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What is customer lifecycle optimization and how does it work?

customer_lifecycle_optimization

Revenue and the customer lifecycle

For nearly every B2C company, revenue is linked to the customer lifecycle. Customer acquisition, engagement, and retention initiatives directly or indirectly impact revenue growth and sustainability by either reducing customer acquisition costs, increasing customer lifetime value (LTV), or ideally, both.

Effective marketing strategies revolve around the customer lifecycle; understanding key lifecycle stages, identifying events that are likely to trigger transitions between stages, and finding ways to optimize interactions across the lifecycle.

Naturally, the more you know about your customers and how to influence them to transition into a desired stage, the more efficiently you can grow and sustain revenue with the resources at your disposal.

Simply put, that's what customer lifecycle optimization is all about: leveraging rich customer data and predictive analytics techniques to generate insights and make predictions that measurably improve outcomes at each stage of the customer lifecycle.

Customer lifecycle optimization (a 4-step practice)

Customer lifecycle optimization (CLO) is a practice. As with other practices, CLO involves a series of prescribed steps to be done effectively. While specific lifecycle stage names, data sources, and analytics techniques will vary depending on your industry, company, and objectives, the canonical CLO process comprises four steps: lifecycle mapping; data discovery; predictive groundwork; and implementation and action.

1) Lifecycle mapping

The first step in any CLO initiative is always identifying and defining key lifecycle stages and transitions between stages. Mapping these stages and transitions to a uniform customer lifecycle is crucial to uncovering rich, predictive data.


The uniform B2C customer lifecycle:

B2C_customer_lifecycle

While terminology will change from business to business, we found that this formulation is rich enough to capture important boundaries, yet simple enough to avoid stages with ambiguous transitions.

Think about your customer lifecycle. How are stages defined? Which attributes qualify individuals to be placed in those stages? What events trigger transitions between stages?

Feel free to use the following table to help organize your findings:

Lifecycle_mapping_table

Note: The Customer lifecycle optimization whitepaper dives deeper into transitions and litmus tests. It's free to download.

2) Data discovery

At each stage, prospects, leads, and customers will complete certain events that will individually or collectively trigger a transition in or out of that stage. Individuals will also have different attributes, which help determine whether or not they belong in any given stage.

Go through each cell of your customer lifecycle map and think about which events or attributes in your data could be used to trigger a transition or pass the litmus test. Then, think about where you can find that data. Is it in your ESP, CRM, or a custom data warehouse?

3) Predictive groundwork

Once you've formalized your lifecycle and its representation in data, you can start recognizing patterns and eventually predict outcomes. Imagine loading up your converted leads (customers in "retention and expansion") alongside your stale leads that never converted. What differences can you find?

This comparison analysis is especially effective when you've added depth and breadth to your existing data.

As you experiment with this type of pattern recognition, you'll quickly realize that it's the kind of thing that computers do very well. That's where machine learning comes in handy.

4) Guided outreach

Whether you want to increase conversion rates from lead generation campaigns or reduce churn from existing customers, properly targeted outreach is essential to engaging and motivating the right leads and customers to take a desired action.

Outbound communication is the strongest and most versatile intervention at an organization's disposal to compel progress and therefore expand revenue. This includes individually targeted digital advertising, a form of direct outreach.

Consider the following examples of outreach initiatives:

Customer_lifecycle_outreach_intervention

Having identified a stage transition you'd like to motivate with an outreach intervention, the question becomes, "Who do I reach?" Regardless of the desired transition, the general technique is called audience expansion, also known as "lookalike" audiences.

To apply the audience expansion technique, we must always identify the audience and a set of candidates with similar characteristics and attributes.

With these groups defined, the next step is to apply your predictive groundwork. This could involve using patterns you identified in your data to look for similar opportunities among your candidates, or in more advanced cases, using artificial intelligence to build a predictive model trained to discriminate between likely and unlikely transitioners.

Finally, you will be left with a well-defined group of candidates likely to transition into a desired lifecycle stage when reached with relevant content.

Putting it all together

To summarize the CLO practice, it's useful to recall the original motivation: leveraging rich data and statistical predictions to optimize revenue-building initiatives throughout the customer lifecycle. This means motivating transitions from one stage to the next.

At this point, you should have good understanding of what CLO is and the four canonical steps involved. For a deeper dive into specific data requirements and predictive analysis techniques, download the whitepaper below.

Customer lifecycle optimization whitepaper

AI for a better B2C acquisition strategy [3 advantageous applications]

AI for B2C customer acquisition

More customers, more problems? That doesn't sound right

Traditionally, customer acquisition strategies were guided by industry best practices and experiential knowledge held by an organization’s executives and senior-level individuals. Sometimes these strategies were successful, sometimes they were not.

