What are lifecycle stages?

If you consider that customer lifetime value (LTV) is a key performance metric, the idea of a customer lifecycle makes total sense. As a lead moves down and past the sales funnel they enter different lifecycle stages. The end of the lifecycle is marked by the customer ceasing to do business with a company.

Customer lifecycle marketing is about the big picture – your entire relationship with a lead. By following along with the customer on their buyer journey, you can hopefully increase the chance of getting repeat sales and referrals. 

For some industries the customer lifecycle is short but in others, it can be very long. Each business will have its own unique customer lifecycle and categories for the different stages. Technically, an organization can create any categorization that they see fit. Some of the most common customer lifecycle stages are:

Lead (Awareness)

When a user shares their information in some way they turn into a lead. The company can now reach out and engage with the individual and nurture the relationship.

Marketing Qualified Lead (Engagement)

These are the leads that have showed signs of interest and possibly even engaged with the marketing materials but hasn’t quite reached the point of contact with the sales team.

Sales Qualified Lead (Evaluation)

When a lead is closer to making a purchase decision it’s time for the sales team to take over. They will do so with every lead the marketing team has deemed to meet the sales qualified lead stage.

Customer (Purchase)

Once a lead purchases a product, hires the company for a service or opts for a paid subscription they are now a customer. Basically, if the sales team considers the deal closed the lead is in the customer stage.

Repeat Customer (Post-Purchase)

The ultimate goal is to reach repeat customer status. The lifetime value of a repeat customer is much higher than one-off customers. 

Advocate (Referral)

When a customer starts spreading the word about your business and makes referrals they have entered the advocate stage. These are your most valuable customers because they drive revenue and lead generation.

There is a cyclical effect to the customer lifecycle, particularly if you have a variety of products or services. The goal is to get customers to start the cycle over again rather than dropping off after a purchase.

Defining customer lifecycle stages will make marketing efforts and contact with the sales team much more targeted, relevant and effective. Going along with the lead on their buyer journey will help strengthen the relationship and improve your odds of getting a lead to the repeat customer and advocate stages.

Knowing the stages is the first step, but it will only get you so far. You have to know how to categorize leads so that you put them in the appropriate stage. There are two primary ways of knowing what stage a lead is in.  

User Behavior Analytics

Deciding which stage a lead is in mostly comes down to behavior. What type of information is the lead seeking out? Are they viewing product pages? Is a customer still actively engaging with your brand after buying?

User behavior analytics is needed to define customer lifecycle stages and know when a user moves from one stage to the next. Analyzing user behavior will reveal trends and patterns about what leads do during the buyer journey. It will help you determine what type of behavior signals that a lead has moved to a new stage.

For instance, if a lead clicks on an offer in an email it could indicate that they have moved from the lead stage to marketing qualified lead. 

The Sales Funnel

Your sales funnel is another resource for identifying customer lifecycle stages. The lifecycle stages correspond with the levels of a sales funnel (top, middle, bottom). If a user is at the very top of the sales funnel, then they are a lead. If they are in the middle of the funnel they are a marketing qualified lead. At the bottom of the funnel most leads are considered a sales qualified lead. 

Your content and promotions should be planned around the sales funnel to help ensure the message is relevant as leads in different stages move through it.

Often what happens is a company will put a lot of effort into engaging with a lead until they convert to a customer. Demand generation is the focus at the top of the funnel and then emphasis is on lead nurturing until they reach the bottom.

But as soon as the deal is closed, engagement drops off. Thinking that the lifecycle ends at a purchase is a costly mistake that could cause customers to end the lifecycle early before reaching the repeat customer and advocate stages. A DemandMetric study found that 88% of marketing budgets are allocated to leads at the top of the sales funnel, and only 20% of companies have a marketing plan that includes the entire customer lifecycle.

Repeat customers and advocates have a much higher lifetime value. Initiating a re-engagement marketing campaign for people in the customer stage is well worth the effort.

For example, let’s say your company makes high-performance athletic shoes. It costs you $50 to acquire a lead and convert them into a customer. The customer buys a $100 pair of shoes. Their lifetime value is $50 (purchase – acquisition cost). But if that same customer buys another pair of $100 shoes six months later their lifetime value is now $150 annually, a 200% increase over one-time customers. 

You have to fill your pipeline with new leads and new customers to continue growing, but existing customers are key to revenue growth and marketing ROI. Implementing customer retention efforts is also very cost-effective since a lot of the heavy lifting is already done. 

The Harvard Business Review notes that it’s up to 25 times more expensive to acquire a new customer compared to retaining a customer you already have. Existing customers are more willing to make a purchase and when they do the purchase price is 67% higher on average than new customer purchases. 

Here are a few ways you can continue marketing during the later lifecycle stages:

Did you use a special promotion to attract customers? That same strategy can work to retain customers as well. Special customer-only promotions offer value and makes your existing customers feel appreciated. A loyalty program is a great way to encourage customers to purchase again. You can also give customers perks for referrals or discounts on their next purchase. 

Even if a product or service is above average if a customer has a difficult time troubleshooting issues or getting questions answered it can ruin the experience. The customer service department is an essential part of keeping existing customers happy and getting them to remain loyal. Customer service representatives should be very prompt with communication and strive to make every touch positive. 

A well-defined customer onboarding program can fall into this category depending on the product or service. It can be as simple as a video tutorial and FAQ or an in-depth one-on-one overview where someone from your team walks the customer through all of the features. The customer service team can help you determine what type of information and assistance customers need during the onboarding process. 

Retargeting campaigns can keep your brand in front of customers with highly targeted ads that persuade them to buy again. There are many avenues that can be used for retargeting. They include:

Reengagement Email Campaigns

Email correspondence is one of the easiest and most effective ways to keep the lines of communication open and stay at the top of a customer’s mind. No matter what type of email is sent it should be highly personalized. At this stage, you’ve built a relationship with the customer. If they feel like an anonymous number within your organization they won’t be motivated to remain loyal to your brand. 

Planning your marketing campaigns with lifecycle stages in mind will help you create a plan that not only attracts new customers but also retains existing ones. The focus is less on the immediate (conversions) and more on the long-term (customer lifetime value). Taking a big picture approach and incorporating every lifecycle stage into your marketing strategy should help boost ROI and the average lifetime value of your customers.