Let’s put ourselves in context and remember that CLM (Customer Lifecycle Management) refers to the management and analysis of customer interactions and relationships throughout the customer lifecycle, from the first contact to the eventual termination of the relationship. The idea behind CLM is to improve customer experience, foster loyalty and ultimately boost profitability.
Why CLM is worth investing in
- Customer retention: There is irrefutable evidence that retaining an existing customer is often more profitable than acquiring a new one. Good customer lifecycle management can significantly improve retention rates and reduce churn.
- Cross-selling and upselling: By getting to know customers and their needs better, companies can identify opportunities to sell additional products or premium versions of already contracted products or services.
- Referrals: Satisfied customers often recommend services or products to friends and family, which can reduce the cost of new customer acquisition.
- Insight: By actively managing and monitoring customer interactions, companies can collect first-hand feedback and use it to improve their products or services.
- Operational efficiency: Clear processes and customer relationship management tools can minimize redundancies and improve operational efficiency.
How the CLM function can be structured in companies
The role of CLM may vary according to the type and size of the company, but we can offer a general idea of how it might be structured:
- CLM strategist: This person defines the overall customer lifecycle strategy and identifies key interaction points, “moments of truth” and opportunities for improvement.
- Customer data analysts: Given the importance of data in customer lifecycle management, it is crucial to have people (or tools) that analyze customer behavior and buying trends.
- Customer relationship managers: These people are on the front line, interacting directly with customers and managing their concerns and feedback.
- Cross-functional teams: Since CLM is cross-functional and therefore influences almost all areas of a company (sales, marketing, support, product, etc.), it is crucial that cross-functional collaboration mechanisms be established.
- Technology and tools: Depending on the size and complexity of the organization, it may be necessary to invest in CRM (Customer Relationship Management), data analytics and automation tools to effectively manage the customer lifecycle.
In addition, companies should measure return on investment (RoI) in CLM by tracking key metrics such as retention, lifetime value (LTV), customer acquisition cost (CAC) and customer satisfaction.
While the upfront investment in CLM can be substantial, the potential return in terms of customer loyalty and long-term profitability usually justifies the effort and resources dedicated.
CLM investment success story
Several companies (especially technology start-ups) have successfully implemented CLM strategies. Let’s take a look at the CLM approach implemented by a well-known file hosting service:
- Acquisition through referrals: The company is famous for its referral program. Rather than spending large sums on traditional advertising, it incentivized existing users to recommend the service to new users by offering more free storage space to both referrers and referrals in return. This viral approach significantly reduced the cost of acquiring new customers and increased the user base exponentially in its early days.
- Effective onboarding: Upon registration, the company guides new users through a simplified onboarding process, with tutorials and clear steps for uploading and sharing their first file. This process not only helps users understand the value of the service quickly, but also increases the likelihood that they will become active and engaged users.
- Fostering loyalty through gamification: The company uses gamification techniques to incentivize users to explore more features. For example, by completing certain “tasks,” such as installing the app on a mobile device, users receive more free storage space.
- Constant feedback and improvement: From its earliest days, the company has always been very responsive to user feedback, implemented requested features and resolved issues quickly. This excellent customer service has helped the company maintain a positive image and build user loyalty.
- Upselling and expanding the service portfolio: With a strong base of loyal users, the company has gradually introduced premium features and other services to monetize and bring its offering to broader market segments.
CLM investment failure story
Yes, there have also been numerous cases where companies, including technology start-ups, have made serious mistakes in managing their customer lifecycle, with negative consequences for their reputation, user base and, ultimately, their finances. Let’s look at the example of a U.S. subscription-based movie ticketing company and find out what it did wrong:
- Unsustainable business model: The company offered a subscription that allowed users to watch one movie a day at the theater for an extremely low monthly fee. Although this offer quickly attracted millions of subscribers, the model proved unsustainable, as the company paid theaters the full price of each ticket.
- Constant changes in the offering: In an attempt to control losses, the company repeatedly changed the terms of service, limiting the number of movies users could watch, excluding certain popular movies, and raising prices. These frequent and inadequately communicated changes frustrated and confused many subscribers.
- Technical and customer service issues: Many users reported problems with the application and difficulties in redeeming tickets. In addition, complaints were often not adequately addressed, which worsened customer experience.
- Data protection issues: There were criticisms related to how the company handled and used its users’ data, which led to mistrust.
- Poor communication: One of the most common reproaches towards the company was its lack of clear and transparent communication with users. Changes in service were often made without prior notice and this made subscribers feel cheated.
As a result of these errors in customer lifecycle management and other business problems, the company lost the trust of users, which resulted in a decline in the subscriber base. Ultimately, the company was unable to recover from its financial and operational problems and went out of business.
This case highlights the importance of having a sustainable business model, listening and responding appropriately to customer feedback, and communicating transparently and honestly. Despite experiencing rapid initial growth, mistakes in customer lifecycle management are not trivial, as they can lead to a company’s demise.
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