LAST UPDATED ON September 21, 2023 ‐ 3 Comments
Why Build Customer Relationships: 4 Winning Reasons
Building customer relationships is important because they increase sales, reduce customer attrition, deliver invaluable marketing, boost employee morale and turn customers into your R&D department.
In this piece, we examine why healthy customer relationships are important and the costs that arise when a company ignores customers or fails to offer positive experiences. By the end, you’ll learn how to be a Long Term Thinking Company (i.e. one that values building customer relationships and maintaining customer loyalty.)
In the movie Miracle on 34th Street, Macy’s hires a man named Kris Kringle to be an in-store Santa. Kringle decides to do something blasphemous in the world of retail though: He tells parents to go to other stores. If Macy’s is out of stock on an item, he informs parents of other places where it’s available so they can be sure to get the presents their children want. As a result, the parents are wowed by Macy’s customer service and vow to be loyal to Macy’s in the future.
When Macy’s is out of the toy a child wants for Christmas, he directs the harried mother to another store. The Macy’s manager is at first horrified—until parent after parent congratulates him on this new marketing tactic and promises they’ll be loyal Macy’s shoppers from now on.
Embedded in this tale is a great lesson in the power of customer relationships. When you view yourself in a long-term relationship with your customers, all kinds of positive results follow. The customer knows they’re being seen as more than just an avenue to profits. This high-touch approach may seem costly upfront, but you’re likely to make that money back (and more) as a result of building genuine relationships with your customers.
In a way, customer relationships are similar to romantic relationships. Imagine that you won over a potential love interest with flowers, fancy meals, and exciting dates. But then, once you’re in a committed relationship, you stop trying to please them. You start phoning it in and acting neglectful. The odds that relationship survives are slim to none. Well, the same thing is true with your customers; the more you communicate with them and show them you appreciate them, the more likely you are to keep the love alive.
Short term vs. long term thinking for customer relationships
What happens when a company ignores customers or fails to offer positive experiences?
Let’s answer this question.
We’ll do this through the lens of two imaginary companies: One is Short Term Thinking Company. This company is merely transactional and doesn’t care about long term relationships with its customers, it’s just trying to make a quick buck and then loses interest after the sale is made. The attitude is “love ‘em and leave ‘em.”
The other is Long Term Thinking Company. This company values building customer relationships and wants to maintain customer loyalty. It’s willing to sacrifice in the short term in order to keep customers happy over the long haul.
Let’s explore what happens to each company’s customer relationships over time…
Customer relationships increase sales and reduce customer attrition
The easiest way to grow your business is to not lose business. Otherwise, you’re constantly trying to bail water out of a leaky boat. When you retain customers, you can double or triple your growth rate. After all, the average business loses between 20-80% of its customers annually simply because of poor customer relationships.
Short Term Thinking Company invests lots of time and effort into making that first sale but then fails to follow up adequately and lets relationships go unattended. As a result, it loses customers over time and has to spend more to acquire new ones.
Long Term Thinking Company follows up after a sale in order to retain customers and increase loyalty. As a result, it sees continual growth. Plus, it saves money since it doesn’t have to constantly find new customers to replace lost ones.
There’s a vast difference between the one-off profit you might make on an average sale, which ignores the bigger picture, and the total aggregate profit your average customer represents over the lifetime of their business relationship with you. Once you recognise how much combined profit a customer represents to your business when they purchase from you again and again, over the months, years or decades, you’ll realise the critical importance of taking good care of your customers. (source)
George Farris, professor emeritus of Rutgers Business School, says, “Conversation with customers will increase sales, even if the product or service is never mentioned.” When you keep customer relationships alive, you stay on their radar and become the first option they seek once they need your products or services again.
Short Term Thinking Company fails to make contact with customers so customers forget about it and its products.
Long Term Thinking Company stays top-of-mind with customers and sees repeat business as a result.
According to the book Marketing Metrics, businesses have a 60 to 70% chance of selling to an existing customer while the probability of selling to a new prospect is only 5% to 20%….It’s easier to retain customers than get new ones. When it comes to your time and the company’s time, I think it’s better to engage existing customers first. (source)
Customer relationships deliver invaluable marketing
Positive word of mouth
When customers are happy, they recommend your company to others and that kind of positive word of mouth is the best form of advertising. When you treat people right, they become repeat customers and your biggest brand advocates. In fact, they’ll become invested in your success. Conversely, if you let them down, beware! Hell hath no fury like a customer scorned – especially one who decides to tweet about it so everyone knows how they feel.
