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The two most important stages of customer lifecycle management in uncertain times
Long-standing wisdom in business says when the economy looks shaky, or worse turns south, savvy companies redouble their focus on existing customers. There are two primary reasons why: First, you need to retain customers to simply “keep the lights on” so to speak. Second, growth during times of uncertainty is most likely to come from cross-selling and upselling. In other words, it’s far easier to convince someone who already knows, likes and trusts you to buy more—than it is to reach, educate and convert new customers—in a time when most budgets are under scrutiny. Further, additional sales with existing customers have a lower customer acquisition cost (CAC). That’s why ChurnZero believes customer retention and loyalty are the most important stages of customer lifecycle management. Yet what happens after the initial sale isn’t always top of mind for most businesses. For example, Forrester says just “11% of B2B decision-makers” say metrics for customer retention and loyalty are tracked by marketing leaders. The challenge is that growth through retention and loyalty requires “strong customer relationships.” If your company has been chasing net new customers and is only now shifting its attention to existing customers, you may have a lot of ground to make up. This blog post aims to help you with that. Further, for those businesses already decisively engaged with loyalty and retention, we strive to offer a few ideas for doing it better that perhaps you hadn’t thought about before.
What is customer lifecycle management in plain English?
To get to the essence of what customer lifecycle management (CLM) means, let’s first break the term down into parts: the customer lifecycle—and—management. The customer lifecycle is straightforward. It describes the process from the moment a company connects with a prospect—to becoming a customer—and ideally evolving into an advocate for the brand. The management aspect refers to the way you organize, understand and administer marketing, sales and customer success as a customer progresses through the lifecycle. The key to effectively managing a customer lifecycle is metrics. When you put these two terms back together—you have a framework for conceptualizing and managing your customers’ lifecycles. The customer lifecycle management framework consists of five stages—each with its own set of metrics. ChurnZero defines the five stages of customer lifecycle management as follows:
- Reach – establishing communication with a prospect to convey a message;
- Acquisition – engaging or educating a prospect about features and benefits;
- Conversion – convincing a prospect to become a customer;
- Retention – meeting customer expectations and delivering on promised value; and
- Loyalty – exceeding expectations and transforming customers into advocates.
While all these stages are important, some deserve greater emphasis under certain circumstances. For example, reach and acquisition are arguably more important to an early-stage company seeking to land its first customer. However, as the customer base grows, retention and loyalty become equally, if not more, important.
Seven ways to improve customer retention and loyalty
Macroeconomic factors are another example of when you might be better served by shifting your company’s focus to customer retention and loyalty. As ChurnZero CEO You Mon Tsang, wrote in Forbes: “A downturn can drastically shift your customers’ financial and strategic priorities. Their top initiative this quarter might become a trivial concern by the next. This means that you need to provide value as quickly as possible by focusing on what matters most to customers in the moment.” Whether we are currently on the verge of an economic recession remains to be seen. The consensus view seems to be that signals are mixed and the outlook uncertain. Even so, it’s better to prepare and not need those preparations, than to be ill-prepared and then wish you were better prepared. So, how can we improve customer retention and loyalty? Our recommendations follow below.
1. Re-evaluate your retention and loyalty metrics
Peter Drucker is credited with saying, “What gets measured gets managed.” We would add that metrics put the “m” in management and suggest re-evaluating the metrics you are using to manage customer retention and customer loyalty. While retention and loyalty are sometimes used interchangeably, they are different. Retention keeps a business running at its current course and speed—but loyalty drives growth through customer expansions and additional purchases. Some customer retention metrics worth considering are:
- Customer retention;
- Renewal rate;
- Churn rate;
- Customer lifetime value (CLV); and
- Gross revenue retention (GRR).
Some customer loyalty metrics worth considering are:
- Net revenue retention (NRR);
- Health scores;
- Engagement rates;
- Referrals and or references; and
- Net Promoter Scores (NPS).
2. Examine the causes of your customer churn
Another key step is to answer this question: What is driving customer churn today?
