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Understanding the customer lifecycle

13 min read
Understanding the customer lifecycle can help you plan and execute successful marketing and CX. Here’s what you need to know.


What is the customer lifecycle?

The customer lifecycle is a way to describe how customer relationships evolve over time, viewed from a business-first perspective. It covers every stage from new customers arriving to longer-standing repeat clients developing enduring brand loyalty.

Framing these interactions as a cycle shows the ongoing nature of customer acquisition and retention, something a business must continue to do every day. Customers move from stage to stage, and may drop out at different points and start the cycle again.

Typically, businesses use the customer lifecycle strategy to help plan and structure their marketing to help move customers from stage to stage. It can be extended into CX (customer experience) too, helping businesses provide a great experience at every stage.

Customer lifecycle vs. customer journeys vs. conversion funnel

It’s easy to be confused by the number of similar-sounding phrases that describe customer-business relationships. Many people use terms like lifecycle, journey, funnel and life stage interchangeably, but in fact each idea has its own specific meaning.

A customer journey tends to be specific, and is always controlled by a customer’s choices. In contrast, a customer lifecycle is a generalised view of customer behaviours, created by a business based on their overall observations of all customers. A customer lifecycle doesn’t happen spontaneously – it’s driven by business actions.

As an idea, the customer lifecycle has more in common with a conversion funnel than a customer journey. Unlike the conversion funnel though, the ecommerce customer lifecycle is a cyclical process, not an end-to-end one. Rather than focusing on the stages of winning and converting a customer, it spans the whole customer relationship, including multiple transactions and interactions between buyer and business.

Customer lifetime value – and its measurement

One of the uses of the customer lifecycle strategy is that it can help you forecast and measure customer lifetime value (CLV). CLV is the total monetary value a customer brings to your business across all of their transactions.

You can calculate CLV at a basic level using a simple formula:

Customer revenue per year
×
Duration of the relationship in years

Total costs of acquiring and serving the customer

= CLV

 

Because acquisition, which is typically expensive, is a one-off cost, and the revenue increases year-on-year, it’s clear that the longer the relationship lasts, the more valuable the customer becomes to your business.

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Customer lifecycle stages

1. Awareness

This is when the customer first becomes conscious of your business. This could be through an internet search, seeing your advertising, reading a review or coverage on a blog or in a magazine, or through word of mouth.

In a world where attention spans are short and markets are highly saturated, capturing a customer’s awareness can be a significant challenge for businesses. You need to be in the right place at the right time with the right message to win their notice.

Awareness marketing strategy:

Developing a strategy for building awareness should be a significant part of your marketing plan. At this stage, you have a more-or-less blank slate, and the opportunity to try out a few things and see what works.

Begin by gathering data about your customers so you can build marketing campaigns around their priorities and interests. It’s useful to know basic demographic information such as age, gender and income, where your target audience shops, which websites and platforms they frequent online, and which brands they are interested in.

Find out where awareness is currently coming from, and aim to maximise that. You can do this by adding some quick feedback listening posts to areas like your ecommerce checkout, newsletter signup form or account registration, asking people how they heard about you. A single multiple-choice question can provide valuable data.

If you’re starting out as a business, or you’re just beginning to think more strategically about your customer lifecycle, you may want to adopt a trial-and-error approach, setting budget aside to try out different advertising and marketing techniques such as social media advertising, PPC, friend-get-friend promotions and online ad networks.

2. Consideration

At the consideration stage, being aware of your business and what it offers develops into a more critical analysis for the customer. They are starting to weigh up your value and compare you to your competitors. They’ll also be thinking about how well your products and services match up to their needs and where they would fit into their lives.

They might revisit some of the information sources they used during the awareness stage, re-appraising them in a more detailed way, and bring in new ones too. Reviews and ratings, anecdotal stories and testimonials from existing customers, product pages and specifications can all play a part.

Consideration marketing strategy:

Your customer is on a mission to collect and process information. They’re asking questions, so you can help by supplying answers. You can support them by providing content that makes it as easy as possible to analyse the options and understand features and benefits. If you have an ecommerce site, you could provide product comparison tools for customers to compare things on a like for like basis.

You can also offer encouragement and reassurance by providing case studies and testimonial content that allow them to put themselves in the shoes of an existing customer with similar questions and criteria.

