How to Match Customer Retention Initiatives with the Customer Lifecycle


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The best customer retention initiative to implement for a specific customer often depends on their position in the customer life cycle.  What’s more, often the earlier in the customer life cycle that you execute a customer retention initiative the more effective and higher the overall ROI of the initiative.  So what should you do and when?

When considering the customer life cycle, we split it up into four distinct sections.  These sections are shown below along with the value, i.e. profit or gross margin, that different types of customers contribute to the business at different parts of the cycle.


This is the time when a customer is just starting their relationship with your company.  The length of time a customer spends in this stage depends on your business but it is normally anywhere from a few days to a couple of months.

The largest group of customer retention strategies that can be implemented in the New stage of the customer lifecycle is Onboarding.  Onboarding is the process of bedding a customer into your organisation and includes ensuring that their personal data is correct, that they understand the products/serivce they have purchased and how to contact the organisation.  We have proved time and again that customers that are properly onboarded will stay with the company longer and spend more money than other customers.

Onboarding initiatives can be as simple as calling all customers in their first 30 days to confirm contact details and resolving any teething problems that they might be having.


These are your company’s current customers and fall into several groups.  The first is the Ideal customer; they continue to use and grow their use of your products.  The second are the Unhappy customers, who although they still use your products, are discontented.  Lastly, you have customers in Silent Attrition.  These customers still have your products but no longer use them actively, for example, credit card accounts with little or no spending.  They are generally a drag on company value because you still have to service them but they add no profit to the business.

Customer retention strategies for existing customers start with classifying each type of customer (Silent Attrition, Ideal and Unhappy) and then creating appropriate initiatives to change their behaviour.

For instance, for customers in Silent Attrition you must determine why they are no longer using your product (are you their “back of wallet” credit card for instance) and then determine how to have them start to use your product again.

One example initiative for the “back of the wallet” issue is to target customers with a campaign to increase their use of direct debit orders.  Once they have started using the card for regular purchases they are more likely to use it in day to day shopping.


These customers are on the way out.  They may still use your product but they are looking for the exit and actively seeking alternatives.  Given time, they will leave.

Your initial challenge in creating retention strategies for Exiting customers is to identify them.  One way is to uncover the tell tail signs that customers considering a move provide to your organisation.  For instance, if you are a bank, they may make a request for the loan pay-out details.  As you uncover these indicators, you should create initiatives to target those customers with a proactive contact.

Where customers purchase multiple products from you, you should also try to understand the order in which customers drop their product relationships when they are exiting because this can give you another good early warning.

Once you can spot existing customer you can create effective customer retention strategies to target those customers.

For instance if a request for loan pay-out details is an indictor of imminent exit for your customers you might send all customers requesting such information a special discount offer on new loans.  This means you have your best foot forward as they investigate their options.


Putting it simply, these are no longer customers.  They have left.

Strategies that are aimed at recapturing customers that have left the organisation are generically called Winback strategies.  This is the most expensive and lowest ROI place to try to implement your customer retention strategies.  Mentally customers have already moved to another organisation and it takes a large inducement to bring them back.

If you choose to execute Winback strategies then you will need to carefully manage the level of incentive that your staff can offer to customers.  For instance, you will need rules to tailor the incentive level to each specific customer in order to ensure that the level of inducement is not larger than the future business generated by that customer.

When executing Winback initiative a good approach can be to send all customers asking to close an account to a specialist team who have the training and access to special offers to try a last ditch effort to retain the customer.

When you create customer retention initiatives you will need to justify them based on the return on investment they will generate and this can be easier or harder depending on the position in the customer life cycle.  Generally, the later in the life cycle, the easier it is to attribute results to your customer retention initiatives and therefore prove a suitable return on investment.  However, intervening earlier is less expensive and more effective, but harder to prove.  Don’t let the difficulty of proving the ROI for early intervention deter you because it can pay very good returns.

For more information on how to implement effective customer retention strategies and customer management approaches give us a call.

Republished with author's permission from original post.


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