A lifecycle-first approach is key to sustainable growth. Learn how aligning marketing, sales and retention can help your agency scale.
The duration of an object from creation to deletion is called a lifecycle. A customer’s lifecycle covers their progression from awareness to loyal advocate and eventually cancelling the service or product.
Given that businesses exist to make money and customers are the source. Every action a business takes, should directly or indirectly contribute to winning or retaining customers. Making the primary purpose of any company, optimising and extending the lifecycle of it’s customers.
While each business model may have different start or end points of each teams responsibility, the diagram below shows which teams are primarily responsible for a stage of a customers lifecycle. In many cases, the point at which a new team takes over is marked by a change of state of the customer.
Leaders need to identify where changes will result in the largest revenue gains and align with other stages (teams) to ensure smooth transitions. They must also balance resource allocation between short term initiatives (small fixes) and long term strategies (foundational changes) that serve to extend or optimise the lifecycle.
Most lifecycle are inherently the same, they can however be viewed from different perspectives, in isolation or as a whole. The linear lifecycle below is from a companies perspective. Typically this follows what can be tracked. Beginning with the creation of a company or contact via sales outreach or marketing and ending when a customer churns.
In order for prospective customer to move from A → D, certain events need to occur. For the purpose of the article, we will refer to measurable and significant events as Critical Actions (CA). By combining journeys of multiple customers, an aggregated customer lifecycle can be produced. Traditionally this was a funnel and a more modern variant is a bowtie.
The limitations of this lifecycle are best explained by a simple explanation of how customers experience the same journey.
‘’I a potential customer have a problem and begin trying to solve it (2 x CA). While doing so, I become aware of a variety of solutions (1 x CA). Next, I investigate the viability and realise one solves my problem better than the alternative solutions or approaches (2 x CA). So I become a paying customer and eventually outgrow it, find a better option or my circumstances change (2 x CA) so I cancel the solution (1 x CA)’’.
In this simplified example, a total of 8 Critical Actions are taken by the customer, 3 of which cannot be tracked. So the challenge companies face is that the actions of customers in Pre Awareness and Post Solution stages are largely outside of their control. Yet understanding and influencing events within them is essential to growth.
In other words, there are 8 variables that control growth and a business can only measure and control 5 of them. Making it vitally important that each of the 5 is well understood by all teams and that their influence on each other can be predicted or at least partially accounted for.
Levers are defined as tools, mechanisms or strategic actions a company can use to grow or improve profitability. While individual levers can be pulled, it’s important to remember that nothing within the lifecycle exists in isolation, so their will be knock on effects. More on that later though.
The 6 growth levers.
1 - Increase the volume / quality of marketing and sales
2 - Improve marketing and sales efficiency
3 - Optimise pricing
4 - Develop and upsell additional products / services
5 - Decrease churn
6 - Acquire and expand customers faster
Put differently: increase volume, improve quality and efficiency, increase average revenue per account (ARPA), improve the value customers receive and do it faster.
In order to do understand which levers to pull and how. Information from later stages needs to be fed backwards, so it can be used to inform and analyse the performance of earlier stages. For instance, if a specific customer type is happier with the solution and retains longer than average. Marketing and sales teams need to target more of these customers.
Below is a simplified customer scenario that highlights why teams and levers are interdependent. Making a holistic lifecycle approach to growth and management a sensible strategy.
Current situation:
A company grew very quickly initially, surpassing 2 million ARR (annual recurring revenue) in under 2 years. However, growth began to slow after 4 years. The management team runs an investigation into the cause, determining that lead to deal conversion rates are decreasing while other key metrics are stable or improving.
The team takes the following decisions:
Short Term
Temporarily spend more on marketing and sales to increase lead volume and make up for lower conversion rates.
Medium Term
Hire more experienced marketing and sales leaders to fix the conversion rate.
Medium / Long Term
Building a new feature to upsell onto the existing customer base and increase the size of new deals + addressable market.
There is however a problem with this approach → churn. It's held steady at 2.5% per month for over a year and even decreased slightly in the last 2 months.
2.5% of churn at 2m ARR is very different to 4m ARR because the business has progressed from replacing $50k of lost revenue each month to remain at $0 to needing to replace $100k. At some point this becomes unattainable and growth will completely stall.
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By increasing volume, the team inadvertently added fuel to the fire and gave birth to the hamster-wheel of slowing growth. In many cases this could also be compounded by customer acquisition costs exceeding the revenue earned from each customer. Meaning that the more customers the business acquires under current operations, the faster it looses money.
Ideally, they would have viewed the customer lifecycle holistically to see churn has an increasing negative or positive effect on revenue with growth. This is not to say companies can’t carefully increase marketing and sales volume while investments in later lifecycle stages begin to improve churn.
Short Term
Analyse above average customer retention and expansion to identify marketing and sales initiatives that perform better at acquiring similar companies. Allocate more budget to the segment and configure reporting to track and reward targeting the right customer profiles.
Hire more customer success / support personal to improve the ratio of reps to customers. Allowing team members can spend more time with past and present customers do discover churn reasons.
Medium Term
Test for correlation between feature/s use, company type, buying / churn reasons etc and retention. If correlation is present, certain features and potentially the one being built may be better included in all packages to reduce churn rather than driving expansion revenue as an add on.
The opposite is true if features are not or are negatively correlated with retention. Meaning they are best used to drive expansion revenue amongst a smaller subset of customers. Either way, pricing, packaging and product development should be updated.
Analyse churn reasons, events proceeding churn and solutions or approaches customers adopt after cancelling. Building product that will improve retention (increase activation) and develop a model for predicting churn to alert the CS / Support team.
Long Term
Back to normal growth investments once churn levels are declining at an appropriate rate to signal that further marketing and sales will not be wasted.
The above example is of course much easier to solve in theory than in day to day operations. It’s often not as clear what’s wrong and pressure from investors, customers or other stakeholders has a profound impact on decision making. To mitigate the effect, it’s good to practice thinking of growth through the customer lifecycle. Even better before something breaks.
Consider how a decision will impact other teams and stages. Planning on scaling the sales team? Ensure their targets are set up to prioritise quality deals and preferable customer types. Before blowing millions on marketing, put measures in place to ensure the team is getting comped or rewarded on the the quality of leads, not volume. Get to know your best customers well and build stuff or offer services they derive value from, not what will win deals.
While there is no magic bullet to growth, operating with a sound framework, will save a lot of unnecessary headaches and wasted expenditure.
A lifecycle first approach ensures sustainable growth by aligning marketing, sales and retention. Instead of viewing components of growth in isolation, then reacting to slowing growth with short-term fixes, a holistic view prioritises analysing the entire customer journey. Making it possible to facilitate both new customer acquisition and retention By understanding where churn, activation, and expansion impact revenue, businesses can break free from the growth hamster wheel and build a scalable, profitable model that maximises customer lifetime value.
