04
Customer Relationship block in Business Model Canvas
© Entrepreneurial Insights based on the concept of Alex
Osterwalder
This post explains the
Customer Relationships Building Block, that represents the fourth building
block in the Business Model Canvas. The article starts with explaining the
1) customer relationship building block. We then look at
2) categories of customer relationships and a 3)case study.
CUSTOMER
RELATIONSHIP BUILDING BLOCK
This building block
dictates the nature of the relationships that an organization will develop with
its various
customer segments. A company could choose to communicate with its customers
through people or automated means. The customer relationships that an
organization opts for are based on the company’s business model and greatly
impact the overall customer experience. The relationships are dependent on
three main motivations that are explained below.
Customer acquisition
Customer acquisition
is the process of persuading a customer to select your organization’s product
over choices available in the market. Businesses usually spend a lot of
resources evaluating the tradeoff between the cost of acquiring a
customer and
the value the customer provides to the company.
A number of mediums and tactics are available to
entrepreneurs today who are interested in acquiring customers for their
business. These are elaborated on below.
1. Content Marketing: for
entrepreneurs with limited resources Content Marketing is a very appealing and
useful alternative. Though a lot of organizations may opt for this medium, it
has been proved extremely effective for those who have employed it
intelligently.
2. Search
Engine Optimization: Content Marketing automatically means you have your name and
information relevant to your brand and your company available online. The more
people are exposed to it and share it, the higher your content will rank in
search results, which is one of the most effective ways of getting your product
noticed by your target customer.
3. Email Marketing: the
resulting traffic directed at an organization from content marketing and search
engine optimization can give entrepreneurs access to a rich resource of
potential customers. When customers subscribe to receive information and news
regarding your product, you have managed to acquire a customer without having
to invest in an extensive sales force.
4. Copywriting: words
have a powerful impact on the way your product will be positioned and perceived
by the customer. Copywriters can play an instrumental role in ensuring the success
of your brand positioning as well as attracting the right customers to your
products.
5. Conversion Rate Optimization:
the more your company starts attracting customers, the stronger your chances
are of acquiring them by making minor tweaks to your content and outlook.
6. Social
Media Marketing: despite the popularization of social media as a customer
acquisition tool, it cannot be depended on exclusively to get word of your
product out in the market. When used in collaboration with other tactics,
however, social media can elevate your product significantly in your target
customer segment’s estimation.
7. Analytics: it is not
just enough to mobilize word of your products through the media mentioned
above. If companies do not use data gleaned from one or more of these resources
and analyze it to better understand their customers, they are not taking full
advantage of the investment they have made.
Customer Retention
Customer Retention
refers to the long-term relationship a company establishes with its customers.
The more repeat customers, a company has, the more it is assured of champions
who will market its products and help it acquire additional customers.
Below are some strategies businesses can use to retain their
customers and form long-term relationships with them.
1. Stand for Something:
customers are more loyal to brands that they identify with or which they feel
represent traits and characteristics that they would like to emulate. So it is
imperative for a company to select what its brand stands for and communicate
that to its customers.
2. Utilize positive
social proof: websites that provide customers with facts that show how the use
of their product will improve their social standing are more likely to help the
company retain customers in the long term.
3. Invoke the inner ego:
customers are automatically more inclined towards a product based on how much
it reflects qualities that they feel exist in themselves. This is called
implicit egotism and can be a very effective weapon. Companies only need to
know their customers inside out, have complete understanding of the language
they speak, their wants, needs and desires to be able connect with them and
show them how the company and its products are an extension of themselves.
4. Use the words they
love to hear: certain words have a deep impact on the buying behavior of
customers, and if the product fulfills the promise of these words, customer
retention becomes easier.
5. Reduce pain points and
frictions: if you address a pain point for your customer or resolve a problem
for him, you will be retaining him for much longer.
6. Realize that budget is
negligible: most companies balk at giving back to customers without realizing
that giving them a discount, even if it is a small one, will wow the customer
and keep him coming back for more.
7. Utilize surprise
reciprocity: surprising the customer by providing them with a boon like a
discount or a free add-on, unexpectedly, will stay with the customer longer.
8. Make it personal: by
providing a personal service to the customers, you increase your chances of
creating a repeat customer.
9. Speed is secondary to
the quality: often, companies make the mistake of picking speed of service over
quality, thinking customers would appreciate the tradeoff. However, studies
have shown that customers are more likely to come back if importance is given
to quality.
10. Customers enjoy
businesses who know them: the more time an employee spends with the customer,
getting to know them and therefore providing a level of personalization, the
more likely it is to reassure the customer that the company truly knows him and
therefore keep pulling him back to the brand.
11. Choose the right
platform: it is important to know what communication channel is preferred by customers
and to utilize
this channel to the fullest to keep their presence ensured in the
customer’s psyche.
12. Make it a communal
effort: all elements of the organization must be fully engaged and kept in the
loop when it comes to servicing a customer. The aggregated effect will greatly
improve the overall experience.
13. Get people started:
loyalty programs are more likely to be used if companies get past the
customer’s initial resistance and ensures that customers are automatically
signed up for such schemes. Once the ball is rolling, customers are more likely
to stay the course.
14. Get ideal customers to
be VIP’s: humans are competitive by nature and studies have backed this
observation up by showing people appreciate being assigned to a particular
customer class if there is a class below them in the program.
15. Label your customers:
customers are more likely to keep coming back if associating with their brand
puts a label on them.
Boosting sales
(upselling)
Companies are forever
focused on increasing their sales and often use a strategy called upselling
which requires representatives to convince the customer to buy more of their
company’s products. By using a combination of linguistics, packaging products
and lowering their overall price and selling dependent products, companies
ensure that a customer buys as much of their products as possible.
In fact, companies
often provide incentive programs that reward employees who manage to boost
their sales through the technique of upