Lifecycle Marketing White Paper

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					LifecycLe to Lifesaver:
TM

An Introduction to Lifecycle Marketing
How It Builds Profitable Relationships with Your Customers through Relevant Communication, Especially in A Down Economy

C o - a u t h o r e d b y:

emily bintz & Chris salmon

650 Century Plaza Dr., Suite 120 • Houston, TX 77073 • 281-821-5522 • www.adplex.com

The purpose of this white paper is to explore what lifecycle marketing is, how it could potentially benefit your organization, and considerations for implementing your own program. This white paper will provide you with the following insights:
• Introduction to and the foundation of lifecycle marketing; • Why it matters – the potential benefits to your organization in implementing a lifecycle marketing strategy in today’s economic environment; • Where lifecycle marketing will work well and conversely, potential pitfalls; • Visibility into the various strategic approaches to lifecycle marketing; • Considerations for operationalizing your own lifecycle marketing strategy and program.

introduCtion to lifeCyCle marketing: the Premise
Welcome to direct marketing 2.0: Lifecycle marketing is an evolution of commonly held direct marketing practices that leverages customer behavioral patterns to enable organizations to more effectively communicate with each customer. It is based on an in-depth knowledge of natural customer behavioral dynamics and motivational triggers to predict what customers will do next, combined with the knowledge of what you as a marketer want customers to do to drive revenue. How, you may ask, is this different than other forms of marketing strategies that you may be using right now? Do not confuse lifecycle marketing with efforts such as customer relationship management (CRM) or loyalty marketing, as: •	 CRM	encompasses	an	enterprise-wide	framework	which	organizations	use	to	aid	 interactions with customers and prospects. By definition, CRM is more operationally focused, so that the customer perceives the organization as one entity. •	 Loyalty	marketing	is	primarily	focused	on	growing	and	retaining	customers	via	a	tangible	 value proposition for the customer. It uses hard or soft benefits and incentives to economize and emotionalize value with an organization or brand. In contrast to these marketing principles, the premise behind lifecycle marketing is:

Timely communication with individual customers based on a high degree of relevancy

acceleraTe the desired customer behavior

maximize sooner, the lifeTime value of the customer

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the foundation of lifeCyCle marketing
At its core, lifecycle marketing is a customer-centric approach to strategic and purposeful communication. The end game is no longer about what the brand can do for you as a marketer (i.e. heavy reliance on brand equity to realize marketing objectives). Rather, it represents a paradigm shift into the realm of what you can do for the customer! In a competitive marketplace and in today’s economy, customers are more likely than ever to switch brands based on price. Building a strong relationship with each customer, based on their personal interaction with your organization, could be the differentiator that protects your revenue stream. In order to build that relationship, you must focus on your customers’ needs and wants, and not just on what you want from your customers. Lifecycle marketing is based on the principle that past behavior predicts future behavior. What does this mean? It goes beyond the accepted customer profiling, segmentation, and targeting that legacy direct marketing principles are based on. Instead, it employs past customer behavioral activity data to determine what is likely to happen in the future with a similar customer and sequence of events. It engages a customer from their first interaction with a brand through to their last interaction and provides a communication strategy for each key interaction the customer demonstrates throughout their lifecycle. The foundation of lifecycle marketing revolves around the fact that no two customers or customer experiences are exactly alike, nor will they happen at the same time, and they are shaped by past experiences with the brand. Therefore, customers need to be communicated with as individuals, triggered by their actions. Make no mistake - segmentation and profiling are still key elements and will provide the insight you will need into what is likely to happen with customers exhibiting certain behaviors. The difference is that each customer will receive communications at different points in time based Provoke a Talk to behavior on those behaviors, or the lack of a behavior. each
customer

You must also identify which sequence of customer activities is most beneficial or profitable to your organization. By identifying which path you want a customer to take to maximize their value to your organization, you can then devise a strategy that guides them along this path and timeline. The knowledge of which path is most advantageous comes from thorough data analysis, which we will discuss in the next section.

