You cannot take any relationship for guaranteed in today’s fast paced business relationship. Only those organizations that tend to carefully choose customers to do business with will succeed. These are the organizations that believe in building deep and long lasting relationships with the “right fit” customers. They also help their customers to succeed by discovering new opportunities and replacing the demand capture with demand creation. They make the purchasing department irrelevant and become a strategic partners rather than only acting as vendors.
It is also pertinent to note that this type of relationship does not happen by a chance or accident but you have to plan it. According to the old school of thought, it costs five times more to acquire a customer than to retain it. This statement has its root in industrial era where bigger the factory and more the production is, cheaper it will be to produce goods.
However, this formula cannot be applied to the modern business environment. Today, businesses have to answer a very important question before launching their marketing campaigns. Should they sell what they have or what their customers need or want? The advent of internet has totally changed the buying habits of the customers and now their demands matter a lot. In simple words, the power has shifted from the seller to the buyer.
Internet has provided people access to unprecedented amount of information. Now, businesses have become global and even a vendor in Canada can sell its products in Saudi Arabia through internet. These developments have given customers millions of options to choose from. Now, only those businesses are going to succeed who caters to the needs of their customers and try to help them find answers to their problems through their products and services.
In the era of mass production, customers had to buy whatever the sellers want them to buy but this is no longer the case. Huge number of options available to customers means they are not going to sacrifice their needs anymore. They will only buy from sellers whose products meets their specific needs and requirements. As the competition is getting intense and customers have the liberty to choose from wide range of options, sellers have to change their approach in order to survive.
What they need to do is to develop good and long lasting relationships with the customers of their choice. They have to make some comprises in terms of how they do their business. They have to define who is a great customer with which they want to do business. Nowadays, it is impossible to have all the customers you can because it will make your organization wander in different directions. Organizations have to go out of the way for “right fit” customers, invest in them and manufacture products specifically for them in order to develop good relations with them and retain them for a long time to come.
Adrian Slywotzky has totally negated the old value chain model in his book, the Profit Zone. He talks about Modern Value Chain which is totally different from anything people know about value in business. In traditional value chain, organizational value was based on its assets including building, land or machinery. The customer comes last in traditional method of doing business where sellers prepare products followed by exploring different channels to transport those products to customers.
The modern value chain is totally different to the traditional one. In this method of doing business, the value lies in understanding of the customers’ needs and requirements. In modern supply chain, the customer comes first and everything else is of secondary importance. When you determine what your customers want, you explore different channels to reach them and then optimize your products accordingly.
Despite how easy it seems to develop relationship with a particular customer, it is a long and tiresome process. You start as a complete stranger to the customer no matter your business is worth billions of dollars. When a customer decides to do business with you, you are no more than a supplier for him which he changes like his clothes. This is where you have to decide whether the customer is a right fit and should you do business with him. If the answer is in affirmative, you must tend to become a desired supplier.
Never-the-less, It is never easy to become a desired supplier because there are thousands of other suppliers who are offering similar services. The method of delivering those services actually determines whether you are preferred over others or not. If your customer is satisfied with your services and the way you deliver them, he is very likely to continue doing business with you. This gives you an opportunity to become his trusted advisor rather than a mere supplier.
In the final state of relationship lifecycle, you become your customer’s strategic partner. A strategic partner is different from trusted advisor in many ways. You as a strategic ally collaborate with your customer to identify the needs of each other’s clients and try to create new value for them. This way, your clients also become customers of your main customer and vice versa. Both parties also discuss the common challenges facing their end customers and how to collaborate to find solutions for them.