Building Great Customer Relationships for Your Local Business

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What’s the best way to maintain a thriving business that generates ever-increasing profits?

It’s tempting to grab for the simple answer:

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Increasing sales to existing clients while capturing more and bigger customers is the formula for success.

But there is something else to consider. Something very important that is in fact the foundational ingredient in this formula.

Customer relationships. These are the ongoing connections between a company and its customers.

The strength of these relationships hinges on the degree of satisfaction customers achieve throughout the buying cycle and following the receipt of goods or services. Building solid customer relationships is closely correlated with developing and retaining a loyal customer base.

Building Great Customer Relationships

Every business, whether it is a corner store or a multi-national concern, runs on customer relationships. And these relationships spring from what is known as customer relations – the way a business communicates and interacts with the public in its quest to capture and retain customers.

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Tuning up your customer relations tactics so as to optimize relationship building calls for strategic thinking.

If you do not have one in place already, you need to put together a coherent approach to customer relationship management (CRM). The CRM concept includes guidelines, strategies, practices, and technologies used to analyze and manage the interactions that make up the customer experience. The objective of CRM is to improve customer service, enhance customer retention, and drive sales growth.

Nowadays CRM is often associated with software tools that companies can use to help manage their customer relations and the data generated around those processes. But the term also refers to as an overall way of thinking that prioritizes the identification, understanding, and satisfaction of customers’ needs and wants.

Once you master the art of customer relationship management and build excellence into your customer relations practices, beneficial customer relationships emerge as the natural outcome.

Are customer relationships really that important?

From an objective standpoint, there is really only one reason for people to patronize your business: Because there is something in it for them. They are only there to get what they want or need from you.

Customers are simply looking out for themselves, and they are doing so in a world that they see as being full of risk. Caveat emptor is the working principle – buyers have to guard against the chance that they will not satisfy their needs, or pay too much to satisfy them.

These are the two risk points that any customer has to navigate around in every transaction: potential failure to reach their desired level of satisfaction, and potential failure to achieve a balance between satisfaction level and what they see as a fair and proper cost level.

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Theoretically, as long as these risk factors in the buying experience can be successfully mitigated, it does not matter to the customer who the provider of a good or service is. It could be you, your competitor, Amazon, or a vending machine.

But in reality, nearly every customer experience is framed within and influenced by relational factors.

How do customer relationships work?

There are two primary strains of business/customer relationships. There are constrained relationships, where the customer has to stay in the relationship, and dedicated relationships where the customer wants to stay in the relationship.

Constrained Customer Relationships

Customers in a constrained relationship can only get what they want from single source. Many customer relationships are constrained by an economic moat, a concept popularized by Warren Buffet.

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Economic moats are various durable competitive advantages. Like the original moats that protected castles, economic moats make attack difficult. They constitute obstacles that competing businesses would have to overcome.

Moats are also factors that can be used to make it difficult for customers to turn away from your business.

The brand moat gives customers things that they are willing to pay a premium for. These are often intangibles like reputation, prestige, quality, or self-satisfaction. A brand moat does not necessarily have to come with high overhead costs, but building one may require significant time and effort along with some intangibles as input from your side.

The secret moat is most often comprised by intellectual property. Things like copyrights, patents, trademarks, and proprietary secrets make it difficult for competitors to draw your customer base away with an identical product. The recipe for Coca Cola, Google’s search algorithm, and Amazon’s 1-Click are all secret moats.

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The toll bridge moat derives from having exclusive control over a market or market niche. Google Analytics, the Mozscape Index, and the McDonald’s Big Mac are examples of this concept. Customers have to come through you and pay your price if they want the product.

The switching moat is constituted by a degree of difficulty required to change from one brand to another. Mobile phones are a good example of this, as are the many free products and services offered by Google. Customers who want to move away will have to transfer all of their data and settings, an undertaking that we all know is unpleasant to consider.

The price moat is created by creating and/or selling products at prices far below what the competition can match. Think Costco, Jet Blue, or Walmart, the master of the price moat.

Case 1: Planet Fitness – Straining and Constraining at the Gym

Planet Fitness is a good example of a business that leverages a combination of moats to beat the competition and constrain customers. Among gym memberships, they offer a lot of perks at prices that are difficult or impossible for any other fitness center to match.

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This price moat is strong, but it is a brand moat that Planet Fitness uses to stand apart from and hold off other gyms.

From the customer viewpoint, it may be a stronger constraining factor than price, blurring as it does into a toll bridge moat by leveraging a certain very common human psychological trait in a way that no other gym does. Planet Fitness loudly promotes their gyms as “Judgment Free Zones” that cater to new or casual gym users – in other words, out-of-shape people who are afraid to strut their lack of stuff in a gym full of toned thighs and ripped abs.

Planet Fitness defends their brand moat aggressively, creating some controversy in doing so. They lost a customer because they asked her to cover up her fit body. Another customer was kicked out for grunting while lifting weights.Screen Shot 2017-08-31 at 12.02.51 PM.png

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Being willing to defend its moats and stated values even at some cost has worked out well for Planet Fitness. They draw hate but get far more numerous positive reviews, and have pulled 5 million members to locations in 47 states. Once settled in, Planet Fitness customers are unlikely to leave. Even if they get in good enough shape to make a showing in another gym, there is still the bargain price to consider.

