Customer Lifecycle Management
From the first point of sale to the customer’s final interaction, customer relationship management plays an important role in increasing customer loyalty and satisfaction.
Through the use of data, customer feedback, and continuous improvement, firms can identify opportunities to further engage with customers and develop strategies that will improve the customer experience—a process known as customer lifecycle management.
What is Customer Lifecycle Management?
Customer lifecycle management (CLM) refers to how businesses track and manage customer relationships over time. It is essentially the process of following a customer through each of the five stages of the customer journey, from the first interaction to the point where they become loyal customers.
CLM includes strategies for:
- Acquiring new customers
- Onboarding them and introducing them to company’s products or services
- Engaging with customers throughout their journey
- Retaining customers through loyalty programs and incentives
- Measuring customer satisfaction levels
- Further monetizing them during their lifetime with your company
Each step of the way, stakeholders use data to identify ways to improve customer experiences—thereby increasing customer satisfaction and loyalty to the company.
- CLM: The abbreviation for customer lifecycle management.
Why CLM is Important
An effective customer lifecycle management program plays a critical role in business operations because it directly impacts the company’s bottom line.
Having a comprehensive view of their customers allows businesses to make more informed decisions when it comes to product development, pricing strategies, and promotions.
By understanding what makes customers choose their product or service over competitors’ offerings, organizations can focus on those key factors and enhance the overall experience for their customers.
With this valuable information at hand, companies maximize the value of each relationship, leading to increased repeat business for the company over time.
It is also a form of organic marketing since customers who have had a positive experience with a company will be significantly more likely to recommend it to others.
The 5 Customer Lifecycle Stages
To fully understand the customer lifecycle management process, it’s important to first understand the five stages of the customer lifecycle.
1. Brand Awareness
In the brand awareness stage, potential customers might be aware of a brand, what it offers, and its values.
It is the first stage of the lifecycle and is generally where companies begin their customer acquisition efforts.
In this phase, a customer lifecycle management strategy focuses on customer acquisition and brand building through targeted campaigns, social media outreach, and industry events.
Other ways to grow brand awareness include content marketing, influencer partnerships, and sales prospecting, which help to introduce the brand to new audiences or products and drive them further down the funnel.
Once an ideal customer is aware of a brand, the acquisition phase focuses on converting them into loyal buyers.
In this stage (also called the purchase stage), CLM strategies are focused on providing customers with an excellent customer experience and offering incentives that will make them more likely to purchase.
This is the stage where prospective customers expect personalized engagement and a streamlined start-to-finish sales process.
A sales engagement platform helps with this—it provides real-time customer insights, automates sales processes, and helps reps and prospects communicate with each other efficiently.
The conversion stage is when a customer completes their purchase and becomes an active user of the product or service.
At this point, providing new customers with useful resources and tutorials is important to help them get the most out of the product or service.
Since this is the first step in building a long-term relationship with a potentially lifelong customer, making the onboarding process smooth and enjoyable is essential.
Setting clear expectations, providing a seamless onboarding experience, and maintaining effective communication all ensure they use the product or service correctly, minimizing the risk of them going elsewhere solely for a better experience.
The retention stage is all about keeping customers engaged and satisfied after purchasing.
Customer service, loyalty programs, timely communication, and feedback all come into play when turning customers into recurring revenue for the business.
In this phase, customers are willing to leave under a few preventable conditions:
- Their expectations are not met
- Their questions and concerns are not addressed
- The products/services do not meet their needs
Of course, there are several instances that companies can’t prevent, such as changes to the company outlook, budget cuts, or realignment, that may impact their ability to continue doing business with a company.
Still, instilling reasonable customer expectations and delivering on them in excess will develop loyal customers that will stay with the company longer.
5. Loyalty and Advocacy
Once current customers have done business with a company for a certain amount of time (which will vary from company to company), they enter the loyalty and advocacy stage.
At this point, customers become brand advocates who are willing to spread the word about a company’s products or services. It’s also an opportunity for organizations to collect valuable customer data to improve their products, services, and internal processes.
Many customers won’t do this automatically, which is why it falls on the business to make it easy for them to do so.
Something as simple as a post-invoice or billing cycle follow-up email that asks for feedback can go a long way—if they are willing to submit a positive review, that could mean a big boost in sales.
