It’s not you, it’s me. For more than a century, your traditional sales and marketing funnels were perfect to help illustrate the path someone takes to become a customer. But the world has changed. Technology has democratized access to information and that changes everything. Furthermore, it used to be enough to just visualize the steps to making a sale. But I admit that I sometimes I needed other diagrams to show related processes and components. Sales, marketing, product management and customer service are so intertwined that I need more.
Look, your traditional sales and marketing funnels are great and I am sure there are still people who you’d make very happy but I am no longer one of them. I created a Customer Relationship Lifecycle that addresses the entire process from being a prospect to a lapsed customer and I know I can use this as the framework for building programs, strategies, systems and competencies. I’m grateful for the time we had together but it is time to move on.
Now that it is over, I can say that I always hated the funnel analogy. I have a funnel in my kitchen and if I pour liquid in, 100% goes into the bottle. This is not remotely close to how a prospect becomes a customer today. Yet, nearly all the models used in the business are called ‘funnels’ and make the assumption that what goes in all exits as customers. Since we are being real, it’s not the only thing I didn’t like.
There is plenty of relevant research that tells us that in today’s highly competitive business market, the focus should be on building relationships – especially in B2B. Existing models (and frankly the way many organizations run sales and marketing) focus on how one generates a sales transaction from a non-customer. This is a short-term and selfish way of approaching customers.
Traditional funnel stages can vary but the basic path is generally: awareness, interest, desire and action. What is the difference between interest and desire anyway? Shouldn’t you be able to verify with data where every prospect is at all times. Just because someone watches your webinar, downloads your white paper or visits your booth at a trade show doesn’t mean they have purchasing intent. Maybe your booth just had excellent swag. This is way more complicated than it used to be.
My new Customer Relationship Lifecycle is a high level visualization of how a prospect becomes a customer, then eventually a lapsed customer.
Sales transactions should be viewed and managed in a larger context to ensure that the multiple functions, processes and systems are all in alignment. The traditional sales and marketing funnels generally only address the stage where a prospect is being transformed into a customer. It is also focused on making sales transactions which is not about building long term, mutually beneficial relationships. The change in scope for my new model ensures that the objective evolves from a simple sales conversion to a longer term relationship.
Every type of professional has specific terminology and acronyms bestowed upon them by their education, profession and employers. You can cut through that by using my trusty lifecycle stages: before, during and after. (This works for absolutely everything because it always helps to speak in plain English instead of industry speak or in buzz words. The only caveat is that you must define what the ‘during’ stage means so everyone is on the same page.)
Now that we are focusing on the customer lifecycle and breaking it into before they are a customer, while they are a customer and after they are a customer we can take a closer look at each of these three stages. There are only two rules here: keep it high level and be able to quantify with data where your relationship is at any given time.
I’d argue that you can simplify all prospect-related interactions (sales and marketing) by quantifying just two things: identity and intent. This system prioritizes who Salespeople should reach out to and helps clarify for marketers how to work with each of the four groups.
A billboard reaches people traveling in a specific geographic area, digital ads on a news website reach that websites audience (which they can provide you details on) and a booth at a trade show will be seen by people in that sector who attend. Yet, you don’t know the individual identities of any of these folks who are interacting with your marketing efforts. Once you know their identity and have their permission to contact them when required (i.e. email marketing) you can interact with them and track it at a more personalized level.
The best way to track intent is to have a prospect tell you directly, “We are planning to purchase a doohickey from someone in the next 30 days.” Alas, we aren’t always so lucky to have a prospect tell us so clearly they intend to buy what we are selling (although not necessarily from us).
Instead we must rely on predictive modeling to help identify the possibility of future outcomes based on the historical data we have (i.e. search history, downloads, # of website visits in short time, etc.). You can create a simple model by analyzing all the data you have or a more complex and automated one by purchasing software that does it for you. Either way, you can divide all prospects into those that have demonstrated purchasing intent and those who have not.
The first step for anyone adapting this model for this own use should be defining ‘active customer’ because can differ. For some companies it is simple and either there is a contract in place or not. Other companies make periodic sales so they will likely select a timeframe that sales have been made in.
Good, lasting, mutually beneficial relationships are built on equality and each party giving about the same. This idea is the framework for how I sort customers: value propositions (customer) and Customer Lifetime Value for the Company.
I sometimes joke that the only two things I remember from college are my social security number and psychologist Abraham Maslow’s “hierarchy of needs.” This model resonated with me even then and I have continued to return to it because I think it can tell us more. I am by no means the only one that thinks this. Luckily, some very smart researchers have used it as the foundation for extensive and I think brilliant work on identifying the various value propositions. Their consumers and B2B buyers models are really useful and were published in the Harvard Business Review.
Now there are value propositions that are published by marketing and then there are the ones that customers experience and they may not be the same. Your customers benefit from your business relationship when the value they feel is strong, relevant and not easily replaced by another vendor. They may not be transparent about what is most important to them but they will return to you if you offer them value.
Lifetime Customer Value
Loyalty isn’t a proxy for profitability. The company that renews their $10,000 contract annually may be loosing you money. Perhaps they have been with you a while and are paying much lower rates. Maybe their point of contact is difficult and is as time consuming for the salesperson to manage as other customers with an annual spend of $50,000.
The Lifetime Customer Value (LCV) is a prediction of the net profit attributed to the entire future relationship with a customer. It helps quantify how much you benefit from each relationship. There are a lot of formulas for creating this metric and organizations should find one that works best for them. (The Association of Accountants and Financial Professionals in Business recently published an excellent guide on LCV with lots of food for thought.)
Even the best relationships come to an end. Sometimes it’s you and sometimes it is them – customers move on for a wide variety of reasons. The average customer lifespan varies by product, service and organization.
I wouldn’t just focus on customers who gave a high Net Promotor Score. This model is not sophisticated enough to provide much strategy. Instead, I would create a new metric, specific to the customer that tries to quantify goodwill or how friendly the customer proves to be. The formula should be specific to an organization but here are a few factors that could be incorporated in:
I’ve used dozens of B2B vendors over the years and some I would happily use again, some I would absolutely not and most I am indifferent about. I am always surprised when I end a business (or consumer) relationship and no one asks me why I am leaving. All organizations should have a system in place so they can prioritize which lapsed customers they will try to reengage with. A smart Customer experience management program would include the lapsed customers to benefit from good will, mitigate bad will and over time winback some of those that are indifferent.
The Lifecycle about provides a generic, high level representation. Before adopting this lifecycle, you need to define what each of the shapes means for you so that you provide consistency across your planning and operations. You may also need to make some minor modifications based on your business model, especially if you want to create separate versions for each major product/service family. Here are the questions you need to answer and document.
During (Active Customer)
After (Lapsed Customer)
The Customer Relationship Lifecycle is designed to help ensure the building blocks of a great relationship are in place so that it can last for the next hundred years.
The future seems more promising now that there is a new model that focuses on building and sustaining customer relationships. It can be used to plan marketing strategies, sales enablement, customer managing programs, budgeting/prioritization and more. I’ll be exploring the many ways to use this as a framework in future articles.
I’m grateful for all the models that came before this one because each experience makes the next one stronger. To quote, Adriana Grande, “thank u, next.”