Most successful businesses hinge on building and maintaining customer relationships. These relationships evolve from when the customer first hears of a company to when they last do business with them.
Throughout the time in between, a buyer’s mindset towards the company and its offerings may shift significantly, and understanding the customer life cycle can provide a competitive edge in staying ahead of the customer.
A Definition of the Customer Life Cycle
The customer life cycle is the process that runs from when a customer first becomes aware of a business to when they last do business with them.
It is typically broken down into five stages: outreach, engagement/acquisition, conversion, retention, and loyalty.
Throughout the life cycle, customers develop different perspectives, sentiments, and attitudinal approaches.
To track how these change throughout the customer life cycle, some companies choose to set metrics and track how it performs in relation to the customer's lifetime.
Such a process is sometimes called customer life cycle management (CLM).
By engaging in CLM, companies can learn customer behavioural patterns and act on them to increase long-term customer value.
What Are the 5 Stages of the Customer Life Cycle?
In 2000, Jim Sterne and Matt Cutler pinpointed the five steps of the customer life cycle in a paper titled “E-Metrics. Business Metrics For The New Economy”.
Although different organizations may conduct their own analysis to identify specific life cycle stages, many still stick to these five stages, which include:
1. Reach or Awareness
During this phase, a consumer becomes familiar with a company's goods or services for the first time. Social media, advertisements, word-of-mouth from friends, or other sources may have helped spread the word.
The goal is to establish a connection between the brand and a present or potential demand, regardless of whether the buyer has an urgent need for the product or service.
2. Acquisition or Consideration
The acquisition stage strengthens the relationship that the previous phase had already built between a brand and a customer's needs.
Customers may learn more about the company's offerings at this stage by visiting its website, speaking with a salesperson, or visiting a brick-and-mortar store.
3. Conversion and Nurturing
Here, buyers purchase a service or product. Understanding what influences a purchase can help a brand position its products, so they stand out against alternatives.
The customer may become a part of the company's customer relationship management (CRM) database after their first transaction.
If this is the case, the company can begin to keep tabs on customer activity in a bid to enhance the following stages of the customer life cycle.
4. Retention