Customer Lifecycle Management Explained: Definition, Stages & Best Practices
Effective management and strategic planning are essential for a business to be profitable. One of the steps in setting up business processes is to attract customers and turn them into regular clients. This entire journey in marketing is called the customer lifecycle. In this article, we're going to break down what the customer lifecycle is, what stages it consists of, and how you can improve your business practices with proper customer lifecycle management.
What is the Customer Lifecycle?
The customer lifecycle is the process during which a consumer becomes a loyal customer of the company. There are five stages of a customer lifecycle: awareness, acquisition, conversion, retention, and loyalty. The lifecycle can be complete and last quite a long time (for example, all the time the company exists) or be partial (i.e., to end after the first or any other stage).
Managers should plan the lifecycle of customers in such a way that the needs of customers are satisfied and there is a desire to move to the next stage. The efficiency of the work of a specialist is measured by the number of clients who come back to make a purchase again.
Why is Customer Lifecycle Management (CLM) Important?
The conventional business model is focused on attracting a large number of customers and increasing sales through one-time purchases. The customer lifecycle model focuses on the completion of all stages of the lifecycle of the consumer, turning them into regular customers who will return for more purchases over time. That is, the idea is not in the number of customers but in their quality and stability of demand.
When planning your advertising and marketing budget, it is important to understand customer segmentation. By knowing how to influence customers of different ages and social groups, you can optimize the cost of attracting new customers and increasing the loyalty of existing ones.
Segment your customers to send relevant offers
In order to attract customers, you need to invest once and then focus on customer loyalty and increase customer lifetime value (CLV). It is loyal customers who usually account for the largest amount of the company's profits. That’s why correctly planned work with them is at the heart of any successful business project.
CRM vs CLM: Understanding the Difference
Before we move on, let's take a look at one important point. People often confuse customer relationship management (CRM) and customer lifetime management (CLM). Some people believe that they are interchangeable, so let's get it clear before we move on.
Customer lifecycle management
So, what is customer lifecycle management? In marketing, the customer lifecycle means the process of creating controllable communication channels. It is subsequently integrated into the omnichannel marketing strategy of the company, allowing clients to form a positive impression and encouraging them to make a transaction based on the benefits of cooperation offered to them specifically.
Customer relationship management
Customer relationship management (CRM) is a set of tools, tactics, and strategies that a business uses for interaction with the client during the lifecycle. CRM ensures marketing automation and helps to build a dialogue with the customer more effectively, avoid mistakes in work, and, as a result, sell more.
5 Stages of the Customer Lifecycle
The entire lifecycle is divided into stages or phases. There are different versions and approaches to this division. We will consider the most developed version of the customer lifecycle map. Depending on the stage of the lifecycle the client is in, your methods and techniques of interaction should pursue different goals.
The awareness stage is the so-called ‘first contact.’ The potential customer learns about the existence of your product or service. At this stage, they are just getting to know your company. Moving the customer to the next stage requires capturing and holding maximum attention to your brand and products.
The potential customer has heard about you and doesn't mind learning more about the product. Here you need to give the person the information that will turn their interest into consideration and evaluation. This is where the consumer thinks through the pros and cons, seeks alternatives, and compares your product with competitors in terms of characteristics, prices, brand prestige, etc. Your task at this customer lifecycle stage is to hook potential and existing customers, create excitement, and cause a desire to buy at any cost.
Conversion or purchase is the culmination of the entire process. During this stage, customers make up the final impression of your product and evaluate its quality. After such evaluation, the customer either leaves if they are dissatisfied with your product or makes a repeat purchase.
At the retention stage, special communication methods are used to convert customers into loyal ones. You may offer customer loyalty programs, send messages about promotions and discounts, invite them to significant events, and congratulate them on holidays. Such attention does not cost much to the company, but it is always positively evaluated by the consumer audience. In addition, a recent trend is to use client portal solutions which allows companies to keep in good touch with clients at all times.
Here, the person isn’t just a regular client anymore. Such customers remain loyal to the brand for several years and actively advertise your product through word of mouth. The value of such customers is very high: they form the reputation of the company, contribute to the prestige, and create a solid foundation for further growth. They make the most profit for the company, which you can boost even more with AI-driven product recommendations to help them find products based on previous purchases.
