Wayne Lockwood: The Evolution of the Customer Lifecycle

Thursday, 10 November 2016

The Evolution of the Customer Lifecycle

Author: Sachin Kalra

As a marketer, you might have heard about the customer lifecycle in one form or another. It’s essentially the different stages that buyers will go through as they interact with your brand—from initial awareness through to purchase and advocacy.

Why is it important? It serves as a framework for your marketing team to think about their goals at each stage, map those goals to key measures of success, and develop the right content and campaigns to drive success for each of those stages.

At Marketo, we’ve seen many versions of the customer lifecycle model, each with their unique stages, and have even gone through a few iterations of our own. What we’ve come to realize is that even though marketing has evolved significantly over time, the customer lifecycle model hasn’t evolved to reflect the same changes.

The models we’ve seen have two things in common:

The customer journey, usually represented either as a circle or a funnel, is sequential. In a sense, this represents traditional marketing in which marketers have bombarded their entire audience with one campaign, then another, in sequence. This model is flawed and needs to evolve, since your buyers move through the customer lifecycle at their own pace.
Different stages. The customer lifecycle stages of awareness, engagement, retention, loyalty, and advocacy are usually found across models. However, do these really represent all of the different ways that a buyer interacts with your brand? The purchase stage is a discrete stage unto itself, separate from retention, as is growth. The model needs to be expanded to reflect all of the stages.

At Marketo, this is how we envision the customer lifecycle model, which represents unique buyer’s journeys and fluid stages:
Marketo customer lifecycle model

Here are three fundamental changes to the customer lifecycle model to reflect the unique buyer’s journey, which can serve as a framework for you to evaluate your own:

1. New Model

The sequential customer journey in the form of a circle or a funnel is dated. Each buyer’s path through these stages is different–some buyers go through the same stage multiple times, some skip a stage, and some may revert back to an older stage before taking two steps forward. In the past, it was hard for marketers to identify individuals in the journey, let alone react to where they are in the journey. That’s changed, however, with the emergence of more sophisticated marketing automation platforms and complementary technologies, and the model needs to evolve to reflect that reality.

The new customer lifecycle model, represented in a Venn diagram, accurately reflects a fluid customer journey. All of the stages converge at a common point at the base, reflecting that buyers can move to any stage from another. You may have a potential customer in the awareness stage who sees a web advertisement about your product that they click through to, and then they may spend multiple cycles in the engagement stage–coming back for a couple of visits to your product page, engaging with your social media page to learn more about the latest announcements, almost purchasing, but then abandoning their cart…only to make the purchase later through a re-targeted ad for cart abandoners.

This is a model that better reflects customer behavior as it stands–ever-changing–and it allows marketers to plan better for a much more personalized experience based on buyer behavior as well as which stage in the journey they’re in. It’s a win-win for both your buyers and your brand.

2. 6 Core Stages

Many customer lifecycle models are missing a few key stages: the purchase stage before loyalty and the growth stage before advocacy.

The purchase stage needs to be distinct from the retention and loyalty stage. You need to use specific tactics to transition a buyer from being interested to purchasing the product–such as making the purchase transaction easier for the customer, in the case of a more complex product, helping with set-up and support immediately post-purchase.

The growth stage is distinct as well–it’s all about getting a customer to like your products enough to purchase larger quantities of the same product or purchase other products from you. You need to be able to understand usage patterns, anticipate needs, and take action accordingly.

These two stages have been included in a number of models, but most models try to simplify and sometimes exclude these stages. A complete model includes these six stages:

Awareness: When a buyer first learns about your brand or product
Engagement: When a buyer becomes interested in your product or service
Purchase: When a buyer is ready to make a purchase
Retention/loyalty: When a customer purchases the product, uses it, and keeps coming back
Growth: When you identify complementary products to cross-sell or upsell the customer to continue to provide increased value
Advocacy: When customers love the product so much that they influence others to consider the product as well

3. Flow

The new customer lifecycle model can also be inverted based on the value of each buyer to your brand. Buyers in the awareness stage, though large in number, represent the smallest per capita value. From a customer lifetime value perspective, the diagram gets turned inside out, as advocates represent the largest value for the company, and thus constitute the largest stage. From this, it’s natural that our efforts as marketers should be focused on driving as many customers into the advocacy bucket as possible, growing the pie to its maximum potential.

What does the evolution of the customer lifecycle mean for marketers? For decades, we have relied on the old, sequential model to help plan and budget our activities in each stage, moving customers sequentially across each of those stages. Now that our buyers have higher expectations and are self-educating, our marketing needs to become more personalized and respond to individual behaviors. As such, the customer lifecycle model your organization uses should reflect this reality, enabling you to plan across each stage as you did before while giving you a full understanding of the different types of activities going on for each unique buyer.