Today, customers have the ability to access information from sources across the globe which is having a significant affect on how they research and shop for both products and services. The World Wide Web has provided us with extensive resources and placed us, the consumer, in control of our own purchasing and buying behaviour. But, with this power also comes challenges in that we have become less loyal and are always looking for the best price, best product and best service. This is proving to be a challenge for all businesses with customer defection continuing to plague many businesses. Whether you are a service based business, online store, coffee shop, accountant or retailer, you rely on retaining customers to provide a stable business income. Developing that loyal customer costs you less than finding a new one so it’s important to keep them.
Customer lifecycle management (CLM) has become a much more recognised marketing and business tool to help all sorts of businesses understand their customer journey, influences and the stages that a customer goes through. You can now use models and data to understand at what stage in the individual lifecycle journey a customer is at and focus on bringing them into, or back to, the ideal customer position. Large businesses are even introducing entire Customer Experience teams, dedicated to mapping, analysing and improving the customer lifecycle to minimise defection risk.
Minimising defection is a goal of all CLM but, if your not a large corporate businesses without extensive data warehouses, analysts and professional relationship marketers, how can you focus on customer lifecycle management and understanding defection.
This is what I wanted to chat about today – to bring in a simpler and small business focussed approach on CLM that doesn’t involve a huge investment both financially and time wise.
THE SMALL BUSINESS APPROACH TO CLM
No matter what type of business you are in, there will always be presence of a customer lifecycle, whether simple or complex. A customer lifecycle is essentially the relationship journey that they take during their association with a business or organisation. Some businesses wrongly think of a customer journey being circular – it essentially has no end and you keep moving customers through the journey, but this isn’t really the case. As with any lifecycle, the customer journey can be considered in mutlitple stages, similar to any type of relationship:
Awareness: making potential customers aware of your business is the first crucial step in building a loyal customer. There are multiple ways to make customers aware whether through physical signage, flyers, direct mail, social media or digital marketing. This stage is really about building your profile, making people aware of who you are and what you do.
Engagement: this is now the more serious stage where you are really starting to build the relationship, take it seriously and to develop the first stages of loyalty. You need to keep customers informed whilst being aware and considerate of how they have and continue to engage with you. Acknowledge them for who they are, continue to stay front of mind and focus on their experience with you.
Loyalty: a dream customer is a loyal one. They will aid referrals, repeat purchase and go out of their way to engage with you.
Dissatisfaction: as customers move through their life-cycle, they can become dissatisfied. This may be due to a change you’ve made to product, service, staff, location, price or as a result of a negative experience. You need to be aware of signs that a customer is becoming dissatisfied. Some may provide feedback (ideal) but others may start to shop with you less, their average transaction value goes down, they unsubscribe from communications, un-follow in social. The tip is identify and engaging with these customer to move them back in to engaged and hopefully, loyal. This is hard if you don’t respond quickly so needs to be a focused activity.
Defection: this is where you lose your customers. If you haven’t been able to recover the relationship, customers will move on to find a company that will meet their individual needs better or to their satisfaction.
With everything being so resource rich, customers are moving more frequently and trying different services, businesses and products more than ever before. Many businesses are trying to circumvent this through the introduction of loyalty cards however, these are only beneficial if you an actually make the customer loyal too you.
Many businesses get caught up in loyalty programs as a way to drive customer loyalty however, you need to be conscious to whether you are driving loyalty versus supporting frequency of purchases. Loyal customers will help drive business to you, provide you with the greatest share of wallet and prefer to shop or purchase from you. Frequent shoppers are those who will buy multiple times from you but yet won’t refer you and may shop with multiple suppliers to get the same deal. People now have wallets, and phones, full of loyalty cards but, looking at the true essence of loyalty, you need to ascertain for your business whether loyalty or frequency of visit / share of wallet is what you are offering. These are marketed and promoted slightly differently as the benefits that you offer to customers are different.
One of the benefits of a loyalty program, if set up correctly, is that you can track and use customer interactions to understand where they are situated in their lifecycle. It’s this data that will allow you to understand whether a customer is starting to move away from your business or brand.
Customer relationship management systems, or CRM as they are widely known, help you to track this information, compile it and analyse it. The most important thing for a true CRM is to ensure that it is both pushing and receiving information to and from customers. A system which is only pushing information and not gathering insight back will not help you to recognise the stages of a customers life-cycle.
But, as a small business, there are simple things that you can do which don’t require a CRM to understand customer life-cycle. The advantage of being a small business is that you understand your customers and you generally know them too. Simple things that you can observe in your every day interactions with customers that don’t require collection of data:
- Customer not visiting as frequently: this is a major change that would highlight that the customers loyalty or need for your business has decreased. Depending on your business, this could mean that they have gone elsewhere or their lifestyle has changed so that they no longer require your service. Either way, the less interactions you get to have with them the lower the loyalty scale would be.
Recommended action: chat with the customer about what has changed and see whether you can assist or help them in other ways. - Customer spending less with you: if you’ve had a customer that has frequented your business regularly and always spent an average amount which has now changed, this could highlight that they are moving away from your business. This could be because they have potentially found another supplier to assist them with their services which means that they are moving towards defection.
Recommended action: chat with the customer and keep them informed of offers and how you can help them. - No longer engaged on social media: social media is a large part of how we interact with customers now and it is also a good indicator of relationship. If you’ve had customers who have previously engaged with you on social media but have suddenly stopped, you have a reason to be concerned. Don’t stalk them through the social channel but, if you know who they are and can reach out to them other ways, it would be worth finding out if there are some loyalty issues and the customer is possibly moving towards defection.
- Customer not returning: If you’ve had a regular customer for a long time and they haven’t engaged with you in a while, this is a definite sign that they are defecting. If you have an email database, it would be wise to send them a prompt to re-engage. Many businesses are doing the “we haven’t seen you in a while, here’s an incentive” retention pieces, which can certainly work. If you find these attempts don’t work, you unfortunately need to assume that the customer has moved on.
Understanding a customers journey with your business and their ultimate life-cycle is extremely important to all organisations – retailers, accountants, plumbers, restaurants, coffee shops and schools. Don’t become overwhelmed with trying to bring in a really expensive CRM system, the advantage of being a small business is that you can develop a closer relationship with your customers. Get to know them, their behaviours and watch if anything changes. You can get simple CRM systems which can be apps on your phone – these will help you manage the outbound and collection of basic data to help you to get to know your customers but nothing will ever beat a personal relationship. Small businesses who do this well will find that defection is low and for the right reasons.
Good Luck!
The Marketing Elf
© May 2018
The Marketing Elf 