Benefits of Customer Lifecycle Management
When organizations manage the customer lifecycle, they retain customers and see a higher ROI on their marketing and sales efforts. They also find that customer satisfaction and loyalty increase, brand awareness grows, and repeat customers open the door to referral business.
Here are the top benefits of customer lifecycle management:
Reduces Customer Churn
Retaining customers is often easier and more cost-effective than acquiring new ones, so it’s vital to maintain a healthy relationship with existing customers. CLM can help you identify ways to reduce customer attrition rates and build loyalty in two primary ways:
- It allows businesses to identify at-risk customers and take a proactive approach to potential turnover.
- It provides a deeper understanding of customer preferences and behavior patterns that can be used to create targeted engagement strategies for future customers.
When selling to a customer already in the business, the chances of closing them again are 60-70% higher than selling to a new customer. Reducing customer churn leads to increased revenue, more efficient operations, and improved customer satisfaction.
Boosts Customer Satisfaction Levels
When customers feel they’re being taken care of, they’re more likely to be satisfied with their purchase and remain loyal to the company.
CLM gives companies valuable insight into customer behavior and preferences, allowing them to create effective strategies for improving customer satisfaction levels. Armed with this information, companies can develop customized engagement strategies that are tailored to their individual customers.
Increases Customer Lifetime Value
By providing a more personalized experience, companies increase their average customer lifetime value.
McKinsey research found that 71% of customers expect personalization, and companies that excel in that area saw at least 40% more revenue than those that don’t.
Customer lifetime value measures the total value a company can expect to receive from doing business with a customer throughout the customer lifecycle.
By prioritizing personalization, CLM helps companies identify opportunities to increase customer loyalty and monetize customers they might have otherwise missed out on.
By understanding customers’ needs more accurately, businesses are better equipped to make data-driven decisions that lead to higher sales and revenue.
Cross-sell and upsell opportunities, for example, help companies maximize profitability by leveraging existing relationships instead of relying on costly new customer acquisition strategies.
Brand Advocacy From Customers
When customer lifecycle management is well-executed, customers tell their professional and social networks about their positive experiences.
In B2B sales, 56% of buyers look offline for advice before making a purchase decision. And when online customer feedback (e.g., product reviews, ratings, and comments) is included, that figure jumps to 88%.
In the B2B vertical, where one deal could be as much as seven figures, the value of customer advocates is particularly significant.
Improves Sales Funnel Efficiency
77% of B2B buyers feel that their last purchase was difficult to close, and a major reason for this is that the sales cycle is too drawn out.
By using the right tools (including CLM), companies can gain insight into customer behavior and create data-driven strategies to optimize their sales process. This results in faster conversions and improved lead conversion rates.
Helps Create a Comprehensive Marketing Strategy
Customer lifecycle marketing requires multiple marketing and communication channels to cover the entire customer journey.
It enables businesses to understand how their customers interact with the brand and which channels are most successful at driving conversions.
Using this knowledge, companies can craft a more holistic marketing approach that incorporates different strategies for each stage of the lifecycle. This results in higher ROI from campaigns that actually speak to customers, instead of those that are simply trying to get their attention.
Customer Lifecycle Management KPIs
To measure CLM efforts effectively, companies must track the following KPIs:
- Conversion Rate: The rate of customers moving to a desired stage in the sales funnel.
- Average Order Value: The sum of all transactions in a set timeframe divided by the number of transactions.
- Total Contract Value: measures the total revenue generated by one customer over their entire relationship with your business.
- Cost per Acquisition (CPA): The amount a company spends to acquire new customers or convert leads into paying customers.
- Upsells and Cross-Sells: Measuring success in presenting additional products or services to existing customers.
- Churn Rate: How many customers end their relationship with a business in a given time period compared to the total number of customers at the start of that period.
- Customer Satisfaction Score: An overall assessment from customer surveys on their overall satisfaction level with product or service offerings.
- Customer Retention Rate: Percentage of customers that continue to purchase from you over time and remain loyal to your brand
- Average Engagement Time: How long customers spend engaging with each element of the product, website, or sales process.
- Lead Response Time: Average period between when a lead enters your system and when they receive contact from sales.
Improving these numbers results in increased sales, higher customer retention rates, and stronger loyalty to the brand in the long term.
CLM Best Practices
When developing and implementing a CLM program, there is a lot of room for error. Not only can businesses risk creating a negative customer experience, but they can also lose out on potential revenue.
To ensure success and maximize the return from CLM efforts, companies should adhere to best practices.
- Establish a customer data collection and management system to ensure you’re collecting accurate, up-to-date information about your customers.
- Utilize automation tools to increase efficiency and reduce costs of customer engagement activities like personalized email campaigns, surveys or follow-up calls.
- Analyze customer behavior trends to gain insights into their buying habits and preferences to target them with more relevant products and services.
- Include CLM initiatives in your sales playbook so your team can learn to respond quickly and effectively to customer inquiries, feedback, or complaints as soon as they arise.
- Personalize every interaction by using data collected from your customer lifecycle analysis to create custom experiences tailored specifically for each individual customer.
- Monitor each stage in the customer lifecycle, including acquisition, onboarding, retention, and referrals to identify any potential issues that could lead to churn or lost opportunities for revenue growth.
- Create comprehensive reports detailing key performance indicators (KPIs) such as conversion rate and average deal size so you can track progress over time and adjust accordingly.
Customer Lifecycle Management Technology
Like every other aspect of business, customer lifecycle management has been revolutionized by technology. Automation tools can be used to streamline complex processes and maximize efficiency.
Marketing automation is the use of technology to automate customer-focused marketing activities like email campaigns, surveys, lead nurture programs, and more.
It helps companies maximize the efficiency of their customer lifecycle management efforts by automating time-consuming tasks and providing valuable insights that would otherwise be too difficult or labor-intensive to uncover.
Marketing automation makes it easy to follow up with customers after a purchase or subscription renewal, send them timely offers for related products and services, and track their satisfaction with the product or service.
On the backend, marketing automation platforms gather customer data that businesses can use
Almost every business uses CRM software. It helps companies keep track of customer data, manage activities for sales and customer support teams, and provides valuable insights into customer behavior.
CRM software can be used to provide a comprehensive view of each customer’s journey from initial contact through purchase, allowing businesses to anticipate needs and proactively engage with customers.
It also makes it easy to set up automated processes for follow-up calls, emails, and other customer and buyer engagement activities.
Configure, price, quote (CPQ) software handles the complex task of configuring pricing for products and services. Especially for organizations with complicated pricing and sales structures, features like contract management and approval workflows can be a huge help.
CPQ software makes it easy to create accurate and compliant quotes in minutes, streamline order processing, and improve quoting accuracy—all of which help businesses increase sales productivity and close more deals.
A billing platform is critical for tracking and managing customer payments. It helps businesses quickly and accurately process payments, track balances, create invoices, set up payment plans and discounts, manage subscriptions, and much more.
Beyond that, billing platforms help finance and accounts receivables teams through the revenue assurance process. By staying on top of payments for each customer, businesses maintain professionalism and secure the revenue that helps them keep the lights on.
Billing software also integrates with other software solutions like CRM to ensure billing records are up-to-date so businesses can make the most of every customer interaction.
Business intelligence encompasses a range of data-driven solutions that provide valuable insights into customer behavior. This includes:
- Web and mobile analytics
- AI-enabled customer segmentation
- Path analysis
- Predictive modeling
Business intelligence tools like customer data platforms help companies create customer segments, anticipate trends, and make more informed decisions about how best to engage with them.
People Also Ask
What is a sales funnel?
A sales funnel is a visual representation of the customer journey from initial contact to purchase. It outlines each stage of the process, showing how customers move through it and what actions they take at different points. Slightly different from a sales pipeline, the funnel focuses on customer engagement and conversion rate, rather than individual sales.
What is the importance of the customer lifecycle?
The customer lifecycle is the process that customers go through when interacting with a business. It’s important because it helps companies understand how customers interact with their product or service, what their needs are, and where they may need help. By understanding the customer lifecycle model, businesses can anticipate customer needs and provide an improved experience.
What is the B2B customer lifecycle?
B2B companies typically have a longer customer lifecycle than B2C companies. This is because B2B customers often require more research and consideration before making a purchase decision than B2C customers. The stages of the B2B customer lifecycle include awareness, engagement, education, evaluation, conversion, and loyalty.