What’s my “customer lifecycle”?
This isn’t a hard concept, but far too many business owners haven’t organized their processes and data around the stages that a prospect must go through to become a customer and a customer then goes through to become a happy, repeat, referring client.
Your process will look something – but maybe not exactly – like this:
To use Ontraport’s process as a specific example, our lifecycle looks like this:
Your process might include these steps or others. Maybe you book free consultations or webinars. Maybe getting the first appointment is a key part of your process. Maybe you offer a lower-priced entry level product (or tripwire) as part of your sales process. You could be driving in-store visits.
Whatever it is, the first steps are to:
A) Have a process.
B) Write it down.
This isn’t hard work; the point is to make it clear and make sure everyone on your team knows it. If I were to ask you what your customer lifecycle is, you shouldn’t have to think about it… you should know it. You’ll know it, because it’s what you work on and think about every day.
Why is having a clear customer lifecycle so important?
In his classic book, The E-Myth, Michael Gerber writes about the difference between working on your business versus working in your business. He describes the difference by reminding us that when you are delivering your product or service, you’re working in the business, and no amount of this kind of work will help you grow your business to the next level.
You can’t ever bake enough cakes or walk enough dogs or write enough contracts or coach enough students to build an actual business. The real “building” part of entrepreneurship is not the work you do performing your service or delivering your product, but instead it’s the work you do on systems and processes that are designed to get clients and deliver on your promises in a predictable and scalable way.
Until you are clearly focused on building those systems and processes, you are simply working a job that you built for yourself. When you start to get serious about systems, then you’re building a real business.
The way to organize and think about those systems is through the lens of your customer lifecycle. With the exception of internal operations systems like accounting and HR, all of the systems and processes you build in your business are in service of moving prospects through the stages of your customer lifecycle. The more effective those systems are at moving prospects from one stage to the next, the stronger your business is. Your ability to grow your business is 100% dependent on how efficiently your customer lifecycle works.
To see what I mean, look at two imaginary businesses:
Business A spends $1,000 to get 1,000 visitors to their site, and they have a website that converts 10% to leads and a follow-up sales process that converts 20% of those leads into customers. That means that for $1,000, they’ll end up with 20 customers. Let’s imagine the product is $100, so they’ve earned $2,000 on their $1,000 investment. Maybe that’s enough to break even after costs. Let’s also imagine that 30% of those customers buy a second product at $200 and 10% tell a friend. That adds another $1,200 in sales, for an average customer value of $160. That means those referred friends are worth another $320, so your grand total sales from a $1,000 advertising investment is $3,360. That’s pretty cool, but if you take costs into account, you’re maybe looking at $1,700 or so in profit… which is just enough to buy another $1,000 in ads while pocketing $700.
Meanwhile, Business B spends $1,000 to get 1,100 visitors (because they’ve worked to optimize their ads) and their website converts 15% of visitors into leads (because they’ve worked to optimize their website) and their follow-up process converts 30% of leads into customers (because… well, you get the idea.) That means that for $1,000, they’ll end up with 50 customers instead of 20. Then let’s imagine that 40% of customers buy that second product (instead of 30%), and 15% tell a friend (instead of 10%).
If you do the math, you’ll discover that Business B has earned $10,260 from their $1,000 investment. If we assume that they have the same costs as Business A (which can also be optimized!), they’ll clear a bit over $5,000 from that $1,000 investment in advertising. If they pocket $1,000 (instead of $700), they have $4,000 left over to invest in advertising next time.
Repeat this process just three times… and you’ll find out that Business A ends up with $2,100 in their pocket and a business that’s no bigger than when they started, while Business B ends up with $3,000 in their pocket and a business that’s 95 times bigger than their poor competitors. That $95k in revenue – which will keep compounding of course – is how you pay for employees, how you open new stores, how you invest in new products and services, and how you gobble up advertising space and become a major player in your market.
And all that comes from relatively minor improvements in the efficiency of your customer lifecycle. Those improvements are made through trial and error — testing out new ideas, tracking the results of those tests, and doing more of what works and less of what doesn’t.