Success was primarily determined by the return on investment (ROI) for various acquisition initiatives. While ROI is still one of the best ways to gauge the effectiveness of your efforts, the “trial and error” approach can have severe impacts on revenue growth, especially for small and midsize companies.

Machine learning, a subfield of AI, enables companies to take much of the guesswork out of the customer acquisition process, and it all starts with good data.

Extracting value from your data

B2C companies have access to an abundance of consumer data — data that enable companies to draw deeper insights about what their best customers look like, which leads are worth targeting, which types of promotions are likely to keep them engaged throughout the buying process, and just about any other outcome companies want to optimize.

As companies consider more data, they require more efficient means of analyzing it. That’s where AI becomes invaluable, as it allows companies to draw deep, data-driven insights and make accurate predictions about target outcomes. However, the key is implementation, leveraging these insights and predictions efficiently throughout the acquisition process.

3 applications of AI for B2C customer acquisition

1) Propensity modeling

The best way to optimize any customer acquisition initiative is to focus your resources on individuals with the highest propensity to convert on a target outcome. Why waste your precious marketing dollars on leads that probably won’t become customers, or worse, spend more on acquiring a new customer than they spend on your products or services?

Through various machine learning techniques, data scientists can build models capable of predicting — with a high degree of accuracy — a lead’s propensity to convert on a target outcome. These propensity models are especially helpful in optimizing lead generation and customer acquisition campaigns in two ways:

  • Predictive targeting: Propensity models “score” individuals on the likelihood that they will convert on an outcome. Outcomes can be as broad as “make a purchase” or as specific as “bought product X and product Y, but not product Z.” Propensity scores become actionable when they’re fed back into a CRM, ESP, e-commerce platform, or any other marketing system. As you might imagine, targeting likely-to-convert audiences helps drive conversion rates and ultimately improve ROI on acquisition initiatives.

  • Personalization: You achieve the greatest performance improvements when targeting propensity-based audiences with highly-personalized campaigns. Identifying the most influential variables in the modeling process helps you draw qualitative insights, which you can leverage to personalize and optimize qualitative aspects of your acquisition strategy: product photography, ad creative, web copy, etc.

The role of AI in personalization whitepaper

2) Real-time lead scoring

The sooner you identify an individual’s propensity to convert, the better you can allocate your resources. Real-time scoring integrations feed new lead data into propensity models, where they’re scored and returned to various marketing systems. Real-time lead scoring can help you optimize your customer acquisition strategy in three ways:

  • Immediately determine whether the lead is worth further marketing or sales engagement. If not, save your resources for high-scoring leads.

  • Immediately enroll high-scoring leads into the right nurture campaigns. If a likely-to-purchase lead was captured on a particular product page, you might want to enroll them into a promotional campaign for that product.

  • Immediately inform your sales team when high-scoring leads enter the funnel. This is especially useful when using multiple propensity models for multiple outcomes. If a new lead has a higher propensity to purchase product X than product Y, your sales team should know as soon as possible.

3) Location intelligence

Location intelligence situates business data in a geographic context. Identifying "hotspots" of high-scoring individuals can significantly reduce customer acquisition costs in two ways:

  • Retail site and showroom expansion: Physical, or "brick-and-mortar," locations carry tremendous costs. It's no secret that location is paramount to a site's success. With scored geographies and careful analysis, you can identify the best (and worst) locations for new sites.

  • Service area geotargeting: Whether the goal is to drive foot traffic to physical sites or to maximize ROI on direct mail or canvassing campaigns, targeting spatially-clustered areas of high-scoring individuals will increase conversion rates and lower acquisition costs.

Where to start

Regardless of which application of AI is most relevant to your business, start by acquiring rich, high-quality data, and lots of it. Good training data fuels the models that give you the insights and predictions needed to optimize your acquisition strategy.

When you have the right data, and enough of it, you’re ready to train your AI. You’ll need experienced data scientists and a solid machine learning engine to build models that actually work, but once they’re built and predicting accurately, you’re ready to start optimizing.

For a deeper dive into data discovery and machine learning, download our Customer lifecycle optimization whitepaper. It lays out the four-step process that hundreds of B2C companies use to operationalize revenue-building AI, from customer acquisition to retention.

Customer lifecycle optimization whitepaper


Operationalize AI quickly and cost-efficiently with turnkey solutions

Turnkey AI solutions

If you've got your finger on the pulse of your business, you know you need to adopt AI sooner than later.

While commercial AI adoption is on the rise, there's still time to catch up and get ahead of the curve with "off-the-shelf", or turnkey AI solutions.

Where do you stand in the AI landscape?

