In using customer relationship management or CRM software, you feel like you have a fairly good grasp on the satisfaction and buying behaviors of your customers. You may even decide to augment your CRM software with social CRM, also known as SCRM. Like SCRM, there’s a way to make your current CRM software even better and more rewarding for your company. That is through implementing the tool(s) that you get with a customer lifecycle management or CLM system.
If you’re not yet familiar with the world of CLM, we implore you to keep reading. In this article, we will dive deep into this area of lifecycle management, explaining the stages and how CLM differs from your standard CRM software. We’ll even tell you methods for determining your customer lifetime value or CLV, a metric that will surely come in handy as you begin tracking the lifecycle management of your customers.
What Is Customer Lifecycle Management or CLM?
First, let’s begin with a question that’s probably on your mind: what is the customer lifecycle? Before we can answer that question, we have another one to address first. That is, what does lifecycle mean in the context of CLM?
A lifecycle is something that every living thing has, from the birds in the trees to the insects in the ground and even to you and I. In short, a lifecycle refers to the beginning of a process until its end as well as all the steps in between.
In CLM marketing then, the lifecycle would be the beginning of your customer’s journey—from them opting in or joining your email list—to making purchases and hopefully restarting most of the journey again over the long run.
Now that you have a greater understanding of what a lifecycle means on its own and in relation to sales and marketing, we can move on to a CLM definition.
As you recall from the intro, CLM stands for customer lifecycle management software. It may be a single tool, or it can be multiple tools depending on the needs of your company. Through these tools, you have the chance to glean pertinent metrics useful to your company. You can then use these metrics to improve the reputation of your brand, to generate higher rates of customer lifecycle management for customer success, and to make each customer journey a more pleasant experience.
It’s important to mention now that the average lifecycle model for customers has more than one stage or cycle. This is something we will dive into fully later in this article.
Why Is Customer Lifecycle Management Important?
- The Possibility of Extending Warranties
- The Ability to Add a Service Agreement Where There Was None
- Timing Your Offers as Products Reach the End of Their Lifecycle
There are several reasons right off the bat to consider a lifecycle management software or tool for your customers if you’re not already using one. These include providing further value to your customer relationships, maintaining these preexisting relationships, and boosting your company’s brand loyalty.
As any company wants to make more money, you have a greater chance of successfully cross-selling and upselling through a CLM than you do without one. Since your customers are already more in-tune with the company thanks to your relationship-building, they could take advantage of these additional offers. This puts more money in your company’s pocket, which is always a good thing.
We’re only getting started with the reasons to consider using a customer lifecycle platform for the good of your customers. Here are several more benefits of having such a platform in place.
The Possibility of Extending Warranties
When your customers buy a tech product or any other high-end goods, they’re typically offered a warranty to go along with their purchase. This may protect their new investment over the course of two, maybe three or even five years, sometimes as much as 10 years. Should your company provide anything other than lifetime warranties, then any product warranty will surely expire at some point.
If the customer happened to spend a lot of money on this product, then surely they will want to retain the protection that they enjoyed under the warranty. After all, should their product malfunction or even break now, they would have to pay for its repair or replacement out of their own pockets.
Before the warranty runs out entirely, you can jump in and email the customer, asking if they’d like to extend their warranty. This value-add boosts the goodwill between your company and the customer while enhancing their loyalty towards you.
The Ability to Add a Service Agreement Where There Was None
Speaking of product protections, another area of protection that a customer may have an interest in is a service agreement. These agreements are considered unattached assets, but they operate much as a warranty does. In other words, should your customers have a problem with the product they bought, including it failing or breaking, they’d rely on the service agreement. This may pay for the costs of a replacement product so the customer doesn’t necessarily have to.
The longer a customer has a product, the more they’ll often wish for a service agreement. If you didn’t do service agreements at the time the product was originally sold, it’s never too late to change that now.
Once more, by presenting a means of protecting the customer’s investment, such as through the service agreement, their sense of loyalty towards your company goes way up.
Timing Your Offers as Products Reach the End of Their Lifecycle
Another wonderful benefit of customer lifecycle management is the ability to swoop in with an offer that has practically perfect timing. By reviewing customer lifecycles and those of your company’s products, you can predict when the product’s usage may run out. You can also assume when a customer might reach the highest point of your sales funnel, using this information to your advantage.
Armed with the data you now have, you can present an offer that should be very much well-received by your customer. This time, instead of presenting an extended warranty or a service agreement, you’d want to introduce a related product to the one the customer used and loved so much.
These purchases don’t always have to be instant, either. If you can guide your customer towards a long-term purchase that takes longer, that works, too.