That work is the real work of business building. That work is what ultimately separates the truly successful from those who just manage to get by.
This isn’t a theory. This is the whole game. If you’re not focusing on this, then you’re not building a business.
What do I do with my customer lifecycle now that I’ve written it down?
Ok, you know this. Maybe you’ve got your lifecycle written down, and that’s a great start. Here’s the rest of the process:
c) Track every prospect’s progress through your lifecycle.
d) Know your conversion rates between each stage.
e) Work to improve those conversion rates.
The rest of these steps are the nuts and bolts of your business maintenance. They’re not hard, they just have to get done.
Track progress through your lifecycle
To track your prospects’ and customers’ progress through your customer lifecycle, you’ll need a pipeline to move each contact through. In Ontraport, you can do this by using a customized dropdown field.
In Ontraport Plus accounts and above, there’s a default field called “Sales Stage” that you can customize and use, or you can make your own by adding a custom field. Either way is fine; just add one dropdown value for each stage of your customer lifecycle. Here’s how you might set that up in your account.
The next step is to ensure that each contact in your database has the correct value according to where they are in the lifecycle. You’ll probably want to create groups of contacts for each stage and then use the Update Field group action to set that value for all of them at once.
Finally, you’ll want to automate the process of updating these stages so you don’t have to worry about it going forward and can count on your data always being accurate. Use a campaign to update the value of your dropdown field whenever a contact moves from one stage to the next.
For example, we have a campaign that changes prospects to leads when they fill out either the “Get a Demo” or “Free Trial” form. Similarly, when they upgrade, we flip that field from “lead” to “customer” using a campaign.
Once you’ve got this all set up, you’ll always know how many contacts you have at each stage, and you can keep track of how people are progressing through your lifecycle. Nice work!
Know your conversion rates between each stage
The goal of your business is to move the most people from one stage to the next, as quickly as possible. And, as they say, “What gets measured gets managed.” So, measure this.
It’s easy when you automate it in a platform like Ontraport.
Create a campaign, and make a trigger at the top for “Contact is added to Database.” Then, add a goal for each of the stages, with the goal setting “Field is Updated” and the condition “Field has Stage = [the next stage].”
There’s a template campaign for this in our marketplace called High Level Customer Lifecycle. Try that out and tweak it to match your process.
Once you’ve got that set up and published, it’ll always be easy to see how many contacts are at each stage (they’ll be sitting on the wait element under the related goal) and what your conversion rate from stage to stage is (look at the Funnel Conversion Report in Performance Mode). You can click on any of those stats to get a list of the specific contacts in each group.
Work to improve those conversion rates
Of course, this is where the rubber meets the road, and I can’t tell you exactly how to get this done in your business. But, focusing your team around improving these conversion rates is the best thing you can do to make sure you’re working on the most important projects in your business.
Are your landing pages not converting traffic to prospects? Split test your page design, make a better offer, experiment with advertising to a different audience, improve your copy. There are a million things you might try, and you won’t know what works until you test and measure.
Are your leads not buying? Improve your follow-up campaign, train your sales reps better, experiment with your pricing, improve your sales pages, make sure you’re attracting the right leads… the list goes on.
The first day of the rest of your business life
This concept is simple, but it’s the most powerful framework there is for staying focused on building a real business that works, keeping track of what matters, and making sure that you’re always improving things instead of just randomly making changes.
And, though it’s a simple concept, it’s not always easy work. All the example projects I mentioned above are real projects that are labor intensive and will require investment of money and/or time. But you’ll tackle those projects knowing that you’re doing the real work of business building, not chasing fads or getting distracted by shiny objects. Each project will serve a particular goal of improving the efficiency of your customer lifecycle and of your business as a whole, and over time you will optimize your way to success, project by project.
This is how great businesses are built, so start today by making sure you have the foundation in place to understand, track, and finally optimize every stage of your customer lifecycle. Good luck!