Get practical customer lifecycle management strategies to grow revenue
Marketing & Growth
November 14, 2022
Getting a customer to stay with you for months or years is the foundation of most successful companies. Using the art and science of customer lifecycle management is a powerful way to keep customers for the long term and earn more. You’re about to learn how to get more satisfied customers and lift your customer retention rates.
Without understanding customer lifecycle management, it’s difficult to understand customer behavior and improve your business metrics.
According to TechTarget, customer lifecycle is a term used to describe the progression of steps a customer goes through when considering, purchasing, using, and maintaining loyalty to a product or service.
In today’s marketing environment, optimizing the customer lifecycle requires multiple channels, including using a referral program and improving email and social media marketing.
To see how this concept translates into higher customer satisfaction, let’s take a closer look at each customer lifecycle stage in detail.
Each company looks at potential customers, happy customers, and ways to improve customer satisfaction differently. In general, the path to higher business performance requires improving each stage.
Fundamentally, customer lifecycle management aims to increase profitability while optimizing growth. For example, acquiring many customers who make excessive demands on your customer support team is not ideal. There are ways to emphasize attracting the right customers while minimizing the acquisition of the lowest-value customer segment.
We’ll primarily focus on digital marketing applications, but leveraging events, direct mail, and the sales team's efforts all have a role to play in the purchasing process.
Finally, ground your approach to the customer lifecycle by thinking of a single customer's thoughts, feelings, and actions. Some companies even build a profile of their single ideal customer to bring their customer lifecycle concept idea to life.
The reach stage is where you focus on the prospective customer. To execute this stage effectively, it is essential to understand your ideal customer. Your marketing strategy should provide helpful clues. The following key steps can help improve the reach stage results.
What communication channel do your customers prefer to use?
Marketing teams that use omnichannel strategies should gradually develop a sense of which channel has the most significant impact on the purchase decision.
What social media platforms do your ideal customers tend to visit the most?
If they’re most active on LinkedIn, focus most of your reach on that platform.
The metrics you select at this stage will depend on your business goals. Some popular metrics include click-through rate on ads and engagement with your marketing material (e.g., comments on social media posts).
The acquisition stage is the first point of interaction between your company and the potential customer. Depending on your business model, this might be a visit to a store, your website, or contact the sales department. The acquisition stage is also your opportunity to start building a direct relationship (i.e., gathering first-party data).
If you offer complex or large-value products, customers may spend weeks or months in this stage. It can take time to build up trust and overcome objections from customers. For example, a financial institution is unlikely to change a core technology platform unless they are thoroughly convinced of its value.
The most important metric for the acquisition stage has a way to follow up and nurture potential customers. For example, you might focus on getting prospects to sign up for your email newsletter or follow you on social media. In general, it is best to focus your efforts on building a direct relationship with customers (i.e., focus on email list growth, free trial signups, and event registrations).
For many companies, conversion is the most exciting part of the buyer journey. This is when a customer checks out their purchase, signs a contract, or makes a purchase in another way. Some marketers regard conversion as the end of the process. In reality, there are two more stages to the customer journey, which we will cover in a moment.
The metrics for the conversion stage are usually simple and easy to understand. Look at how many new customers you have signed up in the past month or quarter. You might also track related metrics such as average order value (AOV) to assess the conversion value. If possible, track conversions by channel (e.g., are you getting higher quality customers from virtual events, email marketing, or social media?).
In many cases, sales departments may be less involved in retention because their attention is best focused on the other aspects of the sales funnel. The foundation of keeping customers for the long term is to deliver on your promise. Your customer success colleagues may need to get on the phone with customers to provide support and training. Alternatively, customer service might have to follow up to ensure that products are delivered correctly.
Once you have the foundation of retention in place, there are secondary strategies you can use to keep your customer base engaged.
There are a few ways to match the impact of sending a thoughtful gift to a customer. This strategy is best used by sales teams with a deep knowledge of their customers. To pursue this strategy, empower your sales team with a budget for client appreciation and let them use their judgment to send gifts from time to time. Sending birthday gifts and birthday cards can often have a tremendous impact, especially when you take the time to make it personal.
Did you know that the average American belongs to more than 18 customer loyalty programs? There’s a good reason why many companies, especially consumer brands and financial institutions, invest heavily in these programs. They are proven to work! Loyalty programs should give unique benefits to each lifelong customer, like early access to new features or products.
Want to improve the customer relationship memorably? Look for ways to surprise customers positively. For example, can you offer a gift voucher for your product? Or surprise your customers with an exclusive experience or invitation? This strategy is wise to use in conjunction with the gift strategy mentioned above. Since this technique takes more effort than standard marketing emails, reserve it for your most valuable customers.
The critical metrics for retention typically include time and money spent. For example, track how many additional purchases customers make per quarter or year and see if your retention efforts positively impact those numbers.
Without loyalty, it is tough to build a sustainable business. In some companies, like software as a service (SaaS), ongoing subscription growth and loyalty are critically important. Loyalty is still vital even if an ongoing subscription is not formally required. Just think about how many companies like Starbucks, American Airlines, and others invest in their loyalty programs.
Once you have a loyal customer base, look for opportunities to engage them more deeply. Here are some ways to get started.
When you have high customer loyalty, don’t be shy to ask for reviews! Start with a wide range of review websites and work with customers to guide them through the review process. Loyal customers will have no problem writing a short review for you. Just think about your last purchase - you probably looked at customer reviews (and the star rating!) before buying. Your customers are no different.
Requesting customer feedback is critically important at this stage. You can use formal methods like a net promoter survey (NPS) to gauge customer satisfaction. In addition to those methods, make time for informal conversations. Amazon has an AWS Customer Council to gather user feedback.
There are several benefits to seeking customer feedback. Taking the time to request and act on feedback from your customers is an excellent way to encourage them to stay loyal to your brand. Second, customer feedback can give you excellent marketing material (i.e., what features, capabilities, and outcomes do customers value)? Third, look for highly positive feedback because you may be able to turn those comments into case studies and customer studies.
The most important metrics for the loyalty stage include formal participation in a loyalty program (e.g., signups and activity in the program). In addition, you might track how many highly satisfied customers you have, according to the NPS survey. If customer loyalty starts to drop, that is a serious sign of a problem. Investigate immediately and look for ways to address the problem, or you may lose your most valuable customers.
Applying the customer lifecycle model to marketing means taking a broader view than traditional marketing objectives. Traditionally, marketers put almost all of their efforts into acquiring customers. Once a customer signs up, marketers move on to the next opportunity. To grow revenue faster, use the following strategies to engage customers more effectively.
The first and most straightforward marketing strategy is to create campaigns and segmentation focused on encouraging past customers to spend more. There are a few ways to apply this principle. For example, an e-commerce business might send out a 2-for-1 offer to new customers to encourage them to buy. A technology company might focus on cross-sell opportunities (e.g., sell professional services packages to software customers to help them achieve results more efficiently)
Convincing people to buy for the first time is expensive! There are ways to ease the process, namely introductions from your current customers. At scale, you might encourage customers to provide referrals by offering an incentive (e.g., get 50% off your next purchase if you refer a customer). In the enterprise scenario, look for other ways to gain referrals, such as requesting introductions to other departments and divisions in larger companies.
When potential customers encounter your brand, they’re probably wondering if they can trust you to deliver. One way to address this concern is to emphasize social proof in your marketing. At a minimum, ask for product reviews. If possible, ask customers to participate in case study interviews. The best case studies take the reader through a simplified customer journey (i.e., life before buying the product, the experience of buying the product, and life after buying the product.
Now that you understand customer lifecycle marketing, it’s essential to determine if it is paying off. The first step is to calculate your customer lifetime value (CLV). After you know your CLV, you can look at strategies to improve that critical business metric over time.
Customer lifetime value is defined as the total revenue generated by a customer over their relationship with you. For example, a SaaS business might sell a subscription for $5,000 per month and find that customers stay active for two years on average. In that case, the average CLV is $120,000 (i.e. $5000 x 24).
To optimize your CLV further, diving a little deeper into your numbers is helpful. For example, let’s say that you have 1,000 customers. Look at the top 20% of customers who spend the most with your company and compare them to the bottom 20%. Look for patterns in both cases, such as if there are marketing channels, campaigns, or customer behavior associated with higher CLV. Once you find these patterns, double down on what is working to bring in higher-value customers.
There's one essential ingredient to bring customer lifecycle marketing to life and increase profitability: data. Specifically, it’s crucial to understand the customer journey so you can make improvements over time. Use Arena Personas to get first-party data into your customer data platform. Contact an Arena consultant to find out more!