Mar 21

Mar 21 BMC Part Four: Customer Relationships

Business Model Canvas Customer Relationships

(If you’re using the Canvas, you’ll love my free Business Modelling eBook, full of tips for inventing and testing ideas that will change the world)

Not every business engages with its customers in the same way.

Some build a loyal following, whereas others are temporary and transactional.
Some sales require an appointment or face-to-face conversation, whereas others are purely electronic.
Some brands are cheeky and playful, some are proud and formal, whereas others are totally plain.
None of these are right or wrong, but they do need to match our Customer and Value Proposition.

You wouldn’t buy a designer handbag from a vending machine.
You wouldn’t expect to have a long application process to buy fish & chips.
You wouldn’t assume that customers will stay forever loyal to one brand of umbrella.

That’s why we need to be clear on the type of relationship our business intends (or needs) to have with our customers.
There are three spectrums that can help visualise our preferred relationship.

1. Is this a short term or long term relationship?
Some relationships are short and sharp, which can be great.
Others take more time, and some even go for decades.

For example, think of your doctor.
Is it an after-hours, bulk billing clinic where you see a different doctor every time?
Or is it the family GP, who has known you for over 20 years?
Both are great, but they fit very different value propositions.

For many businesses, the aim is to turn a short term relationship into a long term relationship. These can be profitable, but generally our customers are hesitant to make commitments.
A business needs to understand its customers, in order to incentivise them to come back.

Customer relationships personal or automated

2. Is this a personal or automated relationship?
I have never met anyone from Spotify.
Have you?
I have never heard of anyone buying a house from someone they didn’t like.
Have you?

Some customers need a personal interaction – maybe it’s to answer their questions, ease their anxieties or to help talk themselves into a purchase.
Even then, some customers are hoping that they will engage with the same person each time.
Some customers would rather an automated buying process – as Amazon, eBay and StubHub have demonstrated.

Each of these has their benefits, and their shortfalls, with many businesses opting for a combination of the two.
The question is, what level of personal interaction best delivers your Value Proposition?

Customer relationships acquisition or retention

3. Are we focused on acquiring customers or retaining customers?
Whilst it’s true that every business needs to acquire and retain each customer, most are more reliant on one than the other.

Think of it like this:
What would it take for you to change banks?
What sort of incentives would be required to prompt a switch?
Change is annoying, so it would have to be something decent, like several hundred dollars or a vastly better interest rate.

People are naturally reluctant to change.
That’s because these types of company are Acquisition Focused – they spend their energy competing tooth-and-nail for your business.
Once they’ve won you over, contact drops to the bare minimum.

It’s the same for your insurance and your phone provider, even for your pod coffee machine.
Win a customer once, and the retention happens automatically.

By contrast, think about the different supermarkets you’ve visited.
Are you loyal to one over the others?
Would you walk an extra 600 metres to shop at Coles instead of Woolworths?
Everyone in the country has been to all the major competitors, we know how they work.
But when you move house, can Woolworths persuade you to stay with them even if Coles is more convenient?

These are retention focused businesses, who run schemes with rewards cards and cheap petrol offers.
They’re designed to create loyalty and ensure repeat business, because repeat business is extremely profitable.
That means constantly re-advertising to existing customers, because they could very well leave tomorrow.

Again, this is a spectrum – you can sit anywhere along that line, and it can be different for each customer segment or product.
The important part is that this forces you to think through and articulate your acquisition and retention strategies.

So now we have a grasp on how our customers expect to engage with our company, and what we need to provide in order to keep the relationship healthy.
Only one thing remains: Tone.

Some companies talk like robots.
Some are fun and playful.
Some are sophisticated and elegant.
Some are borderline rude.

It’s important to think through how you’d like your communications to be perceived, and how you intend to relate to your customer.
Are you trying to be the equivalent of a butler in a suit and tie?
Or are you trying to be like the cheeky friend whose emails make people smile?

In public speaking, a good presenter knows whether they’re trying to persuade, entertain or inform.
Customer Relationships require the same insight.
Is your aim to cross-sell, deliver technical data, or brighten your customer’s day?
All of the above?
Then you’d better have some talented writers on your team, because these are valuable advantages that are hard to get right.

Which brands do you have a good relationship with?
What do they do to create such a positive, effective engagement style?

Four questions for your business
Are our relationships long term or short term?
Are they personal or automated?
Are we focused on acquisition or retention?
What tone do our communications have?

Next, we’re looking at Channels…

This is a multi-part series on the Business Model Canvas.
If you’d like to jump straight to a particular section, go to:
Overview: How To Use The Business Model Canvas
Desirability: Customer Segments, Value Proposition, Customer Relationships, Channels
Feasibility: Key Resources, Key Activities, Key Partners
Viability: Cost Structure, Revenue Streams