Customer Lifecycle Stages
A little earlier in this guide, when we laid out the definition of lifecycle management for customers, we mentioned that there are different stages to the customer lifecycle. There are five of these: approach, acquisition, development, retention, and loyalty. Let’s discuss more about these customer lifecycle stages now.
The first step or stage of the customer lifecycle is the approach stage. Most of the work is on the shoulders of the sales and marketing teams here, as the customer is still a lead by this point. The goal is to convert them to customers, but before that can happen, the sales and marketing teams must ensure the leads are even worth working with.
This is something we have discussed many times on this blog, including discussions of methods such as lead scoring and segmentation. In scoring leads, you study the behavior of a group of leads that could become potential customers.
Each time they do something, points get added or deducted from their score. If a lead were to unsubscribe from your email newsletter a week after joining, for example, then that would impact their score negatively. Should they open your emails or even make a purchase, you would instead add points. The more weight you give to an action, such as buying a product vs. opting in, the more points they would get.
Through segmentation, you’d split your leads based on demographics like age, gender, location, occupation, job title, income, pain points, and more. The most valuable leads become prospects, marketing-qualified leads or MQLs, and sales-qualified leads or SQLs. These are the ones you want to offer your products to, illustrating how valuable they are as part of the approach stage.
From the approach stage, you enter the acquisition lifecycle phase. At this point, you have leads that are very interested or prospects who are quite likely to become customers. They jump into your company’s sales pipeline and begin their progress early.
The duties of your company are multiple during this stage, in that you must have dedicated sales and customer service reps available to answer the inevitable questions and concerns your leads will have.
Besides that, your marketing and sales teams must do their best to showcase the usefulness and value of the product/service you’re trying to sell to each group of leads. Remember that segmentation still matters here, as even the most qualified leads won’t have identical pain points. In segmenting your leads, you may try to market several products/services, dividing these among your various audience groups.
If you vetted your leads with a fine-tooth comb, then they should have continued through the sales pipeline without exiting at any point. At this time, they have gotten close to finishing their trip through that sales pipeline, thus necessitating the start of the next stage, which is development.
These high-quality leads and prospects should have converted to customers once they get to the development phase. These customers may have even taken up your offers on products or services, but your work isn’t done yet. Instead, you want to continue nurturing and engaging with the new customer to retain their business.
In doing so, you may send surveys and other means of generating feedback. Make sure you use the information presented in these surveys to make positive changes to your sales and marketing approaches. You can also ask the customer to follow up with you directly or leave a review, but again, be ready to improve your processes based on what you hear.
The retention stage is next, and with it comes the parsing through the information presented during the end of the development stage. That is, we’re referring to the very useful feedback and reviews you got through your customers. As we said, you want to tailor your marketing and sales based on this feedback so it’s more personalized towards the needs of your customers.
In many lifecycle management models, the last stage is loyalty, which ends the lifecycle. Well, it’s not exactly an ending as it is an indefinite prolonging of the loyalty phase. The customer could become almost like a brand advocate, referring your products and services to others in their professional and personal lives.
Now, the customer lifecycle stages are not at all set in stone, with some marketers adding more stages and others renaming some of the ones we covered above. Here’s an example of that:
Image courtesy of Astute Solutions
The Difference Between CLM and CRM
At the beginning of this guide, we talked about how customer lifecycle management or CLM tools make a great complement to a customer relationship management or CRM system. However, we must be clear, these are two different pieces of software we’re talking about here. While they can work well with one another, confusing one for the other is not a mistake you want to make as you begin tracking the lifecycle of your own customers.
For that reason, we thought we’d use this section to highlight the myriad of differences between your standard CRM software and a CLM system. This isn’t necessarily about choosing one over the other, as you should have both, but rather, it’s about knowing which tool can help you achieve and track your goals and when.
More Companies Use CRM
CRM software is the standard for many a company, from small businesses to mid-sized brands all the way to your major Fortune 500s. While CRM is something we’ve written about countless times on this blog (and it’s a service we offer here at EngageBay for free), we wanted to take a moment to recap it for the sake of this article.
With a CRM system, you use various tools to further the professional relationships between your company and your customers. In the case of EngageBay’s CRM, we offer such services as call integration, lead scoring, email integration, reporting, contact management, sales management automated data entry, meeting scheduling, and visual deal pipelines.
Through CRM, you never have to worry about a customer slipping through the cracks, as you can track everyone that enters the pipeline. You also have a recorded history of interactions with this customer, be those phone call transcripts, email exchanges, and more. This data informs the approach your sales team will take in trying to convince the lead to buy your products and services.
