How Customer Experience Can Make or Break Your Exit Strategy

Does your business have a robust customer relationship management strategy?

Can you describe your customer lifecycle management process?

What tactics do you employ to attract, close, and retain customers?

Are your tactics working? How do you measure success?

Customer Experience Does Influence Company Value

Answering these crucial questions will impact your company's value and future exit strategy because customer relations influence value. A robust customer relationship management strategy can lead to a premium on valuation, while deficiencies in the area can result in discounts.

Customer relations indicate a company's future revenue streams and profitability. A loyal customer base ensures consistent revenue and reduces the cost of sales due to the lower need for marketing and customer acquisition efforts.

From the perspective of a potential buyer, a company with solid customer relations is a less risky investment. The predictability of revenue from existing customers provides a stable financial outlook, which is highly valued during the due diligence process. Moreover, a satisfied customer base can be a strategic asset, offering a platform for launching new products or services.

This is why implementing a customer lifecycle management process and tracking a few key customer metrics is essential.

The Customer Lifecycle Management Process

The Customer lifecycle management (CLM) describes the process of tracking the steps a customer takes on their journey to making a purchase. The steps include awareness, engagement, conversion, retention, and loyalty. Below is information about these steps from the Zendesk.com blog. I've included the link below to the full article.

The customer lifecycle provides insights into the business's operations and allows decision-makers to make small business development and customer care decisions. It also helps companies identify areas of improvement and enhance the customer experience.

1. Awareness – All new customers start at the awareness stage when they first learn about your company and become interested in your products or services.

2. Engagement and Consideration – At this stage, companies can engage with potential buyers by creating a solid knowledge base and offering human touchpoints throughout the journey.

3. Conversion – The purchase step should be frictionless, with many payment options and as few steps as possible between the customer clicking "Buy" and receiving a confirmation email. You should also be transparent about pricing, returns, and refunds and make it easy for potential customers to reach out to your support team.

4. Retention – After you seal the deal with your new customer, customer satisfaction should be your top priority. Customers will be likelier to stick around when you create a positive onboarding experience and provide ongoing support.

5. Loyalty – A loyal customer is likely to become a lifelong customer. Many become strong brand ambassadors.

A Few Key Customer Experience Metrics

You can increase revenue and realize higher retention rates by focusing on how experiences drive the customer journey for your business.

Below are a few key metrics to focus on.

Customer Retention Rate (CRR)

CRR = ((E-N)/S) x 100

E = # of customers at the end of the period

N = # of new customers acquired during the period

S = # of customers at the beginning of the period

For example, if you had 1,800 customers at the beginning of a period, 2,300 customers at the end, and acquired 700 new customers, your CRR would be 89%.

CRR = ((2,300-700)/1,800) x 100

Churn Rate

Churn Rate = 100% less CRR. In this example, the Churn Rate = 11%.

Net Promoter Score (NPS)

NPS is calculated by surveying existing customers to determine how likely they are to recommend a product or service to others. The results are used to identify satisfied customers and those needing more attention.

A robust customer relationship management strategy can lead to a premium on valuation. The strategy reduces the risk of the investment from a potential buyer's perspective. A satisfied customer base can also be a strategic asset.

Below are additional resources that you may find helpful.

Poe Wolf Partners Blog – What Is A New Customer Worth? Know Your Metrics | The blog includes a case study and examples of how to calculate Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV). Click here.

Poe Wolf Partners Blog - Know Your Customer Metrics: Improve Business Profitability and Value | The blog includes a case study. Click here.

Kent, Jessica A. "How to Create Positive Customer Experiences for Your Business." Harvard Professional & Executive Development Blog, March 15, 2023. Click here.

Lahey, Susan. "Ultimate guide to customer lifecycle management." Zendesk Blog, February 13, 2024. Click here.

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