Short Term Thinking Company’s customers don’t have an ongoing, positive relationship with the company so they never speak about it to anyone else (and if they do, it’s probably to say something negative). The company overpromises and underdelivers leaving customers irritated and the company’s reputation damaged.
Long Term Thinking Company keeps its customers happy and as a result, customers tout it to friends, leave positive reviews online, and mention it on social media. All this saves the company money on marketing. The company underpromises and overdelivers so customers wind up pleased and its reputation is strong.
According to experts, a dissatisfied customer could tell around 13 people about a terrible service he got from your business. Therefore, you must take great care to monitor customer satisfaction to avoid having a bad reputation on the streets. (source)
Save money on customer acquisition costs
Many companies spend tons of money to bring new customers into the fold. But acquiring a new customer can cost five times more than retaining an existing customer. In fact, increasing customer retention rates by 5% increases profits by 25% to 95%, according to research done by Bain & Company. It’s wise to focus efforts on nurturing existing customers who are already spending their money on your goods or services.
Short Term Thinking Company is constantly spending money to acquire new customers to replace ones it’s lost.
Long Term Thinking Company saves money by getting repeat business from existing customers. It also benefits from referrals as happy customers spread the word to others.
The first rule of any business is to retain customers and build a loyal relationship with them, and thereby avoid customer acquisition costs. It’s a well-established fact that 44% of companies have a greater focus on customer acquisition vs. 18% that focus on retention. Also, it’s true that only 40% of companies and 30% of agencies have an equal focus on acquisition and retention. (source)
Permission to stay in touch
When you take care of customers and build trust, they give you permission to keep reaching out to them. They have confidence in you and the ongoing relationship. Instead of rejecting a cold call, they’ll feel like you’re doing them a favor by contacting them and pay attention to your communication..
Short Term Thinking Company only interacts with customers when it’s trying to sell them. As a result, customers start to feel like they’re just a commodity and the company winds up in people’s spam folders.
Long Term Thinking Company is genuinely helpful to customers. Therefore, people are excited to interact with the company and hear what it has to say. Instead of the Spam folder, the company winds up in the inbox and its emails get opened (or its calls get answered).
Customers view salespeople as helpful professionals interested in the success of others. Their goal is to be of service and help prospects make the right decisions for their organizations. Even if a potential buyer doesn’t sign on the dotted line, the salesperson has earned the respect of the prospect and permission to stay in touch. From this perspective, sales and marketing have ongoing roles in the relationship building process. (source)
Maintain a consistent identity
Every touchpoint matters and each time a representative of your company speaks to (or advertises to) a customer has an impact. When you give customers mixed messages, they’ll assume you’re unreliable and inconsistent. When they know you can be counted on, you build trust.
Short Term Thinking Company has different people speaking with different messages to customers. As a result, its audience winds up confused and unsure of the company’s voice and what it represents.
Long Term Thinking Company speaks with a consistent voice in a consistent way. Customers develop a sense of trust from this unchanging identity and perceive it as authenticity.
It’s important to ensure that the messages you send out, from your marketing collateral down to how your customer care team speaks to people, are right for your brand. Because if a brand can’t build a consistent identity, customers may assume that the brand itself isn’t consistent, and therefore, not reliable. (source)
Build an emotional connection
Do you feel an emotional connection with generic online retailers like Amazon or Walmart? Probably not. Now think about how you feel about the local “mom and pop” shop in your hometown; it’s most likely a completely different feeling. That kind of emotional connection is what happens when you develop a long-term customer relationship. It may be easier for small businesses, but large companies like Patagonia and Nike also excel at this.
Short Term Thinking Company is perceived as a faceless megacorp that simply wants to maximize profits at all costs. There’s zero emotional connection, it’s just where one goes to “do business.”
Long Term Thinking Company is perceived as personal and caring. To this company, customers are actual human beings that deserve respect. As a result, an emotional bond is forged.
