Definition of Customer Lifecycle Management
Customer lifecycle management aims to achieve long term association between business organisations and customers. Wiesner et al. (2015) defines customer lifecycle management as the matrices which, indicate the performances of business organisations in terms of acquisitions of customers. The term embraces the various steps which business organisations pursue to serve customers and generate revenue. Customer lifecycle takes into the time when the business organisations acquire customers and offers those customers appropriate goods, services or both. The second parameter which business organisations take into account in customer lifecycle management is, the rate of cross-selling which can be done to the acquired customers to generate further revenue. If the companies are able to retain customers for long time and generate business from, the customer lifecycle is considered to be long while if the organisations lose their customers to their competitors, the customer lifecycle is considered short. Khodakarami and Chan (2014) point out that this customer lifecycle is heavily dependent on the power of the business organisations to build long term relationship with customers by offering them appropriate products and maximise their satisfaction. Larsen and Jacobsen (2016) in this respect point out that management of customer lifecycle have tremendous significance when it comes to generation of revenue and maintaining competitive advantage in the extremely competitive market context. That is why management of customer lifecycle holds high importance of to business organisations and has strong implication in the ‘real world context’. The aim of the paper would be delve into the concept of customer lifecycle management in business organisations in the ‘real world’ context and its strong implications on the business organisations.
Management of customer lifecycle can be defined as a combination of five stags which the organisations go through in creating a loyal base of consumers to generate business from them. Spiess et al. (2014) point out in this respect that these five steps hold extreme importance for companies because the customers are the sources of revenue the business companies earn. This means that the customer lifecycle also reflects in the financial statements of business organisations. Long customer lifecycle means that companies are able to retain more customers by continuous selling products, thus increasing their sales and net profit. Shorter customer lifecycle means high customer turnover or customer attrition which means the companies incur more marketing expenses to acquire new customers rather than generating more revenue by cross selling of products. Mishra, Pradhan and Bisht (2018) in this respect point out that shorter customer lifecycle means companies lose their revenue and ultimately end up paying their investors with lower returns. Thus, customer lifecycle management in the long run impacts the very capital generation, thus effecting the balance sheet. This tremendous effect of customer lifecycle management has led the companies manage each step of customer lifecycle management very strategy to ensure high rate of customer retention and minimise customer attrition.
The first step of customer lifecycle management is reaching out to prospective customers to attract them to consume the products business organisations have to offer. Datta, Foubert and Van Heerde (2015) mention that business organisations in order to reach appropriate customer segments have to promote their products in the market. Promotion enables the firms to segment their customer bases and choose the appropriate segments which can buy their products. Bernabé-Moreno et al. (2015) sheds light on the role of segmentation of market and points out that appropriate segmentation strategies enable business organisations to position themselves ideally to attract their target customers. For example, business organisations marketing premium products position themselves at marketers of high-end products like wearables made by international designers. This positioning allows them to attract their target customers, the upper class customers. This appropriate STP (segmentation, targeting and positioning) strategies enable the business organisations to reach out to appropriate customer bases which paves ways to the second stage of customer lifecycle management, acquisition.
Impact of Customer Lifecycle Management on Revenue Generation
Berman (2016) points that acquisition stage enables business organisations attract customers to their products. The business organisations at this stage must gain deeper knowledge about the needs and expectations of customers. Min et al. (2016) point out that the business companies in order to convert acquired customers to actual consumers must incorporate the needs and expectations of customers while framing the product strategies.
The third stage consists of customers building relationships with business organisations by purchasing products from them. Bhaskar and Kumar (2016) in this respect point out that it is at this stage creation of satisfaction comes into play. The companies should create high level of customer satisfaction by offering superior quality products. They can use strategies like using product bundling and appropriate pricing to create value addition of the purchase of the customers. Bilgihan, Kandampully and Zhang (2016) lend an entirely new level to the discussion in the present context when the market is extremely competitive mere selling of products is not sufficient to satisfy. They point out is equally important to create strong perception about the company among customers. The business organisation today give continuous support to customers using the customer care support systems and official websites. Satisfied customers can view their product details on the official websites and order for more products on real time base. This strong perception created among customers lead to the next stage which is retention of customers.
The fourth stage of customer retention enable companies to generate more revenue by continuously selling products to the customers they retain. Jiang, Jun and Yang (2016) point out that retaining an immense customer base attribute the firms several business advantages. It must be pointed out that the retained customers maintain strong relationships with the companies. They order more goods and services for the companies, thus adding to the revenue generation. For example, telecommunication companies can build relationship with customers by offering high quality mobile connectivity. They, at the retention phase can offer new variants of mobile connectivity packages or internet packages, which are entirely new products. Thus, they are able to generate more revenue from these customers by cross selling more products. Similarly, these satisfied customers may advocate the products of the companies to their acquaintances, friends and relatives. Thus, retaining customers enables business organisations gain new customers at no or very little promotion, thus once again initiating new customer lifecycles. Thus, it can be pointed out that retention of customers enable to generate repeated business by cross selling and reaching out to new customers, thus securing future business as well. The customer lifecycle ends with the fifth stage which attributes companies strong and loyal customer base (Li and Karahanna 2015).
An analysis of the five stages would show that they have immense practical implications on the business generation of companies. Lehmann (2015) points out to the first and the direct implication of customer loyalty and retention, revenue generation. He points out that when companies are able to ensure long customer lifecycle, they are able to generate immense revenue by selling them products. Adebanjo et al.(2016) point out that the implications customer lifecycle management is not limited to revenue generation but encompasses manufacturing as well. The companies in order to ensure perpetual customer satisfaction and repeated business generation, require to align their manufacturing processes with customer requirements like adopting measures like total quality management and six sigma, which is the second implication. The third implication of customer lifecycle management is capital generation.
Importance of Each Stage in Customer Lifecycle Management
The third implication of an efficient customer lifecycle management is a strong capital base. The business organisations today have to allocate immense capital towards development of new products and innovation. This necessitate them to inject immense amount of capital into the business. Earning high revenue allows these companies give high returns to their investors (King, Dhameeth and Kim 2017). Thus high revenue earned from efficient customer lifecycle management acts as a security to investors, thus enabling the companies attract more market capital.
The fourth implication of efficient management of customer lifecycle management can be described as the outcome of the three implication which is competitive advantage in the market. Kraj?áková, Navikaite and Navickas (2015) point out that an immense base of customers provides companies pools of revenue and capital. These revenue and capital pool enables companies to channelize funds towards continuous innovations and new product development. These two strategies enable companies to offer new products to customers which fulfil the need. They as a result remain with these companies. The smaller companies which fail to manage their customer lifecycle are not able to compete with the multinational companies. This practically leaves the products from multinational companies very few competitors. Thus they are able to retain their customers perpetually which literally reduces the threats of customer poaching by competitors (Chen 2015). Thus, efficient customer lifecycle management attributes the companies with competitive advantage in the market. This statement is testified by the immense customer bases of the multinational companies, their share indices, innovative products and robust revenue structure.
Conclusion:
It would be worthy to mention from the conclusion that customer lifecycle management has immense implications on business organisation. It forms the base of financial strength as well competitive advantage. Management of customer lifecycle cast shadow on the books of accounts and manufacturing processes as well. It would be apt to state the customer lifecycle has emerged as a driver to every aspect of the business processes.
References:
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