Personalised contact can be powerful at this stage. If your prospective customer has opened an account or signed up for emails, be sure to address them by name and reflect your knowledge of their interests through customised content in the form of promotions, discounts, product edits or value-added content like how-to articles and guides.

Now is also a good time to answer questions directly through chat or AI chatbots, which should be visually obvious on your website or social media pages.

3. Purchase

Here’s where your customer becomes a customer in the truest sense – exchanging money for goods and services. However, although they’ve reached the point of making a purchase, things can still go wrong and sales can fall through at the 11th hour.

Purchase marketing strategy:

To make sure purchases are successfully completed, you need to know what might prevent that from happening. Use data from past customers to look at where drop-offs occur in the purchase process and gather feedback to find out why customers failed to complete their purchase.

Emailing customers who have abandoned a cart can help you get a second chance at purchase completion – “you’ve left something in your basket” messages can recover 10% of your potential sales, according to Tidio. These messages can be automatically sent to logged-in customers who have shared their email address and opted in to the necessary marketing consents for your region.

Providing contextual support through on-page chat software can also help your customers move past barriers to purchase, such as technical problems or questions about delivery or returns. These channels can also help you collect feedback from customers who have decided not to proceed for more subjective reasons like price or quality concerns, to help you understand their reasons why and feed those back to the relevant areas of your business.

4. Retention

After the first purchase has been made, the focus moves to the ongoing relationship. Will the customer buy from you again? You can help increase the chances by doing your best to promote an ongoing connection.

Content that’s of interest to the customer, promotions relevant to their interest, loyalty programmes and customer feedback can all come into play at this stage.

Retention marketing strategy:

Maximising retention is all about providing great service and personalised support for your new customer.

Let them know you’re ready and willing to answer questions and offer tips and advice about the product or service they’ve bought, and provide self-help resources too such as FAQs and troubleshooter guides on your website.

Ask for their feedback about their new purchase, and use this as an opportunity to reach out and close the loop if they have expressed doubts or talked about problems with any part of the customer journey so far.

As the relationship progresses, you’ll be getting to know your customer’s tastes and preferences, meaning you’ll be able to offer them personalised recommendations and discounts on the things they’re most likely to be interested in.

5. Advocacy

At this stage a repeat customer has developed a strong positive bond with your brand and is spontaneously promoting it to other people.

It takes time and effort to reach this level, and customer advocates will represent a relatively small fraction of your customer base. Take care to treat them well and recognise their contribution in order for them to remain at this stage.

Advocacy marketing strategy:

Customers at the advocacy stage are precious. Offer them recognition through tiered loyalty programmes that reward their spending through status as well as material benefits. Loyalty programmes can act as a form of gamification that keep customers engaged and make them excited to reach the next level and get more rewards.

You can also reward their willingness to recommend you by setting up a referral programme. This is a formalised approach to advocacy that not only rewards your customer – both they and their referee get a discount or bonus – but allows you to track and quantify the added value each customer brings by referring new awareness-stage customers.

Finally, a powerful way to recognise and retain loyal customers is by closing the loop when they feed back to you about an experience that didn’t go well. By giving personal responses and resolutions to valuable customers, you can repair and even strengthen their relationship with you.

Customer lifecycle management

As well as optimising each stage of the customer lifecycle, it’s valuable to be able to take a step back and look at the cycle as a whole. That way you can understand what proportion of your customers are at each stage and whether there are trends in how people move between customer lifecycle stages – for example they may reach purchase but not make it through to retention.

With an overall perspective, you can also think about assigning metrics to each stage of the lifecycle in order to measure its progress. These might include:

Cost per acquisition

The cost to your business of gaining a new customer through the activities you did at the Awareness stage, including advertising and marketing.

Ad impressions and conversions

You can track your digital marketing and advertising in terms of how many people looked at an ad and how many have interacted with it and clicked through to your website or downloaded your app as a result.

Transaction value

How much are customers spending per purchase? Does this go up or down after the purchase stage as you go into the retention stage?

Transaction frequency

How often do your customers at the retention and loyalty stages purchase? Does the frequency stay constant or does it increase or level off over time? Are there any obvious patterns year on year?

Engagement metrics

Customers who have reached the advocacy stage, and some of those at the retention stage, may be more likely to engage with your brand. How often do they open your emails? Do they follow you on social media, and if so, how often to they “like” or comment?

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