79% of customers say that they want brands to show that they understand and care about them before they buy anything. Businesses that perceive the importance of building customer relationships develop an emotional connection towards them and retain with them for a long time. (source)
Customer relationships turn customers into your R&D department
Gain insights into your customers
An ongoing relationship means you really get to know your customers; that’s the best R&D department you can have. When customers know you and communicate with you, they reveal their desires, goals, and preferences. That will help your future product designs and allow you to customize marketing messages so they reach the right audience.
Short Term Thinking Company sells once to customers and then ignores them, missing out on potentially valuable feedback.
Long Term Thinking Company keeps in touch, sends surveys to customers, and tracks their preferences in a Customer Relationship Management (CRM) tool. As a result, it knows exactly what customers want to see in their products and the right way to promote them.
As the people who purchase and use your product or service, your customers will have a unique insight and will often see things which can be overlooked by the company’s own team. This unique insight enables them to be incredible when it comes to feedback, and by utilising that you not only get tailored advice to your product or service, but you’ll find that your customers will become more invested in the success of your company. (source)
Turn negative experiences into positive ones
The best way to anger customers is to leave them feeling dismissed. A lackadaisical response can turn a small issue into a major problem and make customers feel ignored. On the other hand, coming to the rescue can turn a customer with a negative experience into a lifelong evangelist for your brand.
Short Term Thinking Company makes a profit off of customers and then forgets about them. It doesn’t invest in customer support and would rather lose a customer than put in the effort to make them happy. These upset customers wind up leaving negative reviews online and saying bad things to friends about the company.
Long Term Thinking Company strives to keep customers satisfied, but realizes they’ll occasionally have a negative experience. The company strives to address these concerns and give them a reason to come back again. Customers are blown away by the care and attention and tell friends/social media all about it.
No matter how hard you work to keep your customers satisfied, you’re bound to come up against one or two who have a negative experience with your product or service. It may not necessarily be your fault, but it’s your job to address the customer’s concerns and give them a reason to come back to your brand. The key is to provide above-and-beyond customer service. It’s important to listen to and empathize with the individual in order to show them that your company is committed to keeping their business. (source)
Improved customer support
An ongoing dialogue with customers will lead to improved support satisfaction. Using a CRM will help you track previous problems a customer has communicated and help you act preemptively. When you listen, reflect, validate, and empathize with your customers, you keep the conversation going and increase the odds that you’ll make things right and keep customers in the fold.
Short Term Thinking Company doesn’t track customers and is thus incapable of learning from past mistakes. Each time a customer contacts them, it’s like they’re starting over from scratch all over again.
Long Term Thinking Company tracks previous support queries and takes proactive steps to keep customers happy. That can mean issuing a refund, offering a free month of service, or researching solutions to issues so customers don’t have to do that work. The end goal is to have customers raving about the quality of support.
96 percent of dissatisfied customers don’t complain. They just walk away, and you’ll never know why. That’s because they often don’t know how to complain, or can’t be bothered, or are too frightened, or don’t believe it’ll make any difference. Whilst they may not tell you what’s wrong, they will certainly tell plenty of others. A system for unearthing complaints can therefore be the lifeblood of your business, because customers who complain are giving you a gift, they’re still talking to you, they’re giving you another opportunity to return them to a state of satisfaction and delight them and the manner in which you respond gives you another chance to show what you’re made of and create even greater customer loyalty. (source)
Customer relationships Boost Employee Morale
Boost employee morale
When you have great relationships with customers, you also have great relationships with employees. People love to work in an environment of good vibes where customers are treated well. There’s less stress on employees when they know the company they work for has their back and they’re empowered to do whatever it takes to keep customers happy. Companies that excel at customer experience have 1.5 times more engaged employees than less customer-focused companies.
Short Term Thinking Company makes employees deliver bad news to customers or, even worse, ignore their queries. As a result, employees wind up disenchanted and turnover is high.
Long Term Thinking Company lets employees take their time with customers, reply patiently to their queries, and solve problems. As a result, employees feel like their workplace is a positive one and that everyone (customers and employees) is truly valued.
Feeling part of the goals that are bigger than themselves (and their job) contributes significantly to positive employee morale. Many employees want to feel as if they are part of something important and contributing to success for the greater good is a real morale booster. A deep focus on serving the needs of customers also promotes positive employee morale. (source)
Statistics that show the importance of long-term customer relationships
Still not convinced? Check out some of these stats that reveal the importance of building quality relationships with customers:
- 96% of customers say customer service is important in their choice of loyalty to a brand.
- Customer-centric companies are 60% more profitable than companies that don’t focus on customers.
- Customers switching companies due to poor service costs U.S. companies a total of $1.6 trillion.
- Loyal customers are five times more likely to purchase again and four times more likely to refer a friend to the company.
- The top reason customers switch brands is because they feel unappreciated.
- 77% of consumers view brands more favorably if they seek out and apply customer feedback.
- Customers tell an average of nine people about a positive experience with a brand, but they tell 16 people about a negative experience.
- A 2% increase in customer retention is the same to profits as cutting costs by 10%.
- 80% of customers say they are more likely to do business with a company if it offers personalized experiences.
The best tools for the job
Now that you’ve realized the importance of maintaining customer relationships, you’re probably asking, “What’s the best way to do it?” Check out our companion piece on how to successfully develop and maintain long-term customer relationships. . Below are five tips (along with five related tools) to get you started…
1) Make customers feel appreciated
Making the other person feel special and appreciated is the key to any relationship. Set up a customer service system, even if you’re a small business. If it’s your company, you may need to man the front lines of support queries. What may seem like a pain is actually a great way to gather feedback about what’s right and wrong with your product. Also, get personal with your customers. Call them by their names, tracks their interests, and be proactive about making sure they’re happy. Many companies use virtual assistants to do the research for your customer service to reach out to the right customers with the right message at the right time.
There are a number of solid helpdesk software tools you should evaluate for your customer service needs. “While Zendesk has dominated the industry for a while the product behind the brand has not improved much over the years, as a result a number of Zendesk alternatives have become very popular lately. Groove is one of them which makes support, sales, and customer engagement software for everyone. It’s quick to implement, easy to use, and scales to fit your needs. ”
Nextiva: “Take your phone system to the cloud with Nextiva’s commercial phone service. One powerful solution for VoIP, Video, Messaging and Fax.”
2) Use customer support software
Online tools help support teams understand their customers’ needs and monitor customer satisfaction based on factors like number of open tickets and average resolution time. This keeps everyone on your team informed so clients aren’t frustrated by mixed signals and poor internal communication. You should also monitor social media, Amazon, Yelp, and industry forums to find and interact with dissatisfied customers. Always be calm and courteous and work to repair any damage done.
Try Freshdesk alternatives: While Freshdesk brand has also dominated the customer support software market the product behind the brand has not improved with the times. It’s a very feature rich and bulky for small or midsize businesses trying to reduce chaos and bring order to their support process with a robust support ticket system, self-service knowledge base and community forums. As a result there are a number of new Freshdesk alternatives for 2022 on the market currently which are less bulky, cheaper and easier to use.
3) Use a CRM system
A customer relationship management (CRM) system will help you track all your customer conversations in one place and streamline your communications. At the very least, you should be keeping a record of your clients and when you last checked in with them. Or lean in and record customer’s product likes and dislikes, spending patterns, location, age, gender, tastes, needs and buying habits. Don’t be shy; ask if there are problems you can solve for them or anything else you can do to keep them happy. Even if it doesn’t result in a sale immediately, you’ll be first in mind when customers need to purchase again.
HubSpot CRM: “Everything you need to organize, track, and build better relationships with leads and customers.”
4) Empower your employees to do the right thing
Make sure your employees know that keeping customers satisfied is a top priority. Tell them to follow up regularly to make sure customer needs are met. Tell them to reply to voicemails, emails, and support queries ASAP. Make customer care part of your onboarding process for new employees. Work to improve your team’s active listening and communication style via ongoing training. The result will be a more consistent customer experience.
Lessonly: “We help customer service leaders take their teams from good to great with powerfully simple training. Empower, elevate, and expand your support team with Lessonly.”
5) Don’t wait for customers to reach out to you
Keep customers notified about the products you offer, new releases, articles/links of topic-specific interest, and anything else that might entertain them. An email newsletter is a great way to do this. That way you don’t have to rely on customers following you on social media since you wind up directly in their inboxes. Also, reply to comments at your blog or online whenever possible. And you can never go wrong with an old fashioned thank you note.
Mailchimp: “Bring your audience data, marketing channels, and insights together so you can reach your goals faster—all from a single platform.”
Want more advice on how to build customer relationships? Check out How to build long-term customer relationships (and the tools that will help you do it).
Related Smallbiz.tools articles: