Why the customer lifecycle is important for marketing communications

Most business people are aware of and understand the concept of the Product life cycle. That a product when it is placed on the market goes through the following stages:

  1. Introduction – When the product is first introduced into the market. Sales and earnings are low and it is likely that promotional and production costs are high.  Sales are to innovative consumers and early adopters.
  2. Growth – Sales pick up as more consumers become aware of your new product and demand grows. The product becomes profitable
  3. Early majority – Growth rates slow as the product achieves its full market potential.
  4. Late majority – Full market potential is achieved. Competitors enter the market and sales may begin to fall away.
  5. Decline – Sales fall as consumers move to other products orto  buy product replacements.

Obviously, most firms try to avoid the decline stage or at the very least try to manage the decline in both profitability and market share.  This is why Apple will introduce a new or amended iPhone every year or why Microsoft will launch a new version of Windows every two or three years. These products are introduced when technological changes and the actions of competitors begins to affect their products dominance.

Other firms will change their market focus when they see the prospect of a product decline. take pocket calculators.  In the early 1970s, when they were introduced to the market, a pocket calculator was a tool for engineers, scientists and accountants.  When that market started to decline, pocket calculators were then marketed to students and schools.  When the student market reached maturity, pocket calculators were marketed to the general public and to housewives doing the weekly shop.  Even this didn’t stop the market for pocket calculators declining but it took the rise of the smart phone to virtually kill it.

What marketers realised was that the focus of communications and the types of communication would have to change depending on which stage in its life cycle a product was located.

The mnemonic DRIP is a useful representation of the functions of marketing communication. It stands for Differentiate, Remind, Inform and Persuade.  Depending on the stage in the product life cycle, the prominence of these four functions will change.  When a product is first introduce, the most prominent function would be to inform consumers of the new products existence.  When the product is in the growth stage, the prominence would be to persuade more people to buy it.  When the product is mature, you use marketing communications to remind existing customers of its existence and differentiate it from the products of competitors.  When it declines, you inform customers of changes to the product and to offers and you remind them it is still available.

These four functions may require different marketing communications tactics.  The promotion of Marvel’s Doctor Strange is a fine example.  Prior to the film’s launch Marvel held fan events at conventions to announce the film’s production and launched a fan website with clips and interviews.  When the film entered cinemas, the used mass media advertising.  When the film had been in cinemas for a couple of weeks, they produced more advertising to remind consumers it was still on release.  When audiences began to slide, they began to promote the launch date for the film on DVD and through download services such as Sky Cinema.

Some marketing academics also argue that consumers, as well as products, have a life cycle.  This is drawn from concepts such as the customer ladder and led to the concept of relationship marketing.  Research on the customer life cycle has focused on business to business markets but certain consumer products manufacturers also use the customer lifecycle concept.  it has four stages:

  1.  Customer Acquisition – At this stage there is low relationship intensity between the seller and the customer.  Both parties search for suitable product pairings. There is an initiation process where each party seeks information prior to the transaction. There is a familiarisation process where each party reveals more information about each other. Marketing communications could be activities such as attending trade shows or visits by sales representatives.
  2. Customer Development – Attempts are made to reduce buyer risk and to enhance the credibility of the offer.  There is likely to be cross-selling and up-selling where offers are made to existing customers.  Value-added offers may be made in an attempt to increase sales volumes.  Marketing communications are used to remind and inform existing consumers of warranties, after-sales service or membership of professional bodies.
  3. Customer Retention – Marketing communications are used to build individual and joint goals between buyers and sellers.  Levels of trust and commitment are deepened, relationships intensified.  Marketing communications become a dialogue not a monologue as two-way interaction is increased.  In some business-to-business markets this leads to joint ventures and product development.  In consumer markets, this could be allowing ‘brand fans’ to co-design products e.g. Reebok’s design your own trainers.  Customer relationships become key account management.
  4. Customer Decline – Relationships between buyers and sellers will eventually close.  A customer may wish to reduce their reliance on a supplier or to end a partnership.  This could be sudden or take place over a protracted period.  At this stage, marketing communications are used to persuade a customer to return or to stop the closure of your relationship with one customer from impinging on relationships with other customers.

When you are planning a marketing communications strategy, it is important that you recognise both the position of the product in its life cycle AND the stage of the relationship you have with the intended recipients of those marketing communications.

If you are a small firm with a solid customer base, spending a fortune on tactics such as search engine optimisation and advertising may be a waste of your scarce budget.  A better tactic may to use electronic word of mouth or to develop your existing customer base into a community of brand advocates.