Consider the following questions:

  • Are you brand new to AI? If so, where will AI have an immediate impact on your top and bottom lines?
  • Are you experimenting with an enterprise-wide AI solution? If so, are you seeing the results you were expecting?
  • Are you already developing AI in-house? If so, what can you do to optimize your existing resources?

Regardless of your position in the AI landscape, you can quickly get started with AI or optimize your existing resources by implementing proven, turnkey AI solutions that address the low-hanging fruit.

What are the low-hanging fruit?

It's all about automating tasks that have an immediate impact on revenues and costs.

Rather than using AI to automate existing jobs, use it to improve efficiency and productivity within those jobs.

After working with hundreds of B2C companies in a wide range of industries, we found that the customer lifecycle is an ideal framework for discovering highly predictive data, applying machine learning, and developing predictive models for a variety of use cases.

Let's take a quick look at a couple popular use cases to get you thinking about how they might apply to your business.

Increasing conversion rates and reducing acquisition costs

The most effective way to optimize your spend throughout the customer acquisition process is by targeting individuals with the highest propensity to convert.

So how do we identify individuals who are likely to convert?

  • The first step is to enrich your lead and customer data with additional demographic, psychographic, and property-based attributes, giving you a vibrant picture of who your leads and customers are, not just what they purchased or where they came from.
  • The next step is to use that enriched data to train the AI that will ultimately make predictions on future data inputs.
  • Once trained, the AI can make data-driven predictions on who your most likely buyers are, where to reach them, and when to reach out.

We've seen projected sales cost reductions of over $300,000 when applying this approach.

Proactively preventing customer churn

Certain companies have a notorious problem with customer churn, especially those with subscription-based business models. Using a similar approach as the one mentioned above, companies can use AI to identify churn-prone customers before they even begin showing signs of churn.

This can help minimize marketing dollars spent on these churn-prone individuals, and focus more on customers with a higher lifetime value (LTV).

A deeper dive into use cases for turnkey AI

Hopefully, you're thinking about how you could leverage a turnkey AI solution to optimize outreach initiatives across your customer lifecycle.

For a deeper dive into the opportunities available with turnkey AI, check out our free whitepaper, AI or die: Understanding the inevitability of AI in business.

AI or die: Understanding the inevitability of AI in business


For more information on to use AI to optimize your customer lifecycle outreach, download our other whitepaper, AI for the customer lifecycle: Making the most of your data.

Where do you stand in the current AI landscape?

Artificial intelligence technologies

You've probably noticed the growing buzz around AI and ML. You've likely done some research into the field, read some AI success stories, and believe that artificial intelligence is more than just a buzzword.

Sound like you? Good, you're totally on the right path!

So is all the hype true? Is AI really as promising as it seems? Have most companies already adopted AI? Or even worse, are you too far behind to be competitive with AI?

Luckily, you're not too late.

Hype versus reality

In a survey of over 3,000 senior executives, McKinsey found that only 10% of respondents said they have actually operationalized AI at scale.

That said, another 10% claimed to have operationalized AI in at least one core business function, and about 40% are experimenting with some form of AI.

Couple those numbers with the massive increase in AI-related investments over the last few years, and we can see the time to get serious about AI is undoubtedly now.

Where's the interest, and how much is there?

Over the last five years, investments in AI have more than tripled. In 2016 alone, total investments (internal and external) ranged from $26 billion to $39 billion, with over 75% of that coming from tech giants like Amazon, Apple, Google and Baidu.

These cash-rich giants have mostly invested internally — on R&D and deployment — but they've also invested significantly in hard-to-find talent, primarily through major acquisitions.

Source: MGI Artificial Intelligence Discussion paper.

How can I possibly catch up and get ahead?

These massive investments can feel deflating, and rightly so if your plan is to go head-to-head with the giants by building up your own AI tools in-house. The good news is that you don't have to, and often shouldn't develop AI from scratch.

A wealth of AI startups have caught some serious traction by developing fit-for-purpose solutions that address focused sets of business challenges.

Whether those challenges rest in IT and security, finance and accounting, or revenue growth and marketing, organizations can easily adopt and operationalize these "off-the-shelf" solutions in a fraction of the time, and at a fraction of the cost of alternative "one-size-fits-all" solutions like IBM's Watson.

The key is to automate tasks that have an immediate impact on your top and bottom lines. AI technologies can't replace your entire marketing team, but they can arm that team with powerful customer insights and predictions, simply unattainable without powerful machine learning algorithms.

Some use cases

For more on this, and to read some specific use cases for off-the-shelf AI solutions, download our free whitepaper, AI or die: Understanding the inevitability of AI in business.

AI or die: Understanding the inevitability of AI in business