just with some more inspired or informed use of your analytics, you may already have the answers!