What you need to know about the value of customer relationships

During our grassroots strategy workshops, one of the exercises is to brainstorm a list of things that create (or could create) customer value.  Frequently, one of our participants mentions ‘relationships.’  You probably hear this in other contexts as well: “our value is our customer relationship.”  In our line of work, certain phrases trigger responses that are instinctive, almost Pavlovian – and for me, this has become one of them.  We have heard this so many times and it is almost always incomplete or inaccurate.  And worse, it can become something your organization hides behind rather than searching more broadly for customer value.

Let’s be clear – we are not anti-relationship.  Having strong relationships with your customers is a good thing and is a primary objective of a good sales force – it will help you get repeat business, help you learn about new opportunities ahead of competitors and in many businesses, it may get you ‘last look,’ that chance to match a competitor’s price and steal the business at the last minute.  All of these can contribute to a healthier and more profitable business, but while they produce value for you, they are not (directly) value to the customer.

When we talk about customer value in Business to Business (B2B) marketing, it must be something that you do uniquely well, that contributes to the customer’s bottom line.  Value means that you can translate a benefit, for example, ‘durability,’ into currency: “yes, ours is priced higher up front, but it lasts twice as long so in the long run it is worth it.” Customer relationships, as usually defined, fail both parts of this test.  Customer relationships are usually defined around individuals, so that your ‘relationship’ with a customer lasts only as long as the individuals stay in their roles at both your company and theirs.  Secondly, it is extremely difficult to translate customer relationship into quantifiable value for the customer.

In our experience, the most notable exception is when the customer is buying something that is hard to define or complicated – at the extreme, the customer may not even understand what they are actually getting – an example might be a large scale IT project.  Here, relationships can be critical because it dramatically limits the risk to the customer if they are dealing with a known provider with a track record for fixing problems and making things work even when the original scope or terms were unclear.  Contrast this with a fully specified purchase – if the customer is buying a known service through an RFP process, or ordering standard parts that they buy frequently, the value of a relationship to them is probably close to zero.

One of our clients sold aerospace components and was convinced that their engineer-to-engineer relationships, fostered by their proximity to their largest customer were a real differentiator.  No doubt they had some good relationships, and maybe even some genuine friendships between their salespeople and the customer’s engineers. But when the customer changed their buying philosophy to a more purchasing-led approach, the engineers no longer had a voice in the final buying decision and the ‘value’ of our client’s relationships evaporated overnight as they were forced to compete on a level playing field to be ‘global best source’ (usually interpreted as lowest price that met the spec.) in each category.

In summary, relationships are great – and if you are in sales, that is your primary job: to develop great relationships with your customers to make sure we get called early and often on every potential opportunity.  But if you are thinking strategically about your market and your offerings, relationships are rarely enough.  Relying on ‘relationships’ alone, without understanding what that really means from the customers’ perspective, can cause you to overlook potentially more sustainable sources of differentiation and value. 

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