July 10, 2013
The Business Case for Building Real Relationships with Customers
Given the wealth of information available online, relationship marketing is becoming ever more important.
Why? Because today’s consumers are more informed than you can imagine. This has resulted in a drastic shift in consumer power and has altered the selling process by placing a greater emphasis on the customer experience.
Most businesses do not have a clear understanding of what relationship marketing really is and how to successfully put it into practice. Let’s debunk one misconception right from the start: Relationship marketing isn’t the opposite of traditional marketing and it doesn’t exclude older channels (like email marketing and content marketing) in favor of solely using social media.
To clarify this important practice, today we’ll look at the most important online channels in relationship marketing campaigns. We’ll even give you the inside scoop from notable entrepreneurs on how relationships helped build the audiences that built their businesses.
Let’s jump in!
What is Relationship Marketing Really About?
With a focus on loyalty, retention and long-term relationships, the aptly named practice of “relationship marketing” is designed around developing strong connections with customers by directly providing them with information that is tailored to their needs, wants and interests.
As opposed to transactional marketing’s focus on direct sales, relationship marketing emphasizes increased word-of-mouth activity, repeat business and a willingness on the customer’s part to provide information to the organization. And unlike “interruption” marketing, this process is started willingly via an opt-in by the customer.
But is this focus on creating a relationship with customers worthwhile? As we previously discussed, the shocking truth of brand loyalty is that most customers do not want to be engaged with a business or brand; their priority is shared values.
The secret here is that the relationship marketing process has nothing to do with engagement and everything to do with being practically useful for both your business and customers.
According to a management study by Robin Buchanan and Crawford Gillies, the increased profitability associated with relationship marketing is the result of several factors:
- There’s less “dating around.” Satisfied, long-term customers in your marketing funnel are statistically less likely to switch. As an added bonus, they tend to be less price-sensitive; experts say that customers who feel taken care of are less concerned about what they are paying.
FACT: relationship marketing is effective in stopping customers from “dating around” with the competition. http://hlp.sc/12rbbzs
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- It’s the foundation of word of mouth. Strong relationships are essential to a high net promoter score, or, in other words, the chance that a customer will happily refer your business to a friend.
Research shows that relationship marketing can improve your Net Promoter Score. http://hlp.sc/12rbbzs
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- Your “regulars” are your rock. Regular customers tend to buy more often and they are less expensive to maintain because of their familiarity with your business and the processes behind it.
Consumer data reveals that regular customers spend more and are less expensive to maintain. http://hlp.sc/12rbbzs
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- Expansion becomes easier. Longstanding customers are much more likely to purchase your ancillary products and embrace your new ventures (think of those folks you know who buy each new Apple gadget).
A recent study has shown that having long standing customers makes business expansion less risky. http://hlp.sc/12rbbzs
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- You avoid the cost of acquisition. The famous Bain & Company analysis that it is 6 to 7 times more expensive to acquire a new customer than to keep a current one is something that keeps marketers up at night, but businesses with high rates of customer satisfaction needn’t worry about high churn rates.
Did you know that relationship marketing helps lower the cost of acquisition AND increase retention? http://hlp.sc/12rbbzs
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There were also some less-obvious benefits noted in the study, such as the fact that companies with strong loyalty measurements tend to be far more capable of shutting out new competitors and generally don’t have to worry about competing products (as much).
Lastly, companies with superior loyalty metrics make their employees’ jobs easier and more satisfying, resulting in a less-stressed and more competent workforce (this one surprised me!).
The bottom line: For customers who do want a relationship with your brand, their concerns are primarily about how useful you prove yourself to be (outside of your product).
Relationship marketing through these channels ...
- Customer service
- Social media
- Loyalty programs
…is the ticket to earning your way into their good graces. Your reward for these efforts, as noted in the research above, is being able to build a company that customers love to talk about.
Below, let’s take a look at how your business can use these individual channels. Take note of the practical advice from entrepreneurs who have placed a priority on building great customer relationships and have been amply rewarded for their efforts.
1. Customer Service
No matter how high tech customer relationship management becomes, the high-touch elements of personal support will always be the foundation great customer service is built on. The cornerstones for providing memorable customer support are reciprocity and personalization. To achieve these ends, it’s imperative to create a balance that provides employees with clear goals and guidelines (but doesn’t suffocate them with red tape!).
To help you get started, we recommend you read the following (free) guides:
- The Customer Service Skills that Every Employee Needs
- A Brief Guide to Writing Better Support Emails
- The Business Case for Loving Customers
Remember that the companies who truly lead the way in exceptional service have this goal ingrained in their culture, so make sure you take the time to invest in employees who get why it’s important to take care of customers.
What if businesses decided to inform, rather than promote? You know that expression ‘If you give a man a fish, you feed him for a day; if you teach a man to fish, you feed him for a lifetime?’ The same is true for marketing: If you sell something, you make a customer today; if you help someone, you make a customer for life. In every business category, one company will commit to being the best teacher, and the most helpful. And that company will be rewarded with attention, sales, loyalty and advocacy by consumers who are sick to death of being sold, sold, sold.”
Jay Baer, author of Youtility
Content marketing is such a hot topic right now that calling it a hot topic has become a trope in itself!
But there’s a reason for this. Traditional paid advertising—the standard interruption marketing method—essentially amounts to renting eyeballs or clicks for your business. Once the money stops flowing into those channels, the results also stop.