See Improved results

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lifeCyCle marketing is based on a Combination of the following five key areaS working TogeTHer To maXimize the value of eaCh Customer to the organization:
•		Collect	and	analyze	customer	purchase	data	-	trends	and	purchase	patterns •		Append	external	sources	of	data	(such	as	demographics	and	psychographics)	 to supplement gaps and provide further insight for customer behavior predictability •		Create	predictive	models	based	on	purchase	history	–	remember,	behavior	predicts	 behavior. •		Ensure	that	you	can	track	all	post	communication	customer	responce	activity	and	that	 data feeds back into the customer database •		For	more	advanced	implementations: 				 •		Link	data	from	the	customer	service	system	into	the	customer	database	 (inbound/outbound call disposition data, etc) 				 •	Collect	customer	opt-in,	or	communication	preferences

1.

DATA

2.

CusTomer BehAviorAl KnowleDge

•		Customer	history	-	where	are	they	in	their	own	experience	with	the	brand?	You	will	 speak to a first time purchaser differently than a repeat customer. •		Recency	and	frequency	of	purchasing	-	understand	when	they	are	shopping	and	 how often •		Know	the	customer	-	what	makes	them	tick,	what	makes	them	transact;	understand	 why they are shopping •		Know	what	will	make	them	happy	and	what	will	make	them	leave

3.

moTivATionAl Triggers

•		First	time	purchaser	vs.	repeat	purchaser	-	understand	the	customer’s	mindset	at	 different points in their experience •		Identify	the	natural	triggers	the	customer	may	follow	–	understand	what	previous	 purchases, behaviors, or interactions have been shown as a predictor of specific future purchases, behaviors, or actions •		What	will	motivate	them	to	return	or,	conversely,	what	will	cause	them	to	disengage?	 understand the key milestones and associated timelines in the customer’s experience that make or break the relationship

4. CommuniCATion

•		Develop	a	communication	strategy	based	on	the	above	insight	into	customer	behaviors	 and the most profitable series of events •		Time	communication	in	relation	to	the	customer	action	–	be	sure	it’s	relevant!	 •		Ensure	communication	supports	response	tracking	to	enable	measurement	and	testing

5.

TesTing

•		Validate	the	predictive	models	–	do	they	actually	predict	behavior	with	a	high	degree	 of accuracy? •		Validate	the	triggers	you	believe	to	be	key	in	the	customer’s	experience •		Validate	customer	propensity	to	change	behavior	based	on	communications	–	up	until	 what point can behavior be modified?

