Business model customer relationships section of the business model canvas

Customer Relationships – Unpacking How To Fuel Long-Term GRowth

All communications should strengthen customer relationships not only during the first stages of the marketing funnel but also post-purchase. Ask how each communication tool enables you to improve customer retention is as important as customer acquisition.

Building relationships and increasing loyalty are required to increase profitability.

Business Model Customer Relationships

Business model customer relationships section of the business model canvas
Customer Relationships section of the Business Model canvas.

This Customer Relationships Building Block represents the fourth building block in the Business Model Canvas.

Why Customer Relationships Are Important

Customer relations are important because:

  • you want to be trusted by your customers and potential customers.
  • your brand reputation impacts how you are trusted in a market and therefore the willingness of new customers to buy from you.
  • it costs 5X more to get a new customer than it does to keep a customer.
  • growth comes from reducing churn as well as acquiring new customers.
customer relationships as a part of the business model canvas
Customer Relationships and why they are important.

Customer Relationship Management (CRM) is a business strategy that is designed to improve how you manage to focus on the right customers to generate profits:

  • GET CUSTOMERS
  • KEEP CUSTOMERS
  • GROW CUSTOMERS

Customers Change

Customers change a lot and often very quickly. Sometimes that can be down to new competitors in the market, a change in economic conditions, new technologies… Assuming your customers are the same year after year can be disastrous.

Developing ongoing relationships with customers not only helps you understand them but also how they change. Great businesses know this and use this to innovate.

Keeping track of your customer’s allows you to:

  • identify new opportunities to innovate and generate new revenue streams.
  • measure your performance vs goals.
  • understand changes in the market and make necessary changes.
  • understand how and what you need to improve to add value to your customers.
  • deliver a better experience.

What is customer relations?

Customer relationship management concerns the way you engage with customers to deliver the customer experience. This involves creating long-term solutions that are geared toward customer success. Customer relations aims to create a mutually beneficial relationship with the customer that extends beyond the initial purchase.

Your vision, strategies and approach impact every part of your business. Customer relationships are not just about the customer service department. Sales teams, marketing teams, customer service teams, customer support, customer success, and product development all play important roles in building successful customer relationships.

Customer relations also extend to marketing and sales teams as well since these departments have a significant influence over the company’s interactions with the customer.

Customer Relationships are the type of relationship that you want to provide to a customer segment. It also represents the section where you consider the strategies for customer acquisition and retention.

The size of a brand’s customer base is closely linked to market share1Why a Brand’s Most Valuable Consumer is the Next One It Adds. Ned Anschuetz. Journal of Advertising Research 42(1):15-2.

Not surprising really, however, it shows the importance of growing a database of customers and lowering churn within your business.

What Are The Benefits of Customer Relationships?

If you don’t have a good value proposition then you won’t get email sign-ups or conversions on landing pages. For more information on how to develop a powerful marketing process download the free Growth Marketing Blueprint. The Canvas is designed to help you map your customer acquisition strategy and test it.

Customer Relationship Management is at the cornerstone of marketing and for good reason. The research shows that customer relationships are fragile and impact the bottom line either positively or negatively depending on how well they are managed.

Companies that do a better job of managing customer relationships see higher customer retention rates.

  • Studies show that 61% of customers stop buying from a company if they have a poor customer experience.
  • 60% of customers who said they would likely do business with an organization again if the company handles a customer service issue fairly, even if the outcome isn’t in their favour.
  • Studies show increasing customer retention rates by just 5% can increase your profits by 25% to 95%.
  • Customers loyalty is highly valuable for businesses as repeat customers are nine times more likely to buy from you than leads that have not yet converted. 
  • ThinkJar Research shows that 55% of consumers will pay more money for a product or service if it’s a guaranteed good experience. 
  • 91% of unhappy customers who don’t complain simply don’t return to a company for another purchase. 
  • Studies have even found that 65% of consumers believe that a good experience with a company has more influence over their purchase decision than advertising does.

 Despite the importance of customer relationships, many companies still struggle to get it right. A Microsoft survey discovered that the biggest complaint with a company is not being able to get help from an agent when needed to.

The Stages Of Customer Relationships

You need to test your business model in the market and understand if customers will buy, for how much and if they will also remain loyal.

Companies like Spotify, Uber, Amazon and many others, focus on ‘usage’ measures, not just customer acquisition measures. If you win customers but they don’t stick around to use your service then you know you have a problem. In effect, you have a big hole in the bucket that needs fixing.

