As we know, acquiring new customers can be up to five times more expensive than retaining your current customers, and research has even shown that retained customers will spend up to 31% more than new customers.
Therefore, understanding and making improvements to support your customer life cycle can deliver a huge range of benefits to your business, such as improvements to churn rate, deductions to customer acquisition costs, and even significant increases to your bottom line. Below, we look at some of the ways that you can improve your customer life cycle.
What is the customer life cycle?
Similar to the standard customer buyer journey, the customer life cycle covers the entirety of your customers’ relationship with you, your brand, and your product or service. At a high level, the average customer life cycle involves the following stages:
Of course, there are other elements in between that involve customer support, signing up to a newsletter, referrals from friends, and creating brand advocacy, but the main steps are outlined above and are applicable to most business models.
To map out your customer life cycle, you can start by creating a simple flow chart that covers all of the touchpoints that your customers experience with you, starting with the awareness stage. To add some additional weight and data behind this, it’s important to engage with your customers before finalizing and gathering insights.
One of the benefits of customer feedback surveys is how simple these are to create, set up, and distribute, and will often only take a few minutes of your customers’ time, but will provide you with key insights from your target audience themselves to help you bulk out your customer life cycle and to highlight any areas you may have overlooked.
Customer life cycle marketing
Customer life cycle marketing (CLM) is a term that covers all of the marketing activity used to attract, convert and retain your audience. Instead of breaking up activity into acquisition, conversion, and retention, CLM takes into account the future behaviors of customers in order to make them more likely to convert and repurchase from the get-go.
By converting one-time customers into loyal buyers and long-term advocates, research has shown that you can expect customers to be seven times as likely to try new offerings from you, five times as likely to repurchase, and four times as likely to refer their friends and family to you, providing enormous boosts to both your profit margins and marketing activities.
Improving your customer life cycle
Research from Gartner has shown that about 80% of future profits come from 20% of existing customers, and further research has shown that by increasing retention rates by just 5%, you can expect an increase in profits anywhere between 25%-95%.
The first step is to benchmark and take stock of where you currently are. Some of the key data points for initial analysis should include:
- Returning customers and churn rates
- Average order values for new vs returning customers
- Average customer lifetime value, split into new vs returning customers
This will give you an initial baseline to monitor against as you make changes. You may also want to try to understand (wherever possible) the standards for your industry and your competitors to see if you’re falling behind.
The next steps are to build initiatives, based on the data, to grow your retention rates and order values. This can include things like:
- Customer referral schemes
- Loyalty schemes, discount codes, or exclusive offers
- Website changes to drive upsell and cross-sell opportunities at checkout
- Changes to post-purchase communications, newsletters, and updates
Improving your customer life cycle doesn’t have to mean shifting your entire focus to retention-only strategies. By truly understanding your customer’s buying journey and making tips to improve this, you can drive long-term customer retention from your first one or two touchpoints, increasing profits and customer satisfaction along the way.