Forget About Your Customer Life Cycle

Forget About Your Customer Life Cycle

The “customer life cycle” is a theory used to describe the steps a customer goes through when considering, purchasing, using, and maintaining loyalty to a product or service.

Understanding the customer life-cycle has become a must for many CRM, sales and marketing analysts, many of which strive to develop tools to break the customer life cycle into distinct stages, and to get the customer to move through the cycle again and again.

Is Customer Management = Natural Science?

Implicit in the notion of “customer life cycle” is that customers follow a cycle analogous to that of living organisms, as if there were “laws” akin to the laws of nature by which living organisms appear to grow, and that the different stages of customer de­velopment are a function of time.

It’s not even difficult to find organizations that categorically believe there is an inexorable movement towards an equilibrium in customer attrition, as if the process of building customer relationships were reminiscent of the “rise and fall of populations on the road to extinction”*.

One cannot doubt that management science has frequently drawn on the natural sciences for anal­ogies designed to help in the understanding of economic phenomena.

Nevertheless, the available evidence does not support the theory that customers have a life cycle characterized by an irreversible transition through stages of development similar to those of living organisms. In­deed, just the opposite conclusion must be drawn: the development of customers does not proceed according to the same “deterministic” laws as does that of living organisms.

So, Why the Analogy Persists?…

… and why there is still a demand for a life cycle theory of the customer?

First, I agree with Penrose* that in “the notion that a firm is an organism akin to biological organisms, (and) since all such organisms have something in com­mon, we can use our knowledge of biological organisms to gain more insight into the firm”. If we agree with this, trying to explain one series of events to another very different series of events will help us better to understand the nature of the latter, which presumably is less well understood than the former.

Second, the characteristic use of biological analogies in the field of business management has traditionally sug­gested explanations of events that do not depend upon the conscious willed decisions of people inside the organizations. The non-motivated behavior of or­ganisms or the mere belief that motivation does not make any difference, releases the management of the organization from the burden of customer complexity and the need to actively compete for customers.

Reality Calls For A Different Approach

We have every reason whatsoever for thinking that the growth of a company customer base is willed by those who make the decisions of the company and are themselves part of the organization, and the proof of this lies in the fact that no one can describe the development of any given company or explain how it came to be the size it is except in terms of decisions taken by individual men.

Such decisions, to be sure, are constrained by the environment and by the capacity of the men who make them, but “we know of no natural “laws” predetermining men’s choices, nor have we as yet any established basis for suspecting the existence of such laws”*.

In summary, to liken the customer life cycle to an organism cycle and then attempt to explain its customer base growth by reference to the laws of growth of biological organisms is an ill-founded procedure. And not only ill- founded, this type of reasoning about customer management diverts attention from the importance of management decisions and obscures the fact that companies are institutions created by men to serve the purposes and direction given by men decisions.

 

(*) Penrose wrote in 1952 the paper “Biological Analogies in the Theory of the Firm”, published in The American Economic Review, which has inspired this post.

Leave a Reply

Your email address will not be published. Required fields are marked *