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By leveraging this customer-centric approach, the marketer can identify the demonstrated behaviors that indicate or predict the likelihood of a subsequent customer action and take action to modify it, or we can simply benefit from the knowledge. example 1: a product-based lifecycle communication A customer purchased a product at a grocery store. We know from past customer purchase data that 85% of customers who also purchased that same product then purchased a specific other	product	on	their	next	visit.	Logically;	therefore,	you	have	 an 85% chance that this particular customer will come in to the grocery store and purchase this subsequent product. As a marketer, what do you do now that you’re armed with this information? There is a correct answer, but without knowing what the specific objective is and testing based on that, there could	be	many	options	from	which	to	choose.		For	example,	 the correct answer could be one or a combination of the following: A. Incent the customer with an offer for the subsequent product so that they come in sooner and therefore realize the revenue sooner. B. Inform the customer that the subsequent product is available without an incentive, since they are likely to purchase without discounting. C. Wait to see if the customer comes in and purchases the subsequent product, and if they don’t, then send them a communication with an incentive for the product to encourage an additional trip. There are lots of other choices to address this specific situation as a marketer. However, the point here is that there are options available to realize incremental revenue or realize revenue sooner than if action wasn’t taken. As a marketer, once you’re armed with this behavioral customer data, you can explore the best options to take advantage of that knowledge and to further your organization’s goals. example 2: a timeline-based lifecycle communication A customer visits a dry cleaner for the first time and spends $30. Past data shows that previous first-time customers who spend between $25 and $50 typically return to the dry cleaner within two weeks. So what do you do if the customer has not returned in two weeks? How long do you give them before you reach out to them? Refer back to the data - it will tell you. In this case, we know that customers who don’t make a second purchase within four weeks of their initial purchase rarely return to the store. You would be well-suited to communicate with this first-time purchaser if, at two and a half weeks, he has NOT returned.
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A communication should be triggered to let the customer know that: A.	You	have	noticed	their	absence	and	want	their	return	business;	and/or B. You will incent them to return. Keep	in	mind	that	these	are	extremely	siloed	examples	of	a	bigger	picture,	but	represent	 what is meant by guiding a customer through their experience. If they are not following the path that generates maximum results for your organization, you must take action to correct their	course.	In	order	to	do	this,	you	must	know	your	tolerance	for	customer	behavior	–	how	 far outside the desired path will you customers go before you communicate with them to try to affect behavior? Testing will be required in order to determine how much leeway you will give customers to act outside of the desired path and to identify when it is too late in a particular stage of the lifecycle to still impact a certain behavior. dialogue… NOW As you probably noticed from the previous examples, one of the pillars of lifecycle marketing is that it is based on communication with the customer in a time-sensitive environment. Imagine, if you will, a new customer goes into a grocery store and makes a purchase for the first time. There is no point sending that customer a ‘Thank You’ or ‘Welcome’ message three to six months after that first visit. Essentially, the window to communicate these messages has passed, and therefore, the communication is no longer relevant to the customer. The same can be said for the vast majority of customer interactions. There is a defined timeframe for which lifecycle marketers have to communicate a specific and relevant message. Also, notice that this section is not called ‘Communication… NOW ’. Lifecycle marketing, in its purest form, is based on a dialogue with the customer, demonstrating to them that you know who they are, have acknowledged their interaction with you, and that their business really matters to you. so What does This mean as a marketer? By combining data, customer behavioral knowledge, an understanding of motivational triggers, and knowledge from testing results, the marketer can then develop a robust communication strategy based on a behavior (or the lack of a behavior) and provide the customer with a message that will be relevant and therefore: •	 Resonate	with	the	customer	because	it’s	based	on	the	customer’s	specific	interaction	 with	the	organization; •	 Engrain	the	organization	further	into	the	customer’s	purchase	habits	and	keep	the	 organization	top	of	mind,	and; •	 Promote	a	response	that	achieves	business	goals.

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Why it matters – the Potential benefits to your organization in imPlementing a lifeCyCle marketing strategy in today’s eConomiC environment
Simply put, because it works!!! In today’s economic environment, lifecycle marketing affords marketers an opportunity to optimize their marketing budget. Additionally, there are very tangible competitive, customer, and process-driven benefits to implementing a lifecycle marketing strategy. marketing efficiencies By understanding customer behavioral patterns and applying that insight to marketing efforts,	it	realizes	marketing	efficiencies	that	result	in	incremental	sales.	Focusing	marketing	 dollars on customers who are not already following the desired purchase path and letting others take their course ensures that little marketing is wasted on sales that would have occurred organically.

liTTle inTervenTion needed moderaTe inTervenTion needed significanT inTervenTion needed

start small, Think Big Any lifecycle marketing program is a living, breathing, dynamic solution. Depending on what your situation is, there is a wide range of lifecycle-based marketing principles that you	can	apply.	The	possibilities	are	endless!	For	example,	in	today’s	unstable	economy,	 a lifecycle marketing program will allow you to focus your marketing dollars only on the desired customer behaviors that matter most. Whether your focus is to retain certain customers, increase value of existing customers, or even win back lapsed customers, a lifecycle strategy can adapt to whatever the business objectives require. As market conditions change, the level of investment can change as you ramp up communications to cast a wider net and reach additional customers by incorporating more behavioral triggers. Even with limited historical customer data, you can still leverage the principles of lifecycle marketing, just by knowing your business and the experience your customers have with your organization. A simple “thank you” after a first purchase is the start to a good lifecycle communication plan.

