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Posted on October 25, 2010 by West Corporation 


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Till Death Do Us Part: Extending the Lifetime Value of a Customer

by Scott Zimmerman

I believe that the old adage “it goes without saying” is a major factor in the breakdown of relationships – personal, social and professional. Articulating care and understanding, and creating a two-way dialogue, are the lynchpins of strong, long-term relationships.

In customer relations and lifecycle management, it is critical that a customer doesn’t just assume or hope a brand is there for them; they need to know it. Equally, it is critical that a brand does not only “turn on the love” at transaction times, such as contract renewal. Just like life partners, customers need to be told and shown how important they are and how much they are cared for.

So how do you stay married to a customer? How do you maintain, enrich and extend the relationship? A starting point is to determine what a customer lifecycle (or the lifetime value of a customer) is. While there are many models out there, they all pretty much boil down to three key stages: Acquisition, Retention and Re-activation. Or, look at it from another perspective — Acquisition (dating), Retention (marriage) and Re-activation (renewal of vows).

Advances in technology and communications from voicemail to Facebook to SMS to e-mail mean that people (customers) are accessible almost anywhere. Connecting and engaging them with timely, relevant and impactful touch points — at just the right time — is a powerful channel for communicating “customer love” and extending the lifecycle. There is a fast growing communications category called Engagement Communications that leverages these advances and combines them with a human touch. Engagement Communications involves tailored and personalized campaign-based outreach to customers — outreach that encourages two-way dialogue.

So how can this be deployed in extending or enhancing the lifetime value of a customer?

Dating: Recent research from Trial Pay shows that small software companies spend 50 percent of revenues on customer acquisition. Likewise, a new dental practice would require a patient acquisition investment of around $70,000 to build a profitable patient base of 600 to 700 patients. Whether as a business or a professional practitioner, the investment in customer acquisition is significant. So, the longer the lifetime value of a customer, the lower the acquisition cost over time; plus, the cost savings from not having to acquire new patients can be redirected into new service and product development, which in turn creates the opportunity for lifecycle expansion thus delivering double the business advantage. Engagement Communications plays an important, role not just in keeping a customer, but in helping acquire new ones – a form of online dating if you will.

Engagement Communications gives companies the means to create e-mail campaigns targeted at encouraging their customers to refer new customers. Not just by offering incentives for customers to refer friends and family (in states that allow it) but also by giving them promotional tools such as Facebook and Twitter links, and high-quality HTML e-mails to share with friends that illustrate a brand and the products and services available. Customer referral is not just the most powerful form of customer acquisition; it is also highly cost-effective. Providing “dating” tools to help customers share the love is just one aspect of how Engagement Communications makes a relationship with a customer flourish.

Marriage: You had to be better than your competitors in order to have won a customer’s trust, confidence and commitment. Just like a marriage though, trust and confidence breaks down when customers are not engaged in a compelling, meaningful or personalized way, or when a brand promise isn’t fulfilled. To retain the customer, or protect the marriage, it is the responsibility of companies to listen, to care, to demonstrate expertise and urgency – and to do something special and above and beyond what is expected. Engagement Communications plays an important role here. Imagine being able to send customers messages of appreciation – on a massive but personalized scale.

Imagine being able to send personalized SMS messages reminding a patient to take their medicine, or to wish them happy birthday, or to remind a customer to pay a bill before they incur extra charges. These are all small acts of caring. But they add up to customer love. And, perhaps most important, is demonstrating true care when you unintentionally let a customer down. Imagine the frustration of a customer waiting for a delivery of a new bed that arrives very late and impacts their entire day — Engagement Communications technology can connect between delivery vans and customer service teams so that when a delivery is late, the customer is informed in advance through automated voicemail or SMS that is then followed up with a meaningful personal phone call in the form of an apology or unexpected gift such as a discount. These types of acts of love keep and extend the lifetime value of a customer, and help drive brand advocacy and the customer acquisition cycle.

Renewal of vows: Customer churn, or divorce, is brutal in some industries. Telecommunications providers and banks face some of the worst churn rates of all verticals, with telecom providers experiencing churn rates of up to 35 percent a year. Engagement Communications technologies help companies maintain regular and meaningful contact with customers, be it through appointment reminders, bill pay reminders, or e-mail newsletters advising how to keep mobile phone bills low or how to avoid bank charges. These thoughtful touches help maintain and extend the life relationship.

Automated satisfaction surveys are another area where Engagement Communications plays a valuable role in the customer lifecycle. After a particular customer interaction or at specified intervals, online satisfaction surveys can automatically be sent to customers with embedded alerts that create a call to action if responses are negative. This gives the means to heal a relationship before it is failed. Only engaging around transactional or contractual windows demonstrates a lack of investment in the relationship and can lead many customers to not renew their vows.

A successful customer lifecycle management strategy demands engaging in meaningful, surprising and caring ways; ways that go far beyond the initial courting and transaction. Such an approach helps transform customer engagement and as a result creates life-long “till death us do part” customers.

Originally published in TMCNet, October 25, 2010


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