As we’ve proven in this article, a customer lifecycle management tool for your customers can prove insanely valuable. It’s just something that fewer companies focus on, as they may think their B2B CRM is enough. By combining their well-used CRM software with tools like SCRM and CLM, they now have the best means of tracking and maintaining customer engagement over the long-term.
CLM Relates More to Analytics
Any good CRM software worth its salt should come with some analytical components. That much is true of EngageBay’s free CRM, as you need to track what you’re doing to determine what’s working and what isn’t. While the analytics and reporting offered in the average CRM software is sufficient, it’s possible to take an even deeper dive into the metrics that drive your company’s success through CLM.
In fact, some marketing experts agree that the best way to review whether your CRM approach is successful is to look to your CLM metrics and how well these performed. That again is a testament to the depth of reporting you can find in a lifecycle management software.
You should recall that there are several stages to a successful customer lifecycle management campaign, and all these allow you to take a broad CRM customer database and divide it into further specifics.
The metrics you want to focus on include:
- The cost of customer retention or acquisition: If by implementing your CRM software, you could lower the cost of converting leads to customers or maintaining customers, that’s ideal. It’s only when you’re spending more money on getting and keeping customers that you may want to make changes to your approach.
- Response to marketing initiatives: How much attention your audience has paid to your marketing efforts lets you know whether your CRM investment was worth it. Granted, you don’t always see wholesale positive changes right after implementing CRM, so remember to have some patience with this metric.
- Size of transactions: Through CRM, your sales team should be prepared to make more targeted, tailored offers. In doing so, transaction sizes may increase. You can track whether these transaction sizes have gone up or down with this metric.
- Purchasing frequency: Once you link together with your customer lifecycle management and CRM software, you’d hope the purchasing frequency from your customers would increase.
We just want to reiterate that that doesn’t mean you need one software over the other, as both types of tools are the drivers to capturing the interest of your customers and keeping them engaged over time. There do exist similarities between the two, but that’s inevitable.
How to Calculate and Measure Customer Lifetime Value (CLV)
On the note of metrics, one of the most important CLM metrics you will deal with is known as the customer lifetime value or CLV. If you’ve yet to hear of a CLV, let’s explain what this means now.
The CLV is a calculation that predicts how much money your customers will bring in for your company throughout their lifecycle as a customer. It’s partly a prediction, yes, but it’s also based on real data from your CRM that you can calculate.
Knowing the average CLV of each customer can aide your company in a variety of ways. You can determine which customers are worth prioritizing and which you can get back to later. You can also segment more accurately to drive further profits. For example, if you group together the customers with the highest CLV, you can ensure with reasonable confidence that they’re going to buy your products/services.
You can also budget for the next quarter and perhaps even longer through calculating the CLV. If you know you have more customers that will drive a higher profit, then you might be able to afford to relax your budget somewhat. However, if the CLV predicts that you may have a drier stretch without as much revenue streaming in, you’d tighten that budget.
Now that you understand the usefulness of CLV, how do you go about calculating it? You want to do some multiplication, taking your yearly retention (as an average) times your yearly purchases times your order total as an average.
Image courtesy of CleverTap
Given that you’re multiplying three numbers together, your CLV will almost always be high. This would seem like good news, but it isn’t always, especially your results are inaccurate. You see, you must also accommodate for marketing costs and acquisitions, which don’t come free (this is something we talked about earlier).
How do you get the cost of your acquisitions as a formula? This time, you want to do some division, taking your acquisition expenses and dividing them by the customers you obtained through these acquisitions.
There’s also something known as return on investment marketing or ROMI that we want to talk about. This tracks the return in dollars per what you spend on activities related to targeting your customers. Before beginning a sales or marketing program, your company might calculate the ROMI to decide if it’s financially worthwhile.
A Customer Lifecycle Model Graphic
- Acquiring Stage
- Retaining Stage
- Increasing Value Stage
- Cherishing Stage
Do you remember the stages of the customer journey that we explored earlier in this guide? To reiterate, those are approach, acquisition, development, retention, and loyalty. As we also said in that section, some marketers will term their own customer lifecycle stages differently, such as acquiring, retaining, increasing value, cherishing, and reactivating. These stages are very similar to the ones we discussed before, but they have other names.
To create a customer lifecycle model graphic, also referred to as a customer lifecycle diagram, you need to knuckle down on your own customer lifecycle stages, be these four or five stages. From there, you can make the customer lifecycle model graphic or diagram that corresponds to the lifecycle stages you created. An example of your own diagram may be as follows:
Image courtesy of Exponea
As you can see, the stages of the customer lifecycle are represented in this diagram: acquiring, retaining, increasing value, and cherishing. The last phase, or reactivation, is left off, but it’s implied in that the cycle would begin again to reactivate the customer’s interest.