Customer Acquisition

The definition of customer acquisition varies. As an example, some definitions consider it to be the absolute moment when a person buys your product. However, others consider this part of a larger process, and in this case, customer acquisition is acquiring customers email. The subsequent stages being validating the customer.

1. Content Marketing

One of the best tactics for acquiring new customers is utilizing the power of content marketing. Matching content to the different stages of your marketing is a proven method for winning customers.

content marketing funnel
Example Content Marketing Funnel

Content Marketing Resources

2. Search Engine Optimization (SEO)

Creating practical and useful content generates shares and links that help you start to naturally rank in search engines.

Social, Content and SEO

3. SEO Resources

4. Email Marketing

email marketing roi
Email conversion rates

Smart businesses and entrepreneurs harness the traffic they receive from inbound marketing to build an email list. An email list is your customer database and forms the backbone of your CRM system.

Email Marketing Resources

5. Social Media

Social media gets hyped a lot but when it is combined with a broader strategy, brand narrative and marketing campaign it can be an extremely powerful way to generate leads.

Social Media Resources

5. Analytics

Building an online business without utilizing analytics is like driving with your eyes closed.

Analytics Resources

Analytics Tools

Customer Retention

Customer Retention refers to the long-term relationship a company establishes with its customers. The more repeat customers, a company has, the more it is assured of champions who will market its products and help it acquire additional customers.

Customer loyalty is a behaviour while customer satisfaction is an attitude.

Customer Retention Strategies

1. Stand for something

Customers are more likely to ignore you if your company doesn’t stand for anything. Research from the Corporate Executive Board that included 7,000 consumers from across the U.S. found that of those consumers who said they had a strong relationship with a brand, 64 per cent cited shared values as the primary reason. 

2. Use positive social proof

While negative social proof (“Nearly 90 percent of websites don’t use heat mapping software!”) has been proven to dissuade customers rather than encourage them, numerous studies on customer acquisition have shown that positive social proof (like testimonials) are commonly the most effective strategy for getting people to listen and trust your brand.

3. Reduce pain points and friction

All businesses, no matter the industry, are going to have to sell to the three types of buyers that are out there. According to research from Wharton Business School, nearly a quarter of these buyers will be conservative spenders or “tightwad” customers.

4. Don’t just sell — educate

According to serial entrepreneur David Skok, sales are often more effective when you have an existing relationship with a customer, and when you’ve already provided value. This matches up with research from TARP Worldwide, which shows customers do enjoy receiving helpful recommendations on new information and products that will help them achieve better results.

5. Delivering surprise reciprocity and delight

The #1 thing that creates loyalty in anybody (that includes your customers) is the social construct of Reciprocity. Reciprocity is the social construct that makes the world go ’round and keeps customers coming back. The premise is simple: when “delighting” customers makes sense, it’s best served up as a surprise. 

6. Don’t overspend to delight

Handing out discounts and freebies can be costly. Instead, you should embrace the art of the frugal wow — creating reciprocity through small, thoughtful gestures. In fact, psychologist Norbert Schwarz found that as little as 10 cents can create reciprocity between two individuals (it really is the thought that counts).

Types of Customer Relationships

Personal assistance

This type of customer relationship is characterized by human interaction and is typically used by industries such as hospitality and events. Customers have the opportunity to interact with sales representatives, customer services representatives, concierges and VIP assistants.

Dedicated Personal assistance

This type of relationship takes personal assistance to the next level by assigning dedicated customer representatives to the customer. This kind of relationship is often used within B2B environment that involve complex services and products as well as high-value contracts. The representative develops a long-term relationship with a customer to help tailor services to a customers need and secure the business over the long-term.

Self-service

Self-service has become more popular as new digital technologies are enabling a greater degree of personalization. Methods used include forums, AI Chatbots, knowledge bases and FAQ’s.

Automated Services

Automated services help customers to perform services themselves. These kinds of services usually offer more customized experiences. As an example, Amazon uses a customer’s online and buying behaviour to provide suggestions to the customer to enhance his/ her shopping experience.

Communities

In today’s social media-driven environment, communities are a wonderful way for companies to understand their consumers, get insights into their habits, perspectives and create a platform in which customers can get together and share knowledge and experiences.

Co-creation

Companies are increasingly changing the nature of the customer relationship by involving them in the design and even the creation of the end product. Proctor and Gamble and many other companies have used customers to help them innovate and produce new product and services. Open innovation, which relates to concepts of co-creation and crowdsourcing, makes use of a technology-enabled platform to innovate with consumers, universities, startups and important network partners. 

NEXT SECTION

In the next section, you will learn how to design a value proposition. Value = Benefits – Cost. Find out how to craft a compelling value proposition next.

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