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The Customer Life Cycle


A customer life cycle framework includes metrics for reach, acquisition, conversion and retention. This framework gives you a business model for understanding the nature of your business in relation to other businesses.

In today's business environment, the trend is for most businesses to use both online and offline channels in their marketing plans. The broad categories of reach, acquisition, conversion and retention can be used to further clarify the metrics you measure.

Whereas in the past, marketing managers could simply report that they got 30 percent more visitors who bought 10 percent more widgets. Now, using a customer life cycle framework to interpret the powerful reports in web analytics solutions, managers can pinpoint the initiatives that brought more visitors or the optimal sales path that increased sales. You can identify the marketing activities that succeed and those that don't, fine tuning your marketing activities.

The following are definitions for the metrics in the customer life cycle. These metrics will be used when you create your Key Performance Indicators, the means for achieving your business goals.

Reach

For our purposes, reach is defined as the likelihood of gaining someone's attention. This can be displayed in a number of ways, depending on how you are looking at it.

  • The number of searches completed for your paid search keyword phrases.
  • The number of reads an article written by someone representing your company received.
  • The number of users who view banner impressions served on a website.
  • The number of subscribers to a newsletter you sponsor or that contains your ad.
  • The number of readers who subscribe to a newspaper or magazine and will see your ad.
  • The number of views your billboard ad receives.
  • The number of views your TV spots secure.

Each qualifier is both easy and difficult to measure. Any banner network can tell you how many banner impressions were served or the number of times your search phrases were used. Likewise, any magazine or newsletter can tell you how many readers they have. Any marketing vendor can tell you how many valid addresses your direct mail piece was sent to. But how could you know how many people read your article or actually received your piece of mail? And if they did receive it, how do you know they opened it? It is impossible to accurately calculate this data.

This is why reach is difficult to measure. No matter how powerful your web analytics solution, no one can tell you the number of people who actually read and think about your marketing message.

For that reason, reach is tied to acquisition; we can't measure the number of people who read a message but we can infer this value from the percentage of people you are able to acquire. So when thinking about reach, keep in mind that it is correlated to the actual acquisition of visitors.

Acquisition

If reach is defined as the likelihood of gaining someone's attention, then acquisition can be defined as how well you got it. Did they make it to your site? Did they click on a link or type your domain in their browser and bring themselves to your site? That's acquisition.

To some, acquisition is more accurately measured in terms of a visitor not only arriving, but also engaging in some sort of action, like a purchase. However, any visitor who lands on your site as a result of one of your ads has the potential to complete an activity of value. Thus, it can be considered an act of arrival or response.

Acquisition stats are focused on your source of traffic, which can be the referring domain, a search engine or a search key phrase. Your web analytics solution extends this measurement, allowing for the qualification of visitors. In so doing, it runs into the measurement of conversion.

Conversion

Conversion and the activities leading to this action are the raison d'etre for your website. Conversion is the successful completion of specific activities by your site visitors that result in a positive contribution to your bottom line.

Conversion can be measured differently for different activities. Conversion does not have to equal a sale. It can be the downloading of a document or application, the act of submitting information to generate leads, the locating of information in an FAQ or support document, the act of navigating from a general to a more specific page, the specific amount of time spent on a website, the viewing of a specific number of pages, or viewing key pages like the services page with pricing information.

Studying the sales path to conversion will help you make changes to your website and influence marketing initiatives that will impact your visitors' ability to complete desired goals. This is a win-win situation because it leads to customer satisfaction and increased profits for your business

We have discussed the fact that a website may want to measure many different conversion rates. It is important to measure all the conversion rates that matter, but do not compare your rates to those of others. Research firms have published studies about conversion rates by business category, and this information is interesting, but it should not be used to gauge your own success. Your measure of success should be the increase (or desirable decrease) in your site's key performance indicators over time.

Select the top three or four key performance indicators for your website (or marketing campaigns) and measure these over time, tracking progress and making the changes that will improve future conversions. It is also important to keep your conversion rates to yourself since competitors can use the data to your disadvantage.

Retention

The reach, acquisition and conversion phrases in the customer life cycle have been very time-invested, but now you need to concentrate on keeping those repeat customers. Research says that an existing customer is worth more than a new customer, so you need to monitor and hold on to them – which is no easy task with the Internet making competitors just a click away. If you sell a product, someone can make it cheaper. If you provide a service, someone can always do it better or faster. Unless your products and services are well branded or very unique, your business will always be subject to churn.

That is why it is important to measure retention. Retention measures the activities of your repeat customers, tracking everything they do on your site whether it is a purchase or any other activity. By watching the individual actions of your repeat customers, you can respond optimally to their needs, then up sell and cross sell products and services to them. Visitor segmentation tools are an important aid to understanding your repeat customers.