Let’s talk more about what this diagram means so you can use it or something like it for your own business purposes.
The first phase of this customer lifecycle, or the acquiring stage, focus on engaging with your visitors. These are just websites and social media visitors and not even necessarily leads yet; they’re certainly not customers, either. You don’t have their contact information at this point, but that could change. These visitors are not yet at the stage where they’re even considering making a purchase from you.
During this phase, your goal is to create a channel for communication between you and the visitor, often through them opting into your email newsletter. In your email exchanges, you could present a discount or coupon code to convince them to buy from you for the first time. You should also strive to prove the value of your products or services to incentivize that purchase.
Should you do all this correctly, your engaged visitors will become loyal visitors. To show their loyalty, these visitors have opted in to your email newsletter, even if they have yet to make a purchase. Do keep in mind that they’re still not even leads, but you could be well on your way to that, as the diagram illustrates.
Also regarding what the diagram illustrates, at this point in the game, you’re at the highest risk of losing out on these potential leads. That’s mostly because you often have no concrete way to contact them yet, at least not with some site visitors. Even if all goes according to plan, these visitors have the lowest earnings potential of any in the customer lifecycle.
In engaging with loyal visitors through email marketing and other forms of marketing, you could get them to convert into customers. They then enter the second phase of the customer lifecycle or the retaining stage. This begins with your first-time customers or those who have bought from you at least once.
To encourage them to make a repeat purchase, you must keep up with your email marketing. You want to send them offers to products or services that would be of interest to them based on their purchasing history (as limited as this is). You also want to acquire feedback from these new customers, giving them discounts or coupons in exchange for their time and cooperation.
Another type of customer in the retainment phase is the recent customer. These are those customers who made a single purchase and maybe even a second or a third, but there’s a big gap between them.
Instead of taking the same approach with your new customers, you want to send reminder emails to convince them to buy. Referral vouchers or coupons, as well as product reviews (with discounts or vouchers), are other methods to draw this customer out of their shell.
The loss risk drops as you get into the early customer stages while their revenue potential for your company increases exponentially.
Increasing Value Stage
Earlier in this guide, we talked about how it’s possible to upsell to customers while using CLM tools. Now, the time has finally come for upselling as your customers enter the increasing value stage of the lifecycle. You have two groups of customers here, the promising customer and the potential loyalist.
Your promising customers have bought more often than recent customers, although they don’t tend to generate a lot of revenue with their smaller, cheaper purchases. You should work to increase how often they spend or how much money, preferably even both.
Upselling is one such method you can use, but make sure you frame the offer as being limited edition or only available for a limited time to make the promising customer want to buy.
Your potential loyalists are repeat customers who spend decently and buy both bigger and smaller items. You don’t want them to slow down, so you should send them offers and deals that convince them to maintain their spending behavior. For example, you could give them priority shipping.
As a portion of your biggest spenders, your promising customers and potential loyalists are some of your most valuable.
Wrapping up now, your customer enters the cherishing stage, which includes your loyal customers and a breed that is branded as champions.
Your loyal customers are the backbone of your company, as they read emails, respond if necessary, and spend consistently. They make up a good portion of your company’s revenue stream, and as such, you’re again going to want to keep them around.
To do that, you could offer them personalized gifts and goods, such as team photos, personalized and signed notes, and even a gift voucher just for them.
Above your loyal customers are your champions, the real big buyers for any company. They buy from you more than anyone else and spend lots of money on your products or services. Without them, you’d have a very large gap in your revenue, something any growing company wants to avoid.
You should establish a customer care team if you don’t already have one and then use this team to communicate with your champions. This individualized attention will keep the champion buyers shopping as they have. You may also opt to give them free complimentary gifts and let them have early purchasing access to new products before anyone else.
EngageBay for Customer Lifecycle Management
If you’re looking for a CLM software to better understand and engage with your customers, EngageBay is the right option for you. We already offer phenomenal CRM software that will make tracking and managing your customers far easier. Not only that, but you can ensure higher-quality leads thanks to features like lead scoring, which is included with the software.
Besides our free CRM, our CLM software will let you better connect with that growing audience of yours. You can create your own lifecycle phases and then diagram out what your customer relationship future looks like. Your company will have a better grasp of what kind of revenue will come in and your customers will feel like the superstars they are.
Customer lifecycle management or CLM is a type of tool used to better the customer experience. It can be part of a multi-channel campaign, such as through combining your CLM tools with CRM software or even Social CRM.
In understanding the lifecycle process like you now do through this guide, you can begin formulating your own customer relationship management cycle for your company. Better understanding your customers and their unique needs will only not only increase your revenue but your customer retention as well. Thus, CLM software is very much worth using. Good luck!