Chapter 6 Wednesday morning
“Do you know what your customer lifecycle is?” asked Zak of both Nick and Slater. They shook their heads.
“Every customer has a lifecycle with you which covers the entirety of their interactions with your business. Their total lifetime dealings with your business produces what’s called a lifetime customer value for you. In effect it’s the entire amount they will ever spend with you, and as a business it’s your aim to make that as large as possible. Take someone who lives in our town here. That person may spend a sizeable sum of money getting a new kitchen from you Slater, but their direct spend with you will be limited to that one significant purchase. However, that same person may come into Coffee & Company several times a week for many years and they will eventually spend far more with you Nick, than they did with Slater. And there’s a second layer of value they offer youand that’s how they talk to others about youre-telling your storyand so bring you additional revenue that way too.”
“I never thought of it like that,” said Nick. “I always assumed that Slater would make more money from a customer than I would.”
“That’s true in some ways but not true in others. Nick, you have the opportunity to serve someone who is passing through our town for the first and last time in their lives. As a non-local person, their lifecycle with you will be for that single transactionwhich is still valuable business of course. As well as having long-term, higher-value customers, you can also serve the low-value customerswhich is something that Slater can’t do. For a café business like yours Nick, the location will help define your customer lifecycle. For example, here in our town, you may well have regulars for many years, however, if you were a beachfront café at a popular holiday resort, then all your trade may be casual, drop-in traffic. Or it may be that you try to make them regulars for the week or so that they are on holiday in that resort. Once you understand the nature of your customer lifecycle then you can start to design your service around this to maximise the value you get from customers.”
“Can you tell how much a customer is going to be worth to you in total?” asked Nick.
“That’s difficult, because you can’t know how much a customer will use you in advance. But what you can do is to shape your business, and the way you interact with customers and prospects, such that you maximise your chances of increasing their overall value with youand you achieve this through identifying your customer lifecycle and all the appropriate touchpoints that go with it. Let me show you a generic customer lifecycle first of all and then you can each modify it to suit your business.”
Zak wrote a list of words in his notebook:
AWARE
INTEREST
DECIDE
BUY
USE
SERVICE / SUPPORT
LEAVE
“Let me explain each of these. A customer has to be AWARE of you before they will ever consider buying from you. After all, how can you spend money with a business if you don’t even know they exist? Then, when they are aware of you, they need to have an INTEREST in what you do. For example, you may become aware of a new cosmetic surgery clinic opening in town, but if you have no desire for cosmetic surgery then this new clinic is of no interest to you whatsoever. Next, assuming the prospect does have an interest in what you offer, they have to DECIDE to use your company instead of one of your competitors, before they actually commit to BUY your product or service. Then they will USE your service either once or many times, and during this usage, they may have cause to complain about something, or require some kind of SERVICE assistance or SUPPORT. Finally, they will LEAVE you, either because they have no further need of the type of service you offeror because they have found another provider. Either way your relationship with them has ended.”
“So do customers pass through this lifecycle in a linear way?” asked Nick.
“In the first part, yes, and let me explain with an example. Think of yourself buying a new car. If you’d never heard of the electric car maker Tesla, then you’d never consider buying one of them. However, when you do become aware of their brand you may be curious and want to learn more about themnow you’re interested. You may assess the pros and cons of buying an electric car and decide that it’s the car you want. You then proceed to buy one. This has been a linear journey up to now, but once you’ve bought the car you will use it every day. At regular intervals you’ll take it in for its routine service as you continue to drive it. This part of the lifecycle may continue going round and round for many years. At some point you may have reason to complain about something or you need to get something repaired. Once this support issue has been attended to, you continue using the car for another period of time before you eventually decide to get rid of the car. Tesla will hope that you’ll buy another car from them to remain within their customer lifecycle, or you may decide that you don’t want another electric car and you decide to buy a non-electric carwhich means your lifecycle with Tesla has come to an end. Does that help you understand the customer lifecycle model?”
They both nodded.
“Now I want you to create your own customer lifecycles. Think about it, then write it down and show me.”