- Review the support tickets and product feedback from customers who churned;
- Ask your sales team why a customer left; and
- Interview customers who are leaving or have left.
We suggest identifying the top three reasons, documenting these reasons and developing “repeatable plays to react to them as quickly as possible.” You can also conduct a customer churn analysis for a more in-depth look at your causes of churn.
3. Improve customer onboarding
You never get a second chance to make a first impression. This means a customer’s experience during onboarding can have a lasting impact on the relationship you build. Ed Powers, a Customer Success consultant with Service Excellence Partners summed up this idea nicely in our guide, “How to Crush SaaS Customer Onboarding” when he said, “High customer loyalty is achieved by design, not by luck.” He and other big thinkers offer a range of tips including:
- Involve product management in streamlining the onboarding process;
- Obtain a detailed understanding of the customer’s pain points from sales;
- Develop a shared understanding with the customer and set expectations;
- Break implementation into short phases to achieve a faster time-to-value; and
- Focus on achieving business success from technology rather than technical success.
4. Use behavioral data to surface expansion opportunities
Companies that sell software-as-a-service (SaaS) can examine customer usage for behavioral intent data and adoption trends within your product. Taking stock and keeping tabs on this data will reveal well-timed opportunities to upsell or cross-sell. Customer health scores are an effective tool to gauge expansion likelihood. Scores combine and weight buying signals—such as key feature usage, license utilization, resource engagement, and third-party intent data—to signal the most ideal time to present an offer. In a separate piece that You Mon also wrote for Forbes, he notes: “When paired with automation, you can trigger expansion outreach based on positive score changes.” To give you an example, let’s say a company knows, or at least has a theory, that customers who use X three sticky features over Y time period usually purchase Z add-on. They can use a Customer Success platform to build an expansion health score that factors in this data point along with other high-intent actions. They can then use that score to power an automated play. Whenever a customer meets or exceeds the scoring criteria, they receive an in-app message promoting the add-on’s benefits as well as an exclusive offer.
5. Truly invest in your Customer Success team
Dedicating someone inside your organization to be charged with the responsibility of ensuring customers have success with your product should be a no-brainer. Customers need and deserve strategic guidance, tactical help and a dedicated advocate inside your organization. Investing in a Customer Success team doesn’t mean giving someone a title. It means providing them with the resources to be adequately staffed, well-trained, following streamlined processes and procedures and using the best tools to deliver on the promises your company made to customers.
6. Give customers the confidence to use self-service resources
Teach customers to fish, writes our very own Bri Adams, manager of Customer Success. Providing access to on-demand training, tutorials, how-to articles, tips, a knowledge base and community forums are proven ways for customers to get answers to burning questions they have right now. These have to be findable, organized, searchable and frequently updated to remain current with new software releases. While some of this might seem obvious, Bri points out that providing self-service isn’t just about furnishing resources—it’s also about building a customer’s confidence and competence to use those tools effectively. That task falls to your Customer Success team.
7. Train customer support to spot upsell and cross-sell opportunities
Most customers will need help from customer support at least a time or two. Customers that find their issues resolved quickly are prone to become huge advocates for your company. Good customer support is good marketing too. Yet there’s another opportunity here for smart companies to train support staff to spot cross-sell and upsell opportunities. That’s according to ChurnZero Chief Customer Officer Allison Tiscornia in a piece she penned for Customer Think: “They speak to customers as frequently as you do, or, if there’s an issue, more so. They know your customer’s challenges, and the products and features they’re using – or not using – to address them. In fact, they’re uniquely positioned to uncover expansion leads.” However, she recommends “keeping the focus narrow” by looking for one or two specific opportunities. The team will also need training and a process to follow when they do spot a customer with a need.
Customer retention and loyalty are built on relationships
Whether we fall on hard times or not, it’s still a worthwhile endeavor to focus on these two stages of customer lifecycle management right now. This is because customer retention and loyalty are built on relationships—and relationships take time. If you enjoyed this post, you might also like: The crucial nuance behind seven top Customer Success metrics for SaaS companies