Important Customer Lifecycle Metrics
You must monitor key performance indicators for customer lifecycle marketing to run smoothly. In fact, there are a lot of metrics, but the following three should receive your particular attention.
Customer acquisition cost
CAC helps to analyze the effectiveness of traffic channels: if the cost of the client has increased and marketing costs do not pay off, it is worth optimizing advertising settings. Knowing this metric will help:
- Determine the most effective traffic channels;
- Optimize your marketing costs;
- Reduce customer churn.
The customer acquisition cost for different channels can be compared with each other to determine what sources of traffic a business should budget for.
Net promoter score
NPS is a customer loyalty index, which helps to measure customer engagement and find out what they think about a business/product. The loyalty index assesses not a specific interaction but the entire customer experience with the company. The standard Net promoter score includes the question, ’How likely would you be to recommend a company/product to your friends and why?’ If professional tools are being evaluated, ‘friends’ is replaced with ‘colleagues,’ and in general, the wording of the question is flexible enough to adapt. The typical scale has ten points. Based on the results, all clients are divided into three groups:
- Critics — scores from 0 to 6.
- Neutrals — grades from 7 to 8.
- Promoters — grades 9 and 10.
Churn rate is a marketing term used in e-commerce and other industries to count the number of customers who stop interacting with a company or project. For example, they unsubscribe from the mailing list or from the push notifications, cancel services, or leave the community. For the successful development of the project, it is necessary that the churn rate does not exceed the growth rate. The churn rate is one of the most important indicators of the effectiveness of SaaS services and companies, where revenues depend on the mass usage of the services.
Best Practices for Building a Perfect CLM Strategy
Create and share the right resources
Creating and sharing relevant content is a crucial step in customer lifecycle management. This is especially true for those who are dealing with your business for the first time. You can create supportive or educational content that will engage your customer and help them better understand the benefits of your product or service.
Contacting customer service is the last resort for many people. Give your customers the opportunity to help themselves, and they will thank you. Create a knowledge base and a handy FAQ, include chatbots, personalize customer experience, and provide as much information as possible.
Offer proactive customer service
Don't underestimate the power of really good customer service. Train your support team to anticipate customer expectations and proactively help them make purchase decisions throughout the customer journey.
Simplify customer support through app integrations
Integrating third-party apps enables your support team to perform customer data analysis from a single dashboard. This greatly improves your customer experience and the quality of support provided by your team.
Encourage customer feedback at every stage
Let your customers continuously tell you how you can improve their experience. This allows you to clearly understand which stages of customer lifecycle management need improvement. Delivering excellent customer satisfaction is crucial for long-term success. By consistently meeting and exceeding customer expectations throughout the customer lifecycle, you can build strong relationships and foster loyalty.
How to Manage Customer Lifecycle with Yespo
No matter how many best practices you try to use to improve customer lifecycle management, none of them will be fully effective without the use of advanced software. And that's exactly what Yespo customer data platform offers you. Yespo is specifically designed to work effectively with customers at all stages of the lifecycle. Yespo contains all the tools you need to manage your relationship with your target audience: massage builder, AI, a strong analytics module, and much more.
With Yespo, you can easily manage settings for sending ready-made messages: time, recipient, type of channel, and conditions. Workflows are automatically triggered by real-time events. Yespo allows you to do RFM analysis, cohort customer lifecycle analysis, and reports on opens and clicks. Contact us now and take the customer success rate in your business to a whole new level.
If you look at your customer relationship, it's not just a chain of events leading up to a purchase, but it is a loop. Once you have found a customer, the business has to take care of keeping them: each repeat transaction is 5–7 times more cost-effective than the first one. Your task is to maintain relationships with customers so they don’t forget about you.
Customer lifecycle software plays a significant role in all that. Good software supports all CLM processes: helps keep records of customers, consolidate and process all incoming information, analyze the history of the relationship, contributing to a better understanding of each customer's needs and choosing the best method of marketing influence. Of course, every company has its own specifics of working with customers, so your customer lifecycle marketing strategy will be different. Find your way to get the most out of your interactions with each customer. Contact Yespo, and we'll help you to set everything up in the best possible way.