Nick and Slater spent a few minutes working individually in their notebooks before coming to their own final conclusions.
Slater went first. “Here are mine,” and she turned her notebook to face them.
AWARE
INTEREST
DECIDE
BUY
DESIGN
INSTALL
USE
“Talk me through this,” instructed Zak.
“The first four stages are the same as your standard model where they get to the point of placing an order on me. The next stage is where I design the kitchen for them and then I install it. Finally they use the kitchen and hopefully tell others about it.”
“That’s good,” said Zak. “Now yours please Nick.”
Nick swivelled his notebook around to reveal his lifecycle.
AWARE
INTEREST
VISIT
CONSUME
SHARE
COMPLAIN
RETURN
“The awareness and interest stages start off the same but then as there’s less investment in time and cost in coming to my café, I think that it will often be more of an impulsive visit rather than making a formal planned visit. While inside, they may eventually decide to have something to eat rather than just have a drink and then hopefully the next stage is for them to share their experiences with others. They may have cause to complain about something at some time, so we need to appreciate that and be prepared for how to handle it, but hopefully they will return repeatedly to us.”
“Again, a good understanding of the lifecycle model. Now we’re going to overlay your touchpoints onto your lifecycle.”
“What’s a touchpoint?” asked Slater.
“Touchpoints are any interaction you have with your customer either directly or indirectly. Examples can range from your website, flyers, newspaper adverts, to business cards, your invoice or receipts, your branded vehicle, the uniforms your staff wear, your signage, emails you send, the way you answer the phone, and obviously in the food, drink you provide Nick, and in the installations your customers receive from you Slater. As you can see, it’s every potential interaction point a customer can have with your business.”
“Okay, so what do we do with them?” asked Slater.
“You need to list every single one of your touchpoints and then allocate them to the particular lifecycle stage where they add the most value. Each touchpoint can only be used onceso sometimes you have to make a choice as to which lifecycle stage it falls under.”
They both started to make a list of their touchpoints.
“You’ll probably find that you inadvertently miss some the first time you try to list them all, so do this over several days and you’ll find that more reveal themselves to you over time. What you can do now is to take a few moments to think of a couple of unusual ones that are specific to your situation.”
Slater and Nick paused for a few moments before Nick broke the silence.
“My menus are a touchpoint and quite an important one too. Also, there’s my front window, as potential customers often look through the window if they’re unsure whether to come in or not.”
“Those are good examples of your specific touchpoints,” said Zak.
Slater then spoke. “When my fitter and I are installing the kitchen, it will obviously be a disturbance for the customer, so we want to do our best there and we should look professionaland stylishwhile we are doing it. That will be a major touchpoint.” She paused. “In fact now that I think about it, the installation may consist of quite a number of separate touchpoints rather than just being one. Such as what we ask them to prepare and do before we can start work; how it appears to them when we first arrive; how we remove the old kitchen partsand so much more.”
“Yes, a great comment. A big touchpoint can usually be broken down into several smaller components which then makes it easier for you to think aboutand to identify ways to improve each of those component touchpoints ,” added Zak.
“Some touchpoints are more important than others in the way that they create value for your business. Some work in the immediate timeframes, such as your menus Nick, while others are important in a longer timeframe, such as the methods you use to turn browsers into buyers of your kitchen transformations Slater. When you’ve completed your customer lifecycle and overlaid all your touchpoints onto it, you’ll then be able to highlight the most important touchpoints. These will be the ones that trigger the most value for your business. You need to interrogate these touchpoints to ensure they are in the best shape and format they can possibly be for you. All touchpoints are important and should be improved wherever possible, but if you only have limited time and resources, then focus on the ones you identify as being of the most value to you.”
He continued.
“So can you see how it’s important to understand how to drive maximum value out of your customers? For you Slater it’s very much about the front end of attracting customers, while for you Nick, it’s likely to be in the moment when they taste your wares in your café. And never underestimate the value of advocacy where satisfied customers refer other people to your service. Make it easy for them to do this is some way.”
Zak checked his watch.
“I have to go now, but good work today on your lifecycles and touchpoints. I’ll see you here tomorrow at the same time.”