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Customer LifeCycle (Part 2)

After writing about brand positioning and value propositions in the first newsletter, here is Part 2 from our Customer Lifecycle working model.

Customer lifecycle research is crucial to understanding customer behaviour across different stages. Here are the 10 key points that are often emphasised in academia and my comments on them.

10 points of the customer lifecycle

#Customer acquisition: Strategies and channels that companies use to acquire new customers. Without the right positioning and values, too much budget is still being burnt here today, without the effectiveness of various marketing and advertising measures in customer acquisition, it is important to clearly evaluate. Which measures and channels cost how much to acquire customers and/or which help to retain customers in the long term and achieve profitability (ARPU).
#Onboarding and introduction: How customers get to know and use a company’s products or services. How easy is it for the customer to find us, best practices for effective onboarding of new customers. What happens when a customer comes to us? How do they get to know us better?
Activation and #engagement: How do customers become active users and how do they regularly engage with a product or service? Active users still have to learn to get to know all the features of a product. Are you prepared for this? Factors that influence engagement include product design, user experience and customer care. In addition to a good product, the product experience and customer care must always be coherent.
#Retention and #loyalty: reasons why customers remain loyal to a company or churn. Let’s deal with this a little later. Many customers stay or leave based on the value a company places on them and customer retention measures such as personalised offers, excellent customer service and community building. We will come back to this topic in Part 3 campaigns.
#Cross-selling and up-selling: Strategies to maximise customer value by selling additional products or services. It is known that when a customer buys 2 products, the churn rate drops by 400%.methods to identify cross-selling and up-selling opportunities during the customer lifecycle. Marketing automation or CRM help to find the right events and play them out to the customer.
#Reactivation of inactive customers: How to revitalise customers who no longer actively use the company. It’s actually easy if you dont let it happen in the first place. If you communicate regularly with customers after they have purchased a product, you are already doing a lot of things righttrigger points and communication strategies to reactivate inactive customers. There are many events where it is worthwhile to start. The birthday, name day or other events from the product life cycle, expiring warranty, end of life of the product are simple.
#Customer feedback and ratings: Analyse customer feedback and ratings to gain insights into customer satisfaction and loyalty. Nothing is easier today than measuring customer ratings and sentiment, and methods to effectively utilise feedback for product improvement and customer experience.
#Customer relationship management: Strategies for maintaining and deepening customer relationships throughout the entire life cycle. This does not just mean the newsletter. Think in parallel about complementary campaigns, e.g. what is currently happening at your company, your brand, etc. Tools and technologies for automating and personalising customer relationship management. Marketing automation is the magic word to fulfil this task.
#Churn analysis and prevention: reasons for customer churn and/or churn. 50% of churn is homemade, we are talking about involuntary churn. We practically kick the customer out ourselves through faulty processes, preventive measures and early warning indicators to minimise customer losses. There are many indicators depending on the industry. The risk of losing a customer exists with practically every contact with the company.
#Life cycle marketing strategies: Holistic marketing strategies that take the entire customer life cycle into account. It’s not enough to win the customer, I also need to be able to retain them in time, which is where most companies fail to use automation and personalisation techniques to deliver relevant messages and offers based on the stage of the customer lifecycle. Let’s take a look at campaigns in Part 3.

All of these points need to be considered in the customer lifecycle. Companies can and should test various things and implement them if they have a positive impact on the customer lifecycle (duration of the customer relationship).

Customer Lifetime Value (CLV) or customer value metric

It has always helped us to have a metric and to know how high a company’s customer lifetime value currently is. Can this be increased with targeted activities, and what is the lift on a company’s overall result if we can improve it by 5 to 10 %? Incidentally, this is the real measure we should be using, so here’s a brief excursion into how to calculate CLV:

Determine average lifetime value:

Calculate the average revenue a customer generates throughout their relationship with your company. This can be done by totalling the sales of all transactions of a customer and then dividing by the number of transactions or by another suitable method.
Calculate the customer retention period:Estimate the average length of time a customer remains loyal to your organisation. This can be done by analysing historical data or by using customer lifetime models.
Calculate the Customer Lifetime Value:Multiply the average revenue per customer by the estimated customer retention period to calculate the Customer Lifetime Value. The formula is typically: CLV = Average Revenue per Customer * Customer Retention
Consideration of costs: When calculating the CLV, take into account the costs associated with customer acquisition and support. This enables a more accurate assessment of the customer value in relation to the resources used and provides cost transparency.

Incidentally, without a CLV calculation, I cannot make a proper calculation of the advertising channels and their efficiency.


Customer journey events with and from the customer

There are certain events or turning points in the customer lifecycle that can significantly change a customer’s behaviour and relationship with a company. These events can have both positive and negative effects (Part 4 Customer Experience) on the customer lifecycle. Here are some examples of such events:

First purchase: the customer makes their first purchase from a company. This marks the beginning of their customer relationship and must necessarily have an impact on future interaction and loyalty. (see Part 3 Campaigns)
Large purchase: The customer makes a significant purchase that is above average and possibly signals long-term customer loyalty. I have to earn the trust of the customer who has spent a larger sum, e.g. with a Thank You campaign over x steps (see Part 5 CRM and Marketing Automation)
Product experience: The customer has an outstanding or disappointing experience with a product or service, which can influence their perception and loyalty. (analogue tobig purchase“
Feedback or complaint: The customer provides feedback or submits a complaint, which is an opportunity for the company to improve customer satisfaction and strengthen the relationship. Caution: The customer is looking for the easiest channel to contact and is not forgiving of poor service.
Customer service experience: The customer has a positive or negative experience with customer service, which can have a direct impact on their satisfaction and loyalty. We all see this in the customer reviews with long text, e.g. 1-star without comment (jumped off), 1-star with long comment (seeking contact / relationship salvageable) etc.
Introduction of new products or functions: The company introduces new products or functions that can influence the customer’s interest and activity. A change means effort and stress for the customer, as we change their environment.
Price changes: The company changes its pricing, which can influence the customer’s buying behaviour, either positively or negatively.
Competitive influence: The customer is approached by a competitor or receives an offer that makes him reconsider his relationship with the current company. It has proven to be a good idea for companies to screen these offers and explain the problems of the competitor’s products to the customer or to emphasise the positive features of their product.
Cancellation or churn: The customer cancels their contract or switches to another provider, which is an important phase in the customer life cycle and can prompt the company to take measures to win them back. There are 3-4 approaches from the soft win-back or the step-by-step approach. (Part 3: Campaigns).
Change in life circumstances: The customer experiences a significant change in their life circumstances, such as moving house, starting a family or changing jobs, which can influence their needs and purchasing behaviour. This is a very important point for us, where our customers can change personas and where we should be prepared for this. What happens to my product or service when the customer gets married, moves house, has children or simply gets old?

Events in the customer lifecycle

These events in the customer lifecycle are crucial for organisations to understand the customer journey, anticipate needs and develop appropriate strategies to retain and acquire customers, something that is still done far too little today, unfortunately.

Do you remember a positive moment when you bought a product that was valuable to you (high value, fun factor or luxury good) and the manufacturer simply said thank you and asked you if you were really happy with it and/or if you needed any further information/assistance?

I think we are all waiting for this appreciation, which is less and less tangible in everyday life.

If you would like to know more about this topic, please feel free to contact me, input and discussions are welcome.

Part 3 is all about campaign management and the right campaigns.

TP/Winkel ZH Martin Lange 3/2024

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