Customer Life Cycle and Value Maintenance of E-commerce Enterprises
GUANGZHOU, China, Oct. 12, 2012 /PRNewswire/ -- As e-commerce advances by leaps and bounds in recent years, more and more enterprises sell their products online, which brings huge profits to them and also makes shopping far more convenient for customers. Being customer-oriented and maintaining a sound customer relationship is the key to winning in the e-commerce era.
An enterprise must know all degrees of their customer relationship and make differentiated investments according to different customer values. A customer base of e-consumers refers to all customers that do deals by clicking an enterprise's website. How to identify users of different value contributions from the general customer base is a key issue that every e-commerce enterprise is confronting.
Customer Value Under E-commerce Mode
Customer value contains two layers of meaning: the value customers bring to an enterprise, and the value an enterprise provides to customers. The customer value discussed here is the former. That is, from an enterprise's perspective, the profits a customer can bring, which are estimated based on the customer's behaviors, characteristics and other variables. It is the degree of importance of a customer to an enterprise, also known as "customer lifetime value". The longer the customer's life cycle is, the higher their customer value is. Behavior characteristics of customers at different stages of the life cycle create different value for an enterprise. The driving forces of customer relationship at different stages are not the same, and the same driving force may have different connotations at different stages, which require that we study the communication strategies with different customers at different stages of the customer life cycle from an enterprise standpoint.
Behavior Characteristics of Customers at Different Stages and Their Different Contributions to Enterprises
An ideal customer life cycle mode consists of four integrated stages - examination period, formative period, stable period and regression period. If the stable period lasts a long time while the examination and formative periods are relatively short, a profitable customer relationship will develop between the customer and enterprise.
During the examination period, customers mainly place test orders from which an enterprise gets little profit. The formative period is a phase of rapid relationship development. Along with a deepening mutual understanding and trust, an increasingly mature relationship grows during this time, with both sides are willing to take more risks, which brings on a continuous increase of transactions. The stable period is the highest stage of the relationship, where both sides' interdependence reaches their peak and the relationship of both sides stays in a relatively stable state. The regression period is the stage when the relationship reverses. A variety of possible causes may trigger relationship regression. For instance, one party or both parties are pondering to end the relationship, finding candidate relationship partners, or start to communicate the intent of ending the relationship. In any case, relationship regression will directly result in a fall-off in transactions.
Since the stable period is the ideal stage enterprises expect to reach, let us focus on the four aspects of the stable period.
Firstly, during this period, transaction amounts reach their peak and may remain there for a long time. Like traditional commerce, after the relationship between customers and enterprises steps into a stable period, a big transaction volume will follow. Enterprises thus should analyze customer-related data at this stage so as to keep them in a long, stable relationship.
Secondly, as a customers' relationship keeps improving, their willingness to pay reaches its height at the top of the stable period. Mutual understanding is enhanced by the increasingly detailed communication between both sides, and enterprises understand the unique needs of customers more profoundly. They are then able to provide more personalized and more valuable services and information to customers. For that, customers are willing to pay higher prices.
Thirdly, the loyalty of customers at the stable period generates indirect benefits. Loyal customers are free publicists of a company. They bring new customers by delivering good word of mouth, which saves substantial costs and helps to gain nice indirect benefits. For instance, after going through the tests of the examination and formative periods, SooBest lays a good brand foundation and fosters massive loyal customers with their flagship products - charm jewelry, fashionable men's clothing, the latest women's clothing, and digital watches. These customers stay stable for long periods and keep bringing new customers to SooBest.
The security of networks is always a key point of e-commerce development. Most customers who are new to e-commerce will worry about that. But if they have friends who are loyal customers of an e-commerce enterprise, then the concern will abate sharply and they will easily become potential customers of that enterprise. Therefore, a dig to data of customers during the stale period will constantly bring indirect benefits.
Lastly, costs hit bottom because scale effects play to their best level during the stable period. Thanks to the increasing understanding of customers and the accumulation of service experiences, the efficiency of services reaches its maximum, while the service cost significantly decreases along with the development of customer relationships. In addition, operation cost go lower as customers buy more, which is called the "scale effect". And as the transaction process becomes regular and routine, transaction efficiency improves and customers' confidence in an enterprise increases, while the associated transaction cost will continue to decrease as well.
With the further application of e-commerce, enterprises must stick to customer-oriented principles and provide great service online. Only in this way can they sell more and attract more new customers. Enterprises have to provide personalized services for different customers, achieve the highest level of customer satisfaction and create differentiated marketing strategies so as to gain bigger advantages and more profits in a competitive marketplace.