Understanding customer lifecycles and improving sales

All too frequently, marketing is written off by small businesses as expensive and unnecessary. There is a sense that small companies have no need for flashy marketing techniques, particularly when they are selling non-discretionary products and services. Many business owners are also put off by apparently incomprehensible ‘marketing speak’.

In reality, however, a sound marketing plan is essential if you are to grow your business. Today’s climate is so fiercely competitive that such a plan may well be necessary for survival. Of paramount importance is a complete understanding of your clientele, and of the processes involved in converting potential punters into loyal customers. Looking at your customer lifecycle is a vital first step towards developing this understanding and, ultimately, improving your sales.

The customer lifecycle can be divided into four basic parts: reach, acquisition, conversion, and retention.

Reach describes your organisation’s ability to get the attention of your potential customers. There is a wide variety of ways in which you could achieve this, but your chosen methods are likely to be determined by the nature of your business and your product. You may choose to purchase advertising space in newspapers or magazines, send out direct mail, rent billboards, buy advertisements through Google, and so on.

Reach is nigh on impossible to quantify. For example, imagine that you have bought an ad in your local newspaper. It is easy to find out how many people buy the paper; circulation will have been one of the headline figures offered by the sales executive when you first expressed an interest. However, judging readership is far more difficult as there is a possibility that each newspaper will be read by more than one individual. Similar principles apply to virtually every method by which you hope to increase your reach.

Acquisition involves persuading an individual to perform an action once you have caught their attention during the reach phase. The nature of this action will be defined by the aims of your business. For example, if you run an e-commerce business, you would probably judge your acquisition rate by the number of visitors to your website. Alternatively, if you run a shop your total acquisitions might be equal to your footfall - the number of individuals entering your premises.

Your total number of acquisitions is a useful metric for gaining insight into reach. As has been mentioned, it is very difficult to judge how many people see your adverts or read your direct mail material. However, you can often measure responses using reference numbers and at the least your increases or decreases in acquisition should tally with periods of marketing activity or inactivity, thus giving you some idea of the success of your methods.

Acquisition is not enough on its own. Rather, in order to have a positive effect on your business (and, indeed, to offset the costs of any marketing efforts aimed at increasing your reach), acquisitions must become sales. This is the conversion period of the cycle.

Conversion is arguably the most important task for any business - without sales you will not survive. To some extent this is a numbers game; the higher your acquisition rate, the more conversions you would expect to achieve.

There are certain basic aspects of the conversion process that you should ensure you have covered. Primarily, the task of making a purchase should be made as easy as possible for customers. There is no point in getting people into your shop or onto your site if, once they are there, actually making a purchase is prohibitively difficult. You should therefore concentrate on the ‘user experience’. Even if your business is not web-based, you may find it beneficial to adapt certain techniques from online marketing. For example, you may want to begin ‘usability testing’, whereby independent individuals test out your processes to see how intuitive and effective they are from the point of view of a potential customer.

Customer service is also extremely important, particularly during a recession when price is at the front of everyone’s mind. A higher than average customer service experience can make the difference between converting a customer or sending them running to the competition.

Having made a sale, the next step is retention. This involves ensuring that your successful conversions become repeat customers, rather than defecting to another provider. For many businesses, the cost of acquisition and conversion is high. As such, retention is of vital importance as it extracts the maximum possible value from each conversion, and exponentially increases your profitability per customer.

The amount of effort required to improve and maintain your retention rate will depend on the industry in which you operate. In many sectors there is little apparent competitive advantage between providers; customers have little reason to stick with one widget vendor if they can get widgets of the same quality elsewhere - particularly if the new vendor is cheaper.

This inevitably means that the greater part of your retention strategy will focus on pricing. However, you should also be concentrating on developing loyalty to your business through other means. This might include some form of discount scheme, whereby repeat customers are periodically given money off their purchases, or access to exclusive special offers. Good examples of this type of scheme are loyalty cards offered by the larger supermarkets; consider the success of the Nectar Card program, for example.

It is also worth remembering that, frequently, the most basic actions can have the most profound effects. As such, simply making sure that every member of staff is providing great customer service can have a significant effect on both your conversion and retention.

Marketing can frequently seem like something of a dark art, particularly when we are constantly subjected to selling practices that are at best manipulative and at worst misleading. However, a basic appraisal of your customer base and your business model, along with an honest attempt to offer a better and more efficient service, can help to grow your business and keep your customers happy.

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