LifecycLe to Lifesaver:

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

emily bintz & Chris salmon

How It Builds Profitable Relationships with

Your Customers through Relevant Communication,

Especially in A Down Economy

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

An Introduction to Lifecycle MarketingTM

lifeCyCle to lifesaver: an introduCtion to lifeCyCle marketing2

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

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.

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:

•CRMencompassesanenterprise-wideframeworkwhichorganizationsusetoaidinteractions with customers and prospects. By definition, CRM is more operationally focused, so that the customer perceives the organization as one entity.

•Loyaltymarketingisprimarilyfocusedongrowingandretainingcustomersviaatangiblevalue 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:

introduCtion to lifeCyCle marketing: the Premise

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 on those behaviors, or the lack of a behavior.

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.

the foundation of lifeCyCle marketing

lifeCyCle to lifesaver: an introduCtion to lifeCyCle marketing3

Talk to each

customer

See Improved results

Provoke a behavior

•Collectandanalyzecustomerpurchasedata-trendsandpurchasepatterns•Appendexternalsourcesofdata(suchasdemographicsandpsychographics)

to supplement gaps and provide further insight for customer behavior predictability•Createpredictivemodelsbasedonpurchasehistory–remember,behaviorpredicts

behavior.•Ensurethatyoucantrackallpostcommunicationcustomerresponceactivityandthat

data feeds back into the customer database •Formoreadvancedimplementations: •Linkdatafromthecustomerservicesystemintothecustomerdatabase (inbound/outbound call disposition data, etc) •Collectcustomeropt-in,orcommunicationpreferences

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:

lifeCyCle to lifesaver: an introduCtion to lifeCyCle marketing4

DATA

•Customerhistory-wherearetheyintheirownexperiencewiththebrand?Youwillspeak to a first time purchaser differently than a repeat customer.

•Recencyandfrequencyofpurchasing-understandwhentheyareshoppingand how often

•Knowthecustomer-whatmakesthemtick,whatmakesthemtransact;understandwhy they are shopping

•Knowwhatwillmakethemhappyandwhatwillmakethemleave

•Firsttimepurchaservs.repeatpurchaser-understandthecustomer’smindsetat different points in their experience

•Identifythenaturaltriggersthecustomermayfollow–understandwhatpreviouspurchases, behaviors, or interactions have been shown as a predictor of specific future purchases, behaviors, or actions

•Whatwillmotivatethemtoreturnor,conversely,whatwillcausethemtodisengage?understand the key milestones and associated timelines in the customer’s experience that make or break the relationship

•Developacommunicationstrategybasedontheaboveinsightintocustomerbehaviors and the most profitable series of events

•Timecommunicationinrelationtothecustomeraction–besureit’srelevant!•Ensurecommunicationsupportsresponsetrackingtoenablemeasurementandtesting

CusTomer BehAviorAl KnowleDge

moTivATionAl Triggers

CommuniCATion

•Validatethepredictivemodels–dotheyactuallypredictbehaviorwithahighdegree of accuracy?

•Validatethetriggersyoubelievetobekeyinthecustomer’sexperience•Validatecustomerpropensitytochangebehaviorbasedoncommunications–upuntil

what point can behavior be modified?

TesTing

1.

2.

3.

4.

5.

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 otherproductontheirnextvisit.Logically;therefore,youhavean 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 couldbemanyoptionsfromwhichtochoose.Forexample,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.Youhavenoticedtheirabsenceandwanttheirreturnbusiness;and/orB. You will incent them to return.

Keepinmindthattheseareextremelysiloedexamplesofabiggerpicture,butrepresentwhat 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 theircourse.Inordertodothis,youmustknowyourtoleranceforcustomerbehavior–howfar 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… NOWAs 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:

•Resonatewiththecustomerbecauseit’sbasedonthecustomer’sspecificinteractionwiththeorganization;

•Engraintheorganizationfurtherintothecustomer’spurchasehabitsandkeeptheorganizationtopofmind,and;

•Promotearesponsethatachievesbusinessgoals.

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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,itrealizesmarketingefficienciesthatresultinincrementalsales.Focusingmarketingdollars 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.

start small, Think BigAny 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 youcanapply.Thepossibilitiesareendless!Forexample,intoday’sunstableeconomy,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.

lifeCyCle to lifesaver: an introduCtion to lifeCyCle marketing7

liTTle inTervenTion needed

moderaTe inTervenTion needed

significanT inTervenTion needed

holistic and sustainable approach vs. Quick revenue infusionIt 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 sustainablestrategy.Foreverydemonstratedkeyinteraction(orlackofone)thecustomerhaswith 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 spotAs relevance of communication increases, so does ROI. Why? It’s a combination of factors working in concert:•Byutilizingexistingcustomerdatatopredictthe

likelihood of a behavior, what you’re communicating resonates more with the customer and responses are higher;

•Notcommunicatingtoandwastingmarketing dollars on customers whose behavior is not likely to be impacted by marketing communications, nomatterhowrelevant;

•Reducingoreliminatingcommunicationstocustomers already exhibiting the desired behaviors.

The combination of these factors will eliminate needless marketing expense, while maximizing the dollars you do spend, resulting in a higher ROI.

Predictable over TimeAs 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

lifeCyCle to lifesaver: an introduCtion to lifeCyCle marketing8

L H

H

ROI

RESPONSE

Mass T

arg

eTed L

ife C

yCLe

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:

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.

lifeCyCle to lifesaver: an introduCtion to lifeCyCle marketing9

•Datainfrastructureexiststosupportthefoundations of the strategy

•Thecustomermakesmultipletransactions over the course of their interaction with the organization

•Theorganizationexistsinacompetitiveor commoditized environment, where customer relationships can be a key differentiator

•Customervolumeexiststosupporttheinvestment

siTuATions where lifeCyCle mArKeTing will…

…worK well …noT worK well

•Thepurchasecyclespansoveralongtime period

•Nohistoricalcustomerdataexists* •Nodatacollectionprocessexists* •Theorganizationlackscommitmenttotheprogram–thereisnoenterprise-widebuy-in

•Theorganizationhaspooroperationalcompliance

* Note that these two barriers can be overcome relatively easily. The others represent more severe barriers

the various forms of lifeCyCle marketing ProgramsHopefully 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.

lifeCyCle to lifesaver: an introduCtion to lifeCyCle marketing10

BAsiC level inTermeDiATe level 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

multi-channel depending on customer preferences

Highly personalized and dynamic content based on previous interaction and desired next interaction

301+

Daily delivery (not batched) – truly individualized

Data segmentation and delivery is automated

sTrATegy

ApproACh

segmenTATion exAmples

ChAnnel sTrATegy

personAlizATion

numBer of BehAviorAl

Triggers CommuniCATion

Timing

AuTomATion

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

Single or multi-channel (email, direct mail, etc)

more detailed segmentation, increased number of triggers, and more frequent communications enables higher relevance

51-300

Bi-weekly batch delivery

Data segmentation is automated

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

• returning Customer o rfm

• inactive Customer o rfm

Single channel (email, direct mail, etc)

limited by level of segmentation and frequency of communications

1-50

monthly batch delivery

none

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 quantifiedsothatyoucansetupforsuccess?Forexample,ifyouarelookingto...

•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.Allyouneediscustomercontactinformation–mailingoremailaddress–andsome 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 experiencewithyourorganization.FromtheCEOtothereceptionist;fromITtomarketing,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 improvementYou’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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lifeCyCle to lifesaver: an introduCtion to lifeCyCle marketing13

about the authorschris salmon, director of strategic marketing Chris has over 10 years of experience working in different marketing capacities. With perspectiveintobothclient-sideandagency-side;Chrishasaholisticmarketingbackground 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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Copyright © Adplex, 2008

TM

adplexAdplex 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’sorganization.Forover27years,Adplexhasbeencommittedtoitsclients’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.