Understand your customer lifecycle

Verticalising the sales funnel: aligning strategy and sales around the customer lifecycle

Posted by Roland Leemans on Nov 5, 2018 12:08:10 PM
Roland Leemans

Building profitable, long-term customers is more than guesswork. Many businesses struggle to create long-lasting relationships at a sustainable cost. Often, inefficiencies created by a lack of understanding and forward planning can erode the profitability of long-term customers, even those with the highest lifetime value.

 

Many businesses struggle to create long-lasting relationships at a sustainable cost. Often, inefficiencies created by a lack of understanding and forward planning can erode the profitability of long-term customers, even those with the highest lifetime value.

In industries as diverse as food packaging and conferencing, I have seen organisations struggle to build enduring, profitable customer relationships and to understand what it means to walk in their customer's shoes.

The challenge

Understanding customers, growing leads, increasing conversion rate, managing the cost of acquiring repeat business… the challenges around attracting and retaining customers are virtually limitless.

63% of marketers listed lead generation as one of their biggest challenges.

70% of customers leave because of poor service, usually attributed to a salesperson.

A better framework for understanding

Unsurprisingly, at the heart of building long-lasting, profitable customers is the customer themself. Stating it may sound trite, but ask yourself how well you actually understand your customer at each stage of their journey with you.

Do you understand what made them choose you? Do you understand how they actually use your product or service? At any given point, do you understand and respond to the jobs they are setting out to achieve and how you can help them achieve them?

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Unlike the traditional sales funnel, which puts the business at its centre, this mapping of the customer lifecycle is customer-centric; it focuses not on how a business progresses leads into sales, but on the steps that customers take, consciously or unconsciously, when making and evaluating a purchase decision.

Every step is distinct but interrelated

Applying Clayton Christensen’s "Jobs to be done" theory to the overall lifecycle, as well as its individual steps, helps to better understand and learn from your customers. By taking this approach, you can build replicable frameworks and deliver value to your customer through processes, rather than specific people.

Jobs theory poses that customers do not purchase a product or service, rather they hire it to help them make progress with a specific need in their lives, under specific circumstances. If you consider the core value proposition of your product or service, it should be aligned with a customer job-to-be-done and address their pains and desired gains. Whilst your product or service may address this at a global level, the key to understanding your customer’s lifecycle lies in the specific circumstances in which they find themselves at each stage of the journey.

Stepping outside of B2B and remembering that business is simply groups of people, take Theodore Levitt’s mantra; “your customer wants a ¼ inch hole in the wall, not a ¼ inch drill bit”. Globally, their need is clear - “I need to put a hole in the wall”. However, consider, through the customer lifecycle perspective, their circumstance-specific needs at different stages of their lifecycle. For example, when evaluating which drill bit to buy (if at all), their specific need changes from mounting something on the wall, to needing to know which drill bit is the right one for the job. Does it fit their drill? Can it go through brick? Can I find this information quickly and in a way I trust? Whilst their overall job is to make a hole in the wall, their circumstance-specific job at this stage, is "I need to know if this is going to work".

Align your teams to accelerate organisational learning

Acknowledging that every step of the customer lifecycle has its own nuances and specific needs, the most effective organisations take the time to truly understand each step.

Organisations that have adopted this mindset and aligned their processes to it have seen a 20% increase in leads, 10% growth in first-time customer numbers and 20% reduction in the time taken to qualify and close a deal.

A clear line of communication between key business units can accelerate the process of understanding and create insights that, operating in isolation, they could never have discovered. Your sales, customer service and marketing teams should share customer insights, specific to the stages they each influence.

For instance, objection handling by sales at the RFP stage may highlight customer needs that the marketing team can proactively address at the search and evaluation stages. This mindset serves to benefit not just your customer, by improving the way you address their needs at each stage, but also your bottom line, by accelerating customer progression and creating process efficiencies.

Think in terms of value proposition design

When what is needed and what is offered are in balance, value is delivered. This is the founding principal of value proposition design. Understanding what your customer needs at each stage of the customer lifecycle allows you to tailor your offer, or innovate, to help them meet those needs.

This is not to say that you should flex your strategy in order to just win customers; in fact, quite the opposite is true. By knowing, through strategy, which customers you should be working with, you can communicate openly about how you add value and to whom, acknowledging that you are not a fit for everyone. If a customer is not a good fit for your business, you add more value to them and defend your reputation by recommending them an alternative than you do by pursuing their business.

A classic example here is found in the evaluation stage. Offering fact-based, impartial comparison tools to your client has a two-fold benefit. Firstly, they need to do their research. By respecting their time and facilitating quick, impartial research, you help them with their circumstance-specific need.

Secondly, by wearing your heart on your sleeve in this manner, you address their need to efficiently find a supplier that fits. By presenting a clear view of what your business stands for, your customer can quickly evaluate if you are a fit - but you can only know this by having a clearly defined strategy.

Turning theory into action

The starting point for nurturing profitable long-term customers is to first understand them. To fully analyse each stage in granular detail is not a quick process, but asking a few simple questions of each stage can give you a quick start in the right direction. At each stage, ask: 

What is my customer trying to achieve?

How are we helping them achieve that?

Why would a customer progress with us at this stage?

Who in our organisation is best placed to help us understand the customer at this stage?

By charting each of these four questions at each stage of the customer lifecycle, you can quickly build a framework to understand your stage-specific value propositions and identify the people through which you can validate your findings. The pathway to profitable long-term customers is not a short one, but having a framework to understand your customers and align your organisation around them removes a lot of the guesswork. 

 

Topics: Customer First Strategy

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