What is a Customer Life Cycle?
A customer life cycle can also be thought of as the length, arc and nature of a customer's relationship with your brand or company. Much like a "human life cycle" or a relationship between two people, this customer life cycle is marked by ups and downs, different phases and different periods of activity. Also like a human life cycle or a relationship between two people, you want your customer's life cycle to be as long and as fruitful as possible. How do you accomplish that? While the quality and value of your company and brand goes a long way to building long customer life cycles, not unlike in real life communication plays a key role as well. Because you won't experience real-life, real-time, one-on-one communication with the majority of your customers very frequently (if at all), your corporate communications, particularly your email communications, can fulfill the relationship building need here.
In this section, we'll talk you through various phases in the customer life cycle. In the sections following, we'll discuss how to integrate email marketing efforts into the various points in the customer life cycle.
Prospective Customers: The First Phase of the Customer Life Cycle
Before your customers are actually your customers, they are simply prospects who may or may not be aware of your product, brand, or company. Your job, as a marketer, is to first make them aware of your product, brand, or company and then peak their interest enough that they will convert to an active customer or user. Once you have their interest peaked, of course, your next job is to provide the trust, security, and incentive that they need to overcome any barriers or obstacles and become a registered or paying user or customer. This phase of the customer life cycle – the process of converting a prospect into a customer or user - is often the most challenging. It involves a marketing acquisition budget as well as an awareness of what will transition prospects from "just interested" into fully engaged. Many marketing books have been written about the techniques and challenges of acquiring new customers. While it is an important part of the mix, email marketing is only a portion of the many marketing activities you'll need to master in order to effectively convert prospects to customers.
Another common term you'll hear used referring to this part of the customer life cycle is "leads."Leads are the names and contact information (typically in the form of an email address) of people who have shown an interest in your product, service, or brand. Often, they have done so by signing up for a special offer or even a piece of free content. Leads may also be purchased from data companies. However, if you are purchasing a lead list, we recommend that you be extremely careful and research that the data you are buying is from a reputable company and won't put you at risk of violating any privacy or CAN-SPAM laws.
New Customers or Users: The Second Phase of the Customer Life Cycle
So, now you've converted a prospective customer or lead into a paying or registered customer. That's great and shows that you have some real marketing skills. However, ideally you want your new customer or user to be a customer or user who has a long term relationship with you, not just one who purchases one time and then never returns. Think of this phase of the customer life cycleas though it's like the early phases of dating. Your new customer has been "sold" enough on you to go out on one date or make one purchase, but they're not sure if you're a long-term commitment yet! It's your job to build a relationship with them so that they continue to return, interact, and purchase from you for a long time to come. Again, the quality of your product or service will certainly matter here, but so will the way in which you communicate with your customer and show them that you respect their privacy, time, and, most importantly, business.
Active Customers or Users: The Third Phase of the Customer Life Cycle
Now you've converted a prospective customer into a paying or registered customer. This is the stage at which you need to not only impress the customer with the quality of your product, but also follow-up with them to build a relationship, make them feel important to you, and ensure that, when they think of you, those active customers think of returning to you. If we're still using the dating analogy, think of this as the time when you make sure that you're always being polite and wearing your best clothing when you communicate with the customer!
Repeat or Loyal Customers or Users: The Fourth Phase of the Customer Life Cycle
If you've managed to get a customer over the first two hurdles, converting them from a prospective customer or lead to an active customer and then from an active customer to a repeat customer, you should be congratulated! Earning loyal customers who will make repeat purchases or visits to your website or service is quite a marketing accomplishment. Once your customers become repeat customers, the aggressiveness and frequency with which you want to communicate with them will diminish, but it certainly won't disappear. You'll want to make sure that customers are being reminded that they are important to you, as well as being given reasons and incentives to remain loyal. There's always a competitor out there ready to move in on your user or customer base. Your best tool to retain customers who have become repeat or loyal customers is to keep an ongoing dialogue with them through all of your marketing communications channels, including email.
Lapsed Customers or Users: The Fifth Phase of the Customer Life Cycle
Unfortunately, even a loyal or repeat customer may eventually lose interest or contact. When a customer has gone a significant amount of time without interacting with your brand or company or purchasing a product, they are referred to as a "lapsed" customer. In most cases, you will break your lapsed customers down into two to three groups. It's common to consider short-term lapsed, long-term lapsed and "seasonally lapsed" customers differently. However, how you define what those groups are (and perhaps how you develop your own segmentation for lapsed customers) will depend greatly on your product, industry segment, or customer base. If, for example, you sell shoes, a customer who didn't purchase from you once a quarter would easily be considered lapsed as shoes are a constant and ongoing need. If, however, you only sell snow boots, you wouldn't expect customers to purchase from you over the summer, so the time between purchases to define a lapsed customer and the point in the year when you would want to contact lapsed customers would be different. Essentially, a lapsed customer is a customer who has not made a repeat purchase within a time frame that you have defined as the time between which active customers typically make purchases.
Inactive or Abandoned Customers or Users: The Sixth Phase of the Customer Life Cycle
Of course, some lapsed customers may eventually turn into inactive or abandoned customers who no longer purchase or interact with your company. Some of these inactive customers will have reasons for no longer having a relationship with your company that you cannot control, such as a bad experience with customer service or a change in their financial situation. However, many inactive customers may simply have forgotten about you, been lured away by competition, or simply need an incentive to re-purchase for you. Customers in this phase of the customer life cycle should be divided into two groups – customers who should not be communicated with at all any more and customers that you hope to win back via a customer communication or marketing campaign.
Of course, within this customer life cycle, different customers will have different values (some will spend more and be worth more to acquire, retain or win-back). However, no matter how big or small the value of the customer, their customer life cycle and relationship with your company, product, or brand will most likely follow the cycle or path outlined above. Fortunately, if you know the likely life cycle or pattern of a customer, you can make changes to your customer communications or marketing strategy to try to optimize the length of time and the value that a customer brings to your business.
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