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holistic and sustainable approach vs. Quick revenue infusion It is very easy to fall into the pattern of being reactive to short-term marketing objectives. We’ve all fallen victim. Lifecycle marketing, on the other hand, offers a holistic and proactive approach interacting with your customers and the value they can bring over their lifetime, not just in the next few weeks or months. It’s to this point that lifecycle marketing is a sustainable	strategy.	For	every	demonstrated	key	interaction	(or	lack	of	one)	the	customer	has	 with your organization, there is a communication opportunity designed to speak specifically to that and to what you would like for them to do next. What is the real benefit of this? Read on! The sweet spot As relevance of communication increases, so does ROI. Why? It’s a combination of factors working in concert: •	By	utilizing	existing	customer	data	to	predict	the	 H likelihood of a behavior, what you’re communicating resonates more with the customer and responses are higher; •	Not	communicating	to	and	wasting	marketing	 dollars on customers whose behavior is not likely RESPONSE to be impacted by marketing communications, no	matter	how	relevant; •	Reducing	or	eliminating	communications	to	 customers already exhibiting the desired behaviors.
M a s s Ta r g e T e d Li f e C y C Le

L

H

The combination of these factors will eliminate needless marketing expense, while maximizing the dollars you do spend, resulting in a higher ROI. Predictable over Time As you learn the behavioral patterns of your customer base and develop a communications strategy around that, coupled with knowing the impact you can have, you will be able to forecast with greater accuracy the incremental revenue you can bring to the business. In addition, you will eliminate the need for the quick hit revenue-generating campaigns that provide limited visibility and results predictability. If you operate in a reactive environment, future goals and objectives may be unclear. This situation suggests that implementing a lifecycle marketing program may be to your advantage. improved relationship with the customer = improved customer lifetime value More and more as you demonstrate to the customer through relevant and timely communication that you understand their needs, and that their business matters to you, your relationship with that customer will grow. Essentially, this will foster a ‘top of mind’ mentality for the customer with regard to your organization, and the customer will become more loyal as they become more engaged. When a company communicates with a

ROI

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customer based on their individual and personal interaction, the customer feels known, understood and appreciated. The end result is that you will get more ‘share of customer’, (a concept that is born out of the fact that customers shop several competing brands and therefore share their value). A major upside to this new, closer relationship is that during economic times such as these, where every customer counts, you will be better positioned than your competition to retain your customer base and maintain and even grow revenue.

Where lifeCyCle marketing Will Work Well and Conversely, Potential Pitfalls
As the title to this white paper suggests, lifecycle marketing can certainly be a lifesaver. Indeed there are many benefits to implementing such an approach, as documented in the previous sections. However, there are also limitations where lifecycle marketing is just not the best fit. To this point, there are situations where lifecycle marketing will work well, and situations where it will not work well:

siTuATions where lifeCyCle mArKeTing will…
…worK well
•	 Data	infrastructure	exists	to	support	the	 foundations of the strategy •	 The	customer	makes	multiple	 transactions over the course of their interaction with the organization •	 The	organization	exists	in	a	competitive	 or commoditized environment, where customer relationships can be a key differentiator •	 Customer	volume	exists	to	support	the	 investment

…noT worK well
•	 The	purchase	cycle	spans	over	a	long	 time period •	 No	historical	customer	data	exists* •	 No	data	collection	process	exists* •	 The	organization	lacks	commitment	to	 the	program	–	there	is	no	enterprise-wide	 buy-in •	 The	organization	has	poor	operational	 compliance
* Note that these two barriers can be overcome relatively easily. The others represent more severe barriers

Any company in any industry that has customers and meets the above requirements can apply some form of lifecycle marketing strategy. Industries such as retail, banking and financial services, insurance, and service industries such as telecom, cable and airline, are particularly ripe with opportunity. Other industries may have less frequent customer interactions, but the opportunities are still there. Just think about what matters to your customers and take advantage of opportunities to communicate with them at those key milestones.