If you can get them in place, moats work well for defeating competition and retaining customers. But note that several or all of the listed economic moats may appear to be difficult to achieve from the perspective of a small, local business. They tend to be based on brilliant and unique ideas, being first, or the mysterious workings of intangibles.

What is a simple small retailer or online business to do? Just go to work on creating dedicated relationships that can end up functioning in a way similar to constrained relationships.

Dedicated Customer Relationships

Dedicated customer relationships are based on emotional bonds that give the customer satisfaction. Loyalty is a natural side effect of this type of relationship. These customer/business relationships are driven by intangibles like:

Admiration that develops when customers respect who you are, values you stand for, and things you do. You gain admiration by modeling behaviors that reflect the ideals of your customers.

Benevolence as exemplified by your willingness to act in your customers’ best interests by giving them care, guidance and protection.

Expertise reflected in your ability to deliver on promised outcomes or results. Things happen on time, at the stated price, and as part of a customer experience that goes above and beyond expectations.

Integrity as measured by alignment between the values, words, and actions associated with your business. Integrity builds trust and lets customers feel at peace with their patronage of your business.

Case 2: Harley Davidson – Constrained Dedication

The Harley Davidson motorcycle company has been through a lot of ups and downs since William Harley and the Davidson brothers began manufacturing motorcycles out of their garage in 1903. The brand came close to death at the hands of imported Japanese motorcycles in 1969 and its years as a family-owned business ended in a buy-out by bowling and recreation equipment manufacturer AMF.

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In 1981, crippled by quality issues and a severely damaged reputation, Harley was recovered from AMF by a group of 13 private investors.

The company faced the immediate problem of resuscitating the brand in the face of a market dominated by Japanese imports. Unable to match the Japanese bikes in terms of quality, performance, or price, the company moved to embrace the iconic, retro, American-made aspect of the brand. A major effort was put into marketing a lifestyle concept built around Harley Davidson motorcycles, and a Harley Owners Group (HOG) was established in 1983.

It was a successful effort. Customers gathered, wanting to enjoy the cachet and camaraderie of riding an American classic and being a member of a “biker club”. Spreading chapter by chapter across the world, HOG has gathered more than 1 million members, a majority of whom have purchased motorcycles or accessories from Harley Davidson.

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The company was saved by Harley customers who are dedicated to and passionate about the brand, riding the bikes because they want to even though import motorcycles still far outperform Harleys. HOG members are constrained to the Harley brand if they want to continue enjoying exclusive customer benefits, the camaraderie, and the community.

Anyone familiar with American motorcycle culture can tell you that a strong bond exists between Harley Davidson customers and the brand; so strong in fact that derogatory remarks about the brand in the wrong company have often resulted in spilled blood!

Bonding Customers to Your Business

Dedicated customer relationships create bonds between customers and your business. Customers want to trust in a business and feel comfortable with their buying experiences. Once these factors are in place, customers generally like to preserve the status quo. They don’t necessarily like change, so if you can give your customers what they want in these areas, you are on the way to having both dedication and constraint in operation.

Take steps to promote dedicated customer relationships by following a few basic guidelines.

Communicate. Effective communication is foundational to any good relationship, and customer relationships are no exception. The goal is to have human conversations with your customers. Depart from the robot phone trees and monotone memorized greetings and pitches. Face-to-face is ideal, but if customer service cannot always be delivered that way, train your staff to talk, empathize, and interact as if they were sitting across from the customer.

Use a polite but friendly conversational style moderated between casual and formal as appropriate to the situation. Listen carefully, and ask the questions necessary to draw out details and show the customer that their case is an individual matter of concern that will be handled to the best of your ability. Customers today want to know they are being listened to.

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By communicating with customers as people and responding directly to their needs, you create connections. Maintain the connections with follow-up and outreach as appropriate to build relationships that keep people coming back and bringing their friends with them.

Stay connected. Modern technology and social media offer more ways than ever before to build and maintain connections with customers. LinkedIn, Facebook, Yelp, and your own website and blog all offer spaces where you can connect with and learn about your customers in near real time.

Use these tools to stay in touch with customers, follow up on sales, respond to questions and criticisms, and generally stay up-to-date with what your customers are thinking. Avoid creating a one-way conversation that is only about the products or services you hope to sell. Devise strategies to stimulate feedback and interaction. Providing useful information, benefits, and bonuses are other techniques for keeping your customers engaged beyond the initial transaction.

Exceed expectations. If you master the art of communicating well, and creating and maintaining connections, you will have already made significant strides toward exceeding expectations. You want to under promise and over deliver. Provide not only the excellent products or services customers expect from you on time and at fair prices, but also orchestrate a great all-round customer experience that continually surprises and delights.

Build Your Business Around Superior Customer Relationships

Let great customer relationships based on outstanding customer experiences define the way you do business. When this is the case, people will not only know, but actually fear that they will not be able to find the experience you give them any place else. When customers reach and pass this point, they settle into comfortable relationships with your business as dedicated, loyal customers. As they spread the word to their friends and neighbors, your customer base will grow along with your reputation for maintaining the type of customer relationships that are rare today. A bright future for your company will be ensured.Customer relationships bright future image.

 

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