In customer relationship management (CRM), customer life cycle is a term used to describe

the progression of steps a customer goes through when considering, purchasing, using, and
maintaining loyalty to a product or service.

Marketing analysts Jim Sterne and Matt Cutler have developed a matrix that breaks the
customer life cycle into five distinct steps: reach, acquisition, conversion, retention, and
loyalty.

In layman's terms, this means getting a potential customer's attention, teaching them what
you have to offer, turning them into a paying customer, and then keeping them as a loyal
customer whose satisfaction with the product or service urges other customers to join the
cycle.

The customer life cycle is often depicted by an ellipse, representing the fact that customer
retention truly is a cycle and the goal of effective CRM is to get the customer to move
through the cycle again and again.

The illustration above offers one view on the value of a customer and why you should think of them in terms of
a value curve.  It is shown as a simple picture and broken into five distinct phases:  Acquisition, Conversion,
Penetration, Retention, Reactivation.

Prospects,  have been intentionally left out of the customer lifecycle because they are in fact not customers at
all.  They are individuals or companies that your company wants to do business with but you are still in
pursuit.  They have not yet been won over and are merely prospective customers and because they have not
yet given you any money for your goods or services.

Acquisition really is the first stage of the customer lifecycle.  The customer was been persuaded by your
overtures and has finally given you money for your goods or services.  They have placed their first order.   They
have decided to do business with you… or have they?

Conversion has been carefully chosen to represent a stage in the customer experience where even though the
customer has bought from your company they really need to become “converted.” The second purchase or
more in some industries, identifies a state of mind wherein the customer is feeling pretty good about their first
purchase experience but need a lot more before they become loyal.  This is why the Loyalty Gap falls here. 
Conversion is frequently a very large point of prediction (aka tipping point or leverage point) on whether or not
you have acquired a loyal new customer or if they simply dipped their toe in your business and then went
elsewhere.

Penetration is really the point at which profits occur.  This is one of the lifecycle stages that is critical to long
term success and profitability of every business.  The ability to have a relationship that is deep and wide with a
company or individual is at the heart of high value customers.

Retention is the second half of the equation that represents high value customers.  When a customer buys
from your company, year after year after year, their value to you increases exponentially - keep them or
perish.

Reactivation is that wonderful group of customers that you have offended, neglected or simply lost out to the
competition.  They know you and have done business with you.  They are distinctively different than a prospect
that has never done business with you before.
As you think about customer value and how it is used within your business we suggest that all aspects of your
company should be consciously aligned to increase customer value.   Functional alignment by department
(sales, marketing, supply, finance, etc)  simply will not accomplish the goal of acquiring and keeping your most
valuable customers.