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the various forms of lifeCyCle marketing Programs

Hopefully by now, this white paper has provided sufficient insight into the benefits and applications of lifecycle marketing, and you’re beginning to think about how you might apply it to your situation. As with any marketing solution, there are varying levels of implementation. Outlined below are three general levels of implementation. Based on your organization’s existing data and desired commitment, you can choose the model that works best for you. It will likely evolve over time as you become more sophisticated in your data collection, analysis, and application of the lifecycle marketing strategy.

BAsiC level
sTrATegy
Used to supplement existing marketing efforts Communicate with customers based on fundamental levels of interaction; grounded in customer data collection and analysis Segment customer base into six major segments based only on rfm (recency, frequency, and monetary values): • new Customer o rfm • young Customer o rfm • active Customer o rfm • Churning Customer o rfm

inTermeDiATe level
Begin to transition existing marketing efforts to lifecycle marketing, as it becomes more integrated into your approach incorporate additional information, including products purchased, to develop even more relevant and timely communications Segment customer base into six major segments & sub-segments based on rfm & product mix: • new Customer o rfm o Product mix • young Customer o rfm o Product mix • active Customer o rfm o Product mix • Churning Customer o rfm o Product mix • returning Customer o rfm o Product mix • inactive Customer o rfm o Product mix

ADvAnCeD level
lifecycle marketing replaces the majority of ongoing marketing efforts Purest form of lifecycle marketing; incorporate customer feedback and preferences with purchase data to maximize message relevance and increase likelihood of desired response Segment customer base into six major segments & sub-segments based on rfm, product mix & enterprise-wide customer feedback (all in/outbound customer interaction points): • new Customer o rfm o Product mix o enterprise-wide customer feedback • young Customer o rfm o Product mix o enterprise-wide customer feedback • active Customer o rfm o Product mix o enterprise-wide customer feedback • Churning Customer o rfm o Product mix o enterprise-wide customer feedback • returning Customer o rfm o Product mix o enterprise-wide customer feedback • inactive Customer o rfm o Product mix o enterprise-wide customer feedback

ApproACh

segmenTATion exAmples

• returning Customer o rfm • inactive Customer o rfm

ChAnnel sTrATegy personAlizATion numBer of BehAviorAl Triggers CommuniCATion Timing AuTomATion

Single channel (email, direct mail, etc) limited by level of segmentation and frequency of communications

Single or multi-channel (email, direct mail, etc) more detailed segmentation, increased number of triggers, and more frequent communications enables higher relevance 51-300

multi-channel depending on customer preferences Highly personalized and dynamic content based on previous interaction and desired next interaction 301+

1-50

monthly batch delivery none

Bi-weekly batch delivery Data segmentation is automated

Daily delivery (not batched) – truly individualized Data segmentation and delivery is automated

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As you can see, there is a wide degree of variance in the level of sophistication and organizational involvement from the Basic to the Advanced approaches. Hopefully this demonstrates that just about any organization with customer interaction can begin to implement a lifecycle marketing program and reap the benefits of more relevant customer communications. In the next section, we’ll discuss key areas of consideration as you begin to think about implementing your own lifecycle marketing program.

Considerations for oPerationalizing your oWn lifeCyCle marketing strategy
start with The end in mind There are several elements that need to be addressed before you start to operationalize your own program to ensure that it will be supported throughout the organization. The first and foremost is your business or marketing objective. At a very high level, what do you want to get from a lifecycle marketing program? And, more importantly, is that objective quantified	so	that	you	can	setup	for	success?	For	example,	if	you	are	looking	to... •	Maximize spend from existing customers; •	Improve retention rates; and/or •	Lift spend with new customers, ...by how much are you looking to move the metric for each criterion? Once you have decided what your objectives are, there are several significant operational aspects that you need to take into account. enterprise-Wide involvement – is it needed? Yes and no. The need comes down to what kind of program you are looking to implement— you don’t have to jump in with both feet. In fact, it’s recommended that you don’t. At the most basic level, enterprise-wide involvement is not necessarily needed to get started.		All	you	need	is	customer	contact	information	–	mailing	or	email	address	–	and	 some type of purchase data. It can be as simple as knowing when a new customer has made their first purchase with you. Begin your lifecycle marketing program by sending a “thank you” postcard (with or without an offer) to them. As your program grows, the key to the long-term success of any lifecycle marketing strategy is ensuring that you have enterprise-wide buy-in and support. The best lifecycle marketing program in the world will not work if customers have a consistently bad experience	with	your	organization.	From	the	CEO	to	the	receptionist;	from	IT	to	marketing,	 each department and each employee must be aware of and understand the strategy that is being used to communicate with customers. By focusing each communication on the customer experience, you will hopefully set the example that everything that is done on a daily basis also must focus on the customer experience.
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continuous improvement You’re not going to ‘crack the code’ right off the bat. As with most forms of direct marketing, one of the most fundamental approaches to any implementation is the incorporation of a testing strategy, or learning agenda. This is true, especially in lifecycle marketing, since it’s based on a continuous communication flow. If you’re not sure where to start, think about the process your customers go through when interacting with your organization. What are the intuitive key interactions? Select one or two potential triggers and begin to test if they really matter. Take a statistically significant subset of the customers in the lifecycle stage you have identified and send them a communication (your test group), while leaving the rest of them alone (your control group). Be sure to design a program where you can track and measure your responses! Then, simply compare the results of the test group vs. the control group. If they are statistically different (with a more positive result on the test group), you have found your first key trigger! Build upon that, and then begin testing the next trigger, and so on.

internally driven, externally managed? Perhaps you don’t have the human resource bandwidth to implement a lifecycle marketing program, but you’re still interested. Working with an outside partner could be the solution for you. External partners, such as Adplex, can help devise a strategy, implement and track the results of a program, and provide actionable recommendations and insights to further your organization’s specific goals.

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about the authors
chris salmon, director of strategic marketing Chris has over 10 years of experience working in different marketing capacities. With perspective	into	both	client-side	and	agency-side;	Chris	has	a	holistic	marketing	 background in direct and interactive marketing. He has a strong foundation in the development and management of loyalty/retention and acquisition/lead generation marketing programs for retail clients. Throughout his career, he has worked with financial (American Express, Alliance Data, and Metris), telecom (AT&T, Cingular), and pharmaceutical (Merck-Medco) B2C and B2B clients.

emily Bintz, director of strategic marketing Emily is a marketing professional with 9 years experience in product marketing and management, account development, and holistic marketing program development and execution at both B2B and B2C firms, notably Xerox, Time Warner, Comcast, and One Communications (telecom). With a full understanding of financial analysis and short and long-term goal setting, her specialties include: Customer Lifecycle Marketing, Customer Retention & Loyalty Programs, Analysis and Strategy Recommendations, Product Marketing, and Customer Communications. Emily has a BA in International Business and Spanish from Grove City College (PA) and an MBA from Sam Houston State University (TX).

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adplex
Adplex is a strategic marketing solutions company that helps many of the world’s leading corporations and organizations address their marketing challenges, from acquiring new customers to maximizing the value of a customer base. Each marketing solution is customized to meet the specific challenges, goals and objectives of each client’s	organization.	For	over	27	years,	Adplex	has	been	committed	to	its	clients’	 success, serving as a trusted marketing advisor on marketing and business decisions facing senior management. More information about Adplex can be found at www.adplex.com.

TM

Copyright © Adplex, 2008

650 Century Plaza Dr., Suite 120 • Houston, TX 77073 • 281-821-5522 • www.adplex.com


				
DOCUMENT INFO
Description: Lifecycle Marketing is a customercentric approach to strategic and purposeful communication. It is an evolution of commonly held direct marketing practices that leverages customer behavioral patterns to enable organizations to more effectively communicate with each customer.