Building long term customer relationships

“People buy from people”.

I’m not sure whom to credit with that often-used business adage, but it has certainly held true for as long as sales have happened.

It strikes to the very heart of the sales transaction. That a contract has been entered into between two parties, both of whom have a vested interested in the product or service concerned.

However, this is just the start point of the relationship. For a vendor to develop their business successfully, they should look to grow and nurture this relationship over a period of time. After all, it is widely accepted that it is “easier” to sell to existing customers rather than find and win new ones.

Over the years, many sales training courses and training films have been produced, to illustrate how easy it is to lose existing customers. Sadly, a great deal of companies invest so much time, effort and money into winning new sales and customers, they forget their existing customer base and end up losing too many of them.

Under current regulations, certain sectors actively encourage their customers to shop around for the best deals on a regular basis. With this pressure on a company, it is no surprise that a great number of vendors now work very hard to retain their existing customer base. In larger corporations, sales teams now are often split between new business sales and account manager teams.

Another way companies have found to retain customers is by adding value to their offering.

As an example of this consider the mobile phone service providers. Over the past decade, all have invested billions in additional services (referred to by them as “sticky services”), with the hope that the more services a customer buys from them, the less likely they are to move to another provider. A process they refer to as “reducing customer churn”.

A simple fact is that it costs more to win a new customer than to keep selling to an existing one. So with this in mind, this article tries to briefly examine ways in which an SME company can retain its customer base through developing a long term relationship with their customers.

A fundamental principal to remember is that the relationship is a two way street. For this to happen successfully, both parties have to be invested and committed to developing a relationship with each other. To put it another way, they must form a partnership.

In order for this to be successful, both parties need to get value of some way from the partnership. For the vendor this can be simply in the form of revenue, and for the customer the value will be most likely derived from the product or service, or maybe something arising from it.

Take the book sector as an example of this. For instance, when someone buys a book, they have a choice. Usually from a local bookstore or from a service like Amazon. Faced with this choice it comes down to either loyalty to the local bookstore, where there may be value in local knowledge, availability or the preference to browse for other items whilst in the store, or simply a fast, trouble-free delivery service. Either way, whatever suits the customer, will most likely determine their choice of vendor service.

So if adding value to the relationship with the customer, through the service offering, is an effective way to retain a customer, how else could a business achieve this?

There are a number of aspects of after-sales service that can offer the necessary value to the customer, for example –

  • Support services
  • Training
  • Additional products or services

Identifying which of these are important to the business really comes into play when defining the target market and profiling the ideal potential customers.

Support services

This could be in the form of a technical support capacity, for example a car service capability. If a customer derives benefit from a technical service from their vendor, (that they cannot provide for themselves), then they develop a need to return to that vendor periodically or when something needs fixing.

Another great example of this is, again, the mobile operators, who all offer ongoing support, or “cloud” based services in addition to their base offerings. This way they make it more than just a transactional relationship with their customers, who now rely on a technical after service from the vendor.

Training

In an indirect sales model in particular, offering the customer the ability to provide the end user of the product with the first line support service, is another great way of building value into a customer relationship.

The vendor gets to offload the costs of supporting many (hopefully) end user customers, whilst their first line customers make money from this service. Both become inter-dependent and both make money from the arrangement.

Additional products or services

If the vendor’s product is a component part of an overall solution, then value can be derived from several sources e.g. after-sales training, ongoing support services, training and repeat sales. All whilst adding value to the end cost of whatever solution is involved and helping the solution seller/integrator make better margins.

All the above examples illustrate ways a vendor can build value into a customer relationship. However, in the end, the rest is down to people building relationships with people.

If you consider the online market place as an example, where little or no interpersonal traction takes place, there is little or no loyalty from the customer to the vendor. With an online transaction t’s all about ease of doing business, or, to coin a well used marketing term, “the customer journey”.

By building some value into the mix, a vendor has the basis to start building a proper customer relationship, which will result in longer term sales and greater profits. After all – “people buy from people”.

And let us hope it will forever remain thus!

John Milner
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John Milner

When the opportunity came about to set up his own business, John decided there was an opportunity to help SME business owners gain a quicker, more effective presence in international markets, based on his own experiences, gained from within a multi-national distribution group. He has more than 20 years under his belt and many happy customers. He works with business owners to help them make a success of exporting, enabling them to win and retain new customers quickly, while minimising the costs and risks, often associated with breaking into new markets.