Tuesday, October 07, 2003
Are you struggling to create and keep profitable customers? Columns for Sales and Marketing Management who wants to build business relationships.
I frequently see marketing materials and news releases boasting about the stronger relationships gained by using product A or method B-- most of these materials are unclear about what exactly that means.
While it is fine to use the "relationship" word in your marketing materials, but define for your audience what it means to the reader. When I tell you I can help executives build stronger business relationships, what is it that I really mean?
Stronger relationships mean less friction in the decision making process-- not blind acceptance, but a system that is conducive to accomplishing common objectives.
If you want stronger customer relationships, then what exactly does that mean to your company? Using vague and general statements are useless if you expect results. Here are some examples of statements that might describe a customer relationship:
- A customer attrition rate of less than 10% per year, with return purchase rate of 50% within 6-months of original transaction.
- Customer satisfaction rate of 82% based on complete order delivered on-time, 2% or less product return, and quality suited for desired implementation.
- Three new accounts referred by top tier customers each year, of which, at least once purchases within 3-months of recommendation.
Instead of the generic stronger customer relationship, you should describe the specific desired result of such state-- include both points of measure and a period for reevaluation. The period can be implied.
Your statements will be more specific for internal measures, less specific for customer communications.
In marketing copy it is better to say, "Product X will reduce customer turnover, increase repurchase, and lower acquisition costs" than "Product X improves customer relationships." Relationships are measured by specific results produced.
Often relationships are described in slogans or mission statements-- while it is reasonable, this is only acceptable if the rest of your communications share specifically what this means. For example, to customers of the Center for Strategic Relations, helping executives build stronger business relationships is described as:
- Turning customer interactions into sustainable profits through process improvements that reinforce consistency, scale, and measurements.
- Ethically develop regular interactions to delivery mutually desired objectives so that costs decrease and profits increase per transaction volume.
- Improve professional social skills that helps achieve business objectives by connecting outside resources in reciprocal and non-reciprocal interactions.
More quantifiable statements are used to describe internal objectives. These objectives are achieved by customer realizing the external statements above. Internally to the consultants and staff of the Center this same message means:
The external and internal messages are only possible through executives with strong business relationships, but with specific statements the abstract concept of relationship is understood. (At least more clearly presented.)
Before you describe the relationship value of your business to another, or internally that value to employees, think about the results produced. Relationship is a vague and often overused term that means different things in both context and audience. If you use a results oriented language you'll convey a message with specifics for action.
Justin Hitt, with over 10 years of experience in business to business executive relationships and strategic business intelligence; has reduced costs and improve customer loyalty for professional services and numerous other technology companies. Call +1 (877) 207-3798 or visit his website at https://iunctura.com/
Interesting insights on kinds of information sources used in making critical decisions as affected by the structure of their compensation package (University of Arkansas, Vikas Anand) included: (Study conducted on high-tech firms)
- Design of executive compensation packages influenced types of information sources used when making critical decisions,
- Research identified three types of knowledge sources,
- Market-- including customers and vendors,
- Network-- including consultants and colleagues in other organizations,
- Secondary-- including publications, the Internet, and industry trade organizations,
- Market sources,
- Risk-free strategy that ties to an organization's core operation,
- Can be assessed through established organizational processes,
- Typically build incrementally on existing strategies,
- Network sources,
- More effort to access (may need to be cultivated),
- Used to gain information not available through market sources,
- Can provide unique information supporting a more risky strategy,
- Secondary sources,
- Less organized requiring more time and effort to acquire,
- Associated with personal development and skill building,
- Collection of information not available through any other source,
- Risk aversion for information sources changes with compensation,
- An executive with a lower base pay was more willing to bear risk because of reliance on short-term variable pay to maintain cost of living,
- Executives will avoid making risky decisions that could jeopardize expected bonuses, and will even clear strategies with stakeholders before action,
- Compensation that required a vested period reduced the amount of risk an executive was willing to bear,
- If base pay was sufficient to cover lifestyle expenses, short-term incentives were treated as extra, executives wouldn't increase risk bearing,
- Structure of compensation package influenced information sources,
- Executives with a many options and a long vestment period showed considerably more use of network sources (not true for control group),
- Low base pay and high short-term incentives showed an increase use in market sources to mitigate executives high risk,
- Low base pay and high short-term incentives executives also heavily used network sources (researchers speculate that high degree of risk caused them to seek as many sources as possible),
- Short-term incentives tied to individual performance doesn't increase the amount of information sought (no increase in market or network source, but large increase in use of secondary sources),
The two-stage study investigated compensation and information sources of 207 top executives in software manufacturing firms and a control group of 247 executives in non-high tech firms. First, CEOs were asked to describe the compensation packages of their top executives. In the second stage, these executives were surveyed about their information-seeking behavior.
Vikas Anand conducted this study with Luis Gomez-Mejia (professor of management at Arizona State) and former graduate student Paul Tiedet (University of Arkansas). Results were presented at the 2003 annual meeting of the Academy of Management in Seattle. Vikas Anand, assistant professor of management, Walton College of Business; (479) 575-6232; firstname.lastname@example.org
Justin Hitt helps executive build stronger relationships that can increase profits and create loyal customers. For more information visit Inside Strategic Relations or call +1 (877) 207-3798
Last update: 04/18/2004; 3:08:45 AM.