By contrast, content marketing allows you to build an audience that you can keep. It should not be viewed as a traditional marketing expense since the returns for evergreen content will last as long as the thoughts stay relevant.
But content goes far beyond acquisition. Using content as a form of support is also marketing. Free resources, help documentation and webinars can marketing to customers (as Des Traynor notes here) as long as the content is:
We love this graphic on content marketing from our friends at Intercom:
Is your content doing all of the above? If not, it’s time to rethink your execution.
3. Social Media
If you can get past the hype, social media can truly be a useful channel for creating relationships with customers.
There are multiple approaches to using social media to build relationships, all of which need to properly reflect your brand’s values. As an example, see how FedEx has used social media to build trust and prestige with customers and to successfully resolve issues:
Even though FedEx does online listening, Sauerwein’s team is the one responsible for handling actionable requests that customer care follow-up to help solve the issue or answer the question. Their engagement time? Mostly in a matter of minutes.”
Conversely, brands like Taco Bell who, let’s be honest, aren’t catering to a professional B2B audience, focus more on connecting with customers through humor. The result: Their Twitter account has become one of the most popular online corporate accounts.
Building relationships through social media is about knowing who your audience is and creating a social media presence that reflects what they want to see from you. If you’ve earned the right to appear in their streams, keep it by giving them content that they actually want.
Email marketing is still one of the most powerful mediums to build relationships with your customers, as it is just so personal. At work, many employees spend 2 ½ hours in their inbox—that's a lot of time! Incorporate this channel by delivering free course content and product updates via email. A consistent stream of genuinely useful content will guarantee that your campaign is really effective—and it’s something that business owners have never been able to deliver over display ads or social networks.”
Chris Hexton, co-founder of Vero
There’s a reason every social network in existence asks for your email when you sign up: Email is still the best way to turn a casual browser into a repeat user, and there’s a plethora of data to back that statement up.
Email marketing for small businesses thrives off of an engaged email list resulting from strong relationships being built with customers and prospects.
One benefit of email that isn’t often mentioned is that you rarely have to compete with fun via email. On Facebook during the summertime I wish your updates and ads the best of luck, because you’ll be competing with BBQs and bikini photos and they likely won’t stand a chance.
What’s the point in creating useful resources for customers if they never hear about them? Having a clear, distraction-free channel to notify customers of these offerings is how you can elicit responses like this:
This may become a weekly tweet. Consistently amazed by the fantastic free resources @helpscout emails. Own a business? Go sign up. Now.— Preveal (@preveal) May 1, 2013
The takeaway: Don’t let your updates get drowned in a sea of nonsense. Build relationships by getting customers to opt-in for email updates.
5. Loyalty programs
Creating “sticky” customer loyalty programs is no easy task, but successful programs show that it’s more than worth the effort.
As with every aspect of relationship marketing, creating a great loyalty program starts with knowing what your customers want and what they want to do in order to get it (oftentimes this is simply buying more of your products, which is great!).
Here’s a quick 3-step rundown of how to angle any loyalty program toward customers’ needs:
- Find a desirable outcome. Customers won’t commit to a program if the reward isn’t worthwhile. Additional access or bonuses for your product may be the way to go, but in many cases free stuff works best.
- Find an action they will regularly commit to. Dropbox found that customers were very willing to refer other users for additional space. For other businesses (like the car wash example), simply purchasing the product or service will be enough (i.e., rewarded for buying something they already want).
- Make sure this system aligns with your business. With business goals in mind, the loyalty program should be crafted around your business’ modus operandi.
A slightly crazy example of the last tip can be found in loyalty programs from companies like Neiman Marcus:
“Committed customers, however, spend from $75,000 to just under $600,000 a year just to earn access to concierge service, private off-hours shopping events, custom travel and a whopping 5 points per dollar spent. For the Chairman's Circle members who spend more than $600,000 a year at Neiman's or Bergdorf Goodman, it's unparalleled access to a store they're practically living in anyway.”
This program may seem insane to the average business, but when you are a luxury brand like Neiman Marcus and your customers regularly reach such numbers, it just makes sense!
Most people don't understand that building a relationship with customers is about helping them. I've learned that the best way to find out how to help is by using surveys. By regularly using both standard surveys and targeted micro-surveys, we've gained a deep understanding of what customers want. We’ve even gathered feedback for non-product related concerns, such as what content customers would find most useful.”
Ruben Gamez, founder of Bidsketch
Customers are far more willing to hand over information to companies they know, like, and trust … and the data gathered can be incredibly valuable to your business.
Of the many methods to gather feedback from customers, surveys offer the best way to approach customers on a large scale. As Gamez mentions above, surveys can be useful to gather a sense of a majority opinion for an upcoming decision (like what sort of content customers might enjoy most).
We’ve previously written an entire post on creating smarter customer surveys, so I’ll spare you the tactical information on what gets surveys completed. But make sure you’re familiar with the three things every survey should be laser-focused on:
- Intent. Why are we making this survey? What do we want to learn?
- Brevity. Is this question really necessary?
- Bias. Is this a loaded question? Are we communicating clearly with customers?
When you conduct smart, regular surveys with your customers (and prospects), you’ll take a lot of the guesswork away and end up with insightful data that you can use to evaluate your next move.
Now I want to hear your results.
What method has worked best for building customer relationships in your business? How has relationship marketing impacted your business as a whole?
Share your story in the comments below!