In this age of the customer, the customer lifecycle is a term that describes the entire process of managing a customer. Some researchers have defined the customer lifecycle as follows:
The customer lifecycle is a representation of the stages that customers go through in their relationship with a company, as seen from the company’s perspective.
Customer lifecycles are presented in different ways by different firms, but basically they all attempt to do the same thing — they attempt to depict the development of a customer relationshipOpens in new window over time.
Stages of the Customer Lifecycle
There are various stages of the customer lifecycle:
The second stage is customer retentionOpens in new window, which involves a firm being able to maintain profitable relationships with their customers by consistently meeting and exceeding their expectations.
A number of important questions have to be answered when a company builds its customer retention strategy. Which customers will be targeted for retention? What customer retention strategies will be used? How will the customer retention performance be measured?
These issues need to be considered carefully and programmed into a properly resourced customer retention plan. Many companies, perhaps as many as six out of ten, have no explicit customer retention plan in place.
Most companies spend a majority of their time, energy and resources chasing new business, with 75 percent or more of marketing budgets being earmarked for new customer acquisition.
A third stage in the customer lifecycle is that of customer developmentOpens in new window, when a firm attempts to broaden their business with their existing clients. This is a key component in attaining profitable, valuable customer relationships.
The first task in managing the customer lifecycle is to acquire customers. Customer retention is a pointless exercise if there are no customers to retain. Customer acquisition is always the most important goal during new product launches and with new business start-ups.
For small businesses with ambitions to grow, customer acquisition is often as important as customer retention. A one-customer company, such as BICC, which supplies copper cable to a single customer, British Telecom (BT), can double its customer base by acquiring one more customer. On the other hand, the loss of that single customer could spell bankruptcy.
Sometimes defection is unavoidable (even with well-developed and implemented customer retention plans), and a good question to ask is whether a customer defection is due to a permanent or a temporary change in the customer’s situation.
Some products and services may be purchased by those customers that are within a certain age, education, or income level, and the defection may not necessarily be as a result of rejecting the firm, more than simply aging out of a particular demand behavior. This should be a consideration when calculating the lifetime value of customers.
Obviously, customers do not necessarily have to follow each step succession, as a dissatisfied customer may opt to stop doing business with a given firm after their first transaction. In such situations, if the firm had spent more time understanding the benefits that a customer desires, there might not have been such a gap between the product or service offered, and what was expected by the customer.
Gamble, P., Stone, M. and Woodcock, N. (1999). Customer relationship marketing: up close and personal. London: Kogan Page; Jain, S. C. (2005). CRM shifts the paradigm. Journal of Strategic Marketing, 13 (December), 275 – 91.
Evans, M., O’Malley, L. and Patterson, M. (2004). Exploring direct and customer relationship marketing. London: Thomson.
Kotler, P. (2000), Marketing management: the millennium edition, Englewood Cliffs, NJ: Prentice-Hall International.
Engle, R.L. and Barnes, M.L. (2000). Sales force automation usage, effectiveness, and cost-benefit in Germany, England and the United States. Journal of Business and Industrial Marketing, 15(4), 216 – 42.
Buttle, F. (2004). Customer relationship management: concepts and tools. Oxford: Elsevier Butterworth-Heinemann.
Payne, A. and Frow, P. (2013). Strategic customer management: integrating CRM and relationship marketing. Cambridge: Cambridge University Press, P. 211. See also Payne, A. (2005). Handbook of CRM: achieving excellence through customer management. Oxford: Elsevier Butterworth-Heinemann; Payne, A. and Frow, P. (2005). A strategic framework for customer relationship management. Journal of Marketing, 69 (October), 167 – 76.
