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The Life Cycle of a Customer: Acquisition, Retention, Loyalty

Βefore analyzing the life cycle of a customer let me give you a metaphorical example. I believe that this is the best way to realize that we (people) are not only bosses or businessmen/businesswomen or managers or employees, we are mostly customers of other businesses. So, in order to improve our businesses or the businesses that we work for we have to understand the other side of the coin.

Story line:

Just imagine that it’s summer. You took your regular days off and you are ready for your vacation. You flew with your family to your destination and you arrive at the 5* hotel you’ve booked online. You go to the reception desk and the reception is greeting you by saying “Hello sir, how can I help you?”, “My name is John Doe, I made a reservation for two double superior rooms for 4 people for 9 days“, you reply. Then the receptionist replies to you with confidence and tranquility “Sir, we can’t give you those rooms, because they are already booked by other customers and unfortunately we are fully booked, so you will have to find another hotel. But of course we will give you your money back, you don’t need to worry“. The point is that you are already worried. Questions like where my wife and kids are going to sleep and what I did wrong and how can I fix this come up.

Then you decide to take your family and go to a nearby coffee shop to think about your next steps. Using your laptop you start surfing the internet trying to find the best and the fastest solution to your problem. YOU HAVE TO FIND A NICE HOTEL, otherwise your vacation is ruined.

You visit lots of different hotel comparison websites and you narrow down your search. In the next hour you have your top 5 solutions and you start calling them to check their availability. You finally find the hotel which will host you for your vacation. You take a taxi and you go there with your family.

In the lobby the receptionist approaches and welcomes you at the hotel saying “Welcome at our hotel, my name is Jennifer. Can I offer you some refreshments?“. She offers drinks to you and your family and she accompanies you to the reception desk. She asks for your passports and at the same time she is chatting in a friendly way with you “Did you enjoy your trip? Is this your first time in our town?“.

Then you narrate your bad experience in the previous hotel and she replies “Oh, really? I don’t like talking about the competition, but the sure thing is that they are not professionals“. When she asks the magic question “We have two superior rooms at discount for members only, but I can give them to you at an extra cost of $50 per night if you please. Would you prefer those?“. Your instant reply is “YES, I would love that“. After finishing your registration, she accompanies you to your rooms and she leaves saying “If you need anything just call at the reception desk. Enjoy your stay with us!“. And her wish eventually comes true as you totally enjoy your stay at the hotel and you return to your hometown happy and satisfied.

A month after your pleasant stay at this very nice hotel you receive the first newsletter from them asking for your review on their services and every one month after that you receive a informative newsletter about hotel’s facility improvements, the opening of a new branch in another town, etc.

Now, let’s move to the most important point: explaining the life cycle of a customer using the example above.

1 – Reach your audience

Be sure to advertise, market and promote your business where your target group is. You may advertise your business online (like the hotel in our example did and was found by the potential customer) or you can advertise your business in newspapers and magazines that are relevant to your sector. You can also use affiliate marketing either online or offline. You can use numerous methods of advertising, but keep in mind that you have to keep the metrics (data) of these advertisement’s results, so that you will be able to know which method brings you the most return per dollar spent.

2 – Acquisition of potential clients (Leads)

Find the NEED and the right TIME

You have to give your potential customers something, so that they will be turned into leads. A potential customer turns into a lead when he/she contacts you either personally or by visiting your store (either online or offline), like the disappointed Mr. Doe did. He called five hotels but chose the one that he thought was the best. In our example the hotel that Mr. Doe chose didn’t give something in return (for example a discount) but he made his choice probably affected by the speech of employee at the booking department who picked up the phone and spoke nicely and helpfully to him.

3 – Conversion (Turning a Lead into a Customer)

When it comes to conversion you have to be prepared to give 100% of your knowledge and experience because this is the moment when a potential customer turns into an actual customer; so this is when you make your first sale to a new customer. You have to be prepared to answer any question your customer may have before he decides to buy your product or service. Thus you have to close your conversation with the customer believing that he is happy and satisfied with his purchase. After all, most people buy things or close deals based on emotion. There are however a few people who buy things or close deals based on intelligence, but even those people narrow down their options (when they do their market research) based on emotion.

My conclusion is that you need two things to be successful in conversion; the first is finding the need of the potential customer and the second is to find the best timing. Αt our example the person who spoke with Mr. Doe was “lucky” because the client needed the rooms and didn’t have time to think about it, but she did a very good job in customer service and this is how she closed the deal with the customer.

Regarding the need, you have to discuss with your potential customer and pay attention to him/her so that you can fully understand what he/she needs. Potential customers often don’t let you know what they want your product or service for and you have to dig deeper in order to understand the true need. Keep in mind that you never sell the product or service, you always sell the need, but you have to find the right time.

As for the timing, you have to get back to a lead at the right time. For example if a potential customer visits your store and doesn’t buy anything, you have to get back to him/her many times (discretely) in order to find the right time for him/her to buy your product or service. So you have to get his/her contact details somehow in order to be able to get back to him/her anytime you want (newsletter, offer, discount newsletter, …..).

4 – Retention (Keep the customer in the house) 

When it comes to retention first of all you have to offer excellent after sales support to your customers, so that they will see your level of professionalism. Keep in mind that you have to be prepared for up-selling as well – like the clever receptionist did in our example – or cross-selling, because you have to make profit from your new customer.

Most of the times, if you deduct advertisement expenses, payroll expenses, commissions to 3rd parties, discounts, etc. the first sale you make to a new customer leaves you no profit. Also, most of the first time customers buy something to test your product or service and the quality of your after sales. Thus, you need to be good in retaining customers, but at the same time you should up-sell or cross-sell to them in order to have a positive outcome.

Also, keep in mind that you have to stay in touch with your customers and contact them regularly – like the hotel did with Mr. Doe with the use of newsletters – because you have to state your presence and your one-time customer will become a repeating customer.

5 – Loyalty

At this point your customer becomes your brand’s ambassador and he or she will spread the news about you to the world; how good your products or services are and why somebody should trust you. You should achieve this stage with at least 40% of your customers, if you want to maintain the good fame of your business or create one. According to our experience and studies, if you keep the rate of loyal customers above 40%, your business is in good place. If you can’t achieve a satisfactory percentage, then you should analyze and focus more on steps number 3 and 4.

Contact us to discuss your business needs and let our consultants help your team in succeeding in the whole process of the client’s life cycle, from Advertisement to Leads Creation and from Conversion (Sales) to customer’s Loyalty.

With valuable experience in various sectors, our consultants can offer you the best solutions for your business.

Please keep in mind that every suggestion in this article should be adjusted to each business’ model and each product and service accordingly.

Spyros Mouflouzis
Spyros Mouflouzis
Spyros Mouflouzis is the managing director of Navigore Boutique Business Consultants. He has extended knowledge in business development and business negotiations in various sectors. He has supported lots of startups, established businesses and corporations to achieve their goals.

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