The customer lifecycle refers to the process people go through to learn about, engage with, and buy from a company. Its stages fall under the processes of attracting, engaging, and delighting customers, and the specific steps involve awareness, conversion, purchase, activation, renewal, and referral.
Definition of Customer Lifecycle
The customer lifecycle is a term that describes the different steps a customer goes through when they are considering, buying, using, and remaining loyal to a particular product or service. This lifecycle has been broken down into five distinct stages: reach, acquisition, conversion, retention, and loyalty. An important point to understand the customer lifecycle is that because it follows a cyclical pattern, it never truly ends. The ultimate goal is to build strong brand loyalty and to create customers that will become advocates for your company, referring your product or service to their friends and family. To achieve this, companies must make sure they stay relevant and are continuing to offer value to their customers.
The customer life cycle describes the points in the continuum where you:
- Claim someone's attention.
- Bring them into your sphere of influence.
- Turn them into a registered and/or paying customer.
- Keep them as a customer.
- Turn them into a company advocate.
Importance of the Customer Lifecycle
Understanding the customer lifecycle is essential to the ongoing success and growth of a business. The lifecycle should be overseen as a whole and not segmented into silos. For example, if a business focuses all of its attention on the early stages (e.g., reach, acquisition, conversion), but disregards the post-purchase stages, it will suffer in the long run -- the business will successfully acquire new customers, but those customers will become unsatisfied and leave, creating customer churn.
Stages of the Customer Lifecycle
There are different stages in the customer life cycle and there are various methods to define them. One approach is that of Jim Sterne and Matt Cutler, as published in 2000 in a paper called “E-Metrics, Business Metrics For The New Economy” In the mentioned paper, Sterne and Cutler divided the phases of the customer life cycle (later other elements were added that were more based upon the customer interaction), and to be more precise, the actions we can take in order to engage them through the customer life cycle, as follows:
- 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’, nowadays also often including so-called influencers
Of course, models are models and the interaction and buying patterns, as well as conversion paths, are often more complex in a multi-channel world than the models we use to capture them. The customer’s – ever evolving – buyer journey is not [linear and funnel models don’t match with an increasingly complicated behavior, that necessitates a fully connected or integrated marketing 2.0 approach. 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. Since Sterne and Cutler came up with their model, many other representations of the customer life cycle were made.
Below is a model explaining six stages of the Customer Lifecycle. They represent the journey a customer takes to move from first learning about a brand to being the one telling others about it.
- Stage 1: Awareness: Here is where the relationship with a customer begins. when they first become aware of the existence of your brand, product, or service. But in most cases, work will have started long before this, because while consumers see an average of 362 marketing messages each day, they only notice 86 of them. And the old marketing rule of thumb is that a consumer has to see your message seven times before they’re even aware of it! Today, though, consumers are just as likely to first hear about a brand via a word-of-mouth recommendation from friends, family members, or social media influencers.
- Stage 2: Engagement (Optional): Customers making a more significant purchase, like buying a new car or planning a theme park vacation, will often take this optional step of engaging with a brand. Once they’re aware of a brand, they’ll start seeking out marketing content by following that brand on social media, signing up for emails, etc. In addition, they’ll start paying attention to what others are saying about the brand and how it responds to service requests and complaints. Brands that publicly engage and provide customer service through social media have an advantage at this stage.
- Stage 3: Evaluation: Every customer goes through some version of this stage, whether it’s months of research and comparison or just a quick “gut check” before making a decision. One of the most effective ways to stand out from competitors at this point is by offering robust digital self-service. Just like customers seeking support, consumers who are evaluating products or services start by trying to find the answers themselves. It’s also important to give agents and store associates access to the same knowledgebase that backs the brand's self-service. Over 90% of consumers expect to receive consistent information over multiple channels; giving conflicting answers could easily take a brand out of the running.
- Stage 4: Purchase: Stage 4 is crunch time, when consumers make their final decision. Providing the help potential customers need is critical at this point: 83% of consumers require some degree of support while making an online purchase, and 53% will abandon that purchase if they can’t find a quick answer to their question. In addition to self-service, live chat could make the difference between making or losing the sale. Over 40% of consumers say that having questions answered by a live person during an online purchase is one of the most important features a website can offer. Consider using intelligent escalation to proactively offer chat assistance to customers who seem to need a final push to move from considering a product to actually purchasing it.
- Stage 5: Product and Support Experience: Attracting a new customer is six to seven times more expensive than keeping an existing one. With that calculation in mind, it’s easy to understand why some say that the customer lifecycle doesn’t truly begin until Stage 5. Now is when consumers start to form their lasting opinion about products and brand. Delivering a quality product can ensure success at this stage by providing exceptional service and support. Every interaction is an opportunity to prove that building a relationship with customers is the objective and not just making a sale. In fact, 76% of consumers view customer service as the true test of how much a company values them, and 97% say it’s an important factor in deciding which brands to choose or remain loyal to.
- Stage 6: Bonding: This final stage is when relationship is cemented. However, the brand must continue to provide quality service and support, nurturing a connection with proactive engagement, and taking every opportunity to create an emotional bond. If you do those things well, you’ll see your customers jumping back into the lifecycle by buying again, buying more, and—best of all—encouraging others to join them.
The Customer Lifecycle Interrupted
Every salesperson has a story about the well-qualified prospect that got away. Even a well-planned persuasion process is filled with opportunities for the prospect to be swayed by the competition or simply lose interest. Despite our best efforts, not every prospect passing through the customer life cycle reaches the desired conclusion. Prospects demonstrate their lack of enthusiasm through abandonment; existing customers, through attrition.
- Abandonment: One of the curious characteristics of online sales is the shopping cart abandonment factor. In the bricks and mortar world, it is relatively rare for a shopper to fill a cart and then leave it and all of its contents without going through the check-out line. Yet this is a very common occurrence on Web sites. The reasons are many, with studies pointing to causes including poor site navigation and usability. How can a shopper be encouraged to become a buyer? By tracking, measurement, and management. Online stores are taking action based on:
- The ratio of abandoned carts to completed purchases per day.
- The number of items per abandoned cart vs. completed transactions.
- The profile of items abandoned versus purchased.
- The profile of a shopper versus a buyer.
- Attrition: Once a customer, always a customer? Not so. The attrition rate is the percentage of existing, converted customers who have ceased buying from you and have gone elsewhere during a specific period of time. As reported widely in the media, when Delta Airlines added a $2 surcharge to fares not booked over the Internet, the marketplace protested that the fees were unfair. The number of people who had previously purchased on a regular basis, but stopped coming back, appeared to grow alarmingly. Had Delta offered a discount for buying online or an additional 1,000 frequent flier miles, like their competitors United Airlines and American Airlines, Delta likely would have avoided this infamous marketing episode. Attrition is different from abandonment. If you switch your telephone service from AT&T to Verizon then AT&T considers you to have attrited a sure sign of a lack of loyalty. If you call up AT&T, start to switch over, but then balk at a certain contract term and hang up, then you have abandoned the conversion process. Attrition is the flip side of retention and carries with it the same considerations regarding time scales. If a customer does not buy a new car from you for three, four, or five years, it could mean that she is now purchasing from your competitor, or it may simply be that she likes her current model. If a music lover who buys CDs from your site on a weekly basis does not come by for a month, some sort of recovery action is in order.
- Churn: Churn measures how much of your customer base rolls over during a given period of time. To calculate churn, divide the number of customers who attrite during the given time period by the total number of customers at the end of the time period. Christopher Knight provides a concise example of ISP churn in his 'Churning Out Marketing Ideas to Keep Customers' article that appeared in the September 1999 issue of Boardwatch magazine. "Say you have 2,000 subscribers on the first of the month. During the month you add 200 new subscribers. You also lose 50 subscribers. At the end of the month, you have 2,150 subscribers. Your churn rate is 50 divided by 2,150, which equals 2.3 percent, which is your churn ratio. Your growth rate for the month is 200 divided by 2,000, which equals a 10 percent growth rate. Annualized, this means (assuming you continue averaging the same performance each month) your ISP has a 27.6 percent churn rate and a 120 percent annual growth rate."
Traditional vs. Modern Customer Lifecycle
Customers have traditionally moved through the customer life cycle stages in a linear fashion, but as social networking and product reviews and ratings sites have evolved and increased in popularity, customers no longer primarily proceed through each stage of the cycle in order and may instead skip stages or bounce back and forth between various stages. The increased reliance on social networking and product review sites has also resulted in companies having to compete with more information about their products from a variety of sources and customers outside of the company's marketing department. Companies can harness these modern trends by successfully optimizing each stage of the customer lifecycle to ensure customer satisfaction and in turn create a higher likelihood of brand loyalty and positive advocacy for the company and its products.
The Omnichannel Customer Lifecycle
An omnichannel, ‘always-on’ customer lifecycle strategy needs to be able to unify every customer touchpoint, from all channels to create what is called the ‘Golden Record’. The customer journey is managed via one centralized strategy and one platform rather than scattered across many marketing platforms. Using email tools to execute email campaigns, a separate SMS platform, another personalization tool etc. leads to a fragmented and disconnected customer experience. In the realms of marketing automation, a brand needs to be able to plan and trigger email, SMS, the website, the CRM and any other marketing channels, via the same workflow that can stitch them together to talk to each other. Below are three components that are needed to create an omnichannel marketing solution:
- Unified customer data to create the Golden Record: All the customer touchpoints need to be integrated to form the ‘Golden Record’ or 'Single Customer View'. This is one singular record for every customer in your marketing database and a complete history of everything they've ever done with the brand (every click, visit, like, purchase, etc). A Customer Data Platform (CDP) is the ideal tool to integrate all your data sources, match, merge and deduplicate them, and then fuel every marketing channel or customer-facing department with trustworthy, structured and consistent data.
- Customer analytics and insights to better understand behaviors: The insights that come from the 'Golden Record' enable a brand to understand customers accurately, build behavioral segments that truly impact results and then analyze the effectiveness of channels and advertising efforts to measure and improve campaigns. Customer intention is also a way to measure and improve customer lifecycle management that is often never used but may be the best way to measure progression along your customer journey. B2B marketing automation and lead nurturing tools often do this better than B2C marketing platforms. Contact scoring, attribution and time-based measurements can combine to create a comprehensive view of the customer lifecycle when used correctly.
- Integration of marketing channels for consistency: To create omnichannel conversations with customers a brand needs to be able to coordinate all it's channels from one ‘air traffic control’ center. By using the campaign management workflow in the email platform whilst having someone execute SMS campaigns, or direct mail being scheduled by an offline team and personalization platform disconnected from offline customer data, the brand is never going to achieve the consistency customers demand. What is needed is a "multi-channel marketing hub" with a marketing platform that can integrate existing technology stack into one workflow, enabling every channel to talk to, and trigger, each other.
Customer Acquisition Cost (CAC)
Customer Data Integration (CDI)
Customer Data Management (CDM)
Customer Due Diligence (CDD)
Customer Effort Score (CES)
Customer Engagement Hub (CEH)
Customer Experience Management (CEM)
Customer Lifetime Value
Customer Service Management
Customer Relationship Management (CRM)
- Defining Customer Lifecycle Sophia Bernazzani
- What does Customer Lifecycle Mean? Tallyfy
- What is Customer Lifecycle? NetGenesis
- Importance of the Customer Lifecycle Techtarget
- Stages of the Customer Lifecycle i-scoop
- What are the Six Stages of the Customer Lifecycle? Astute Solutions
- The Customer Lifecycle Interrupted NetGenesis
- Traditional vs. Modern Customer Lifecycle Webopedia
- How can marketers move to an optimized, omnichannel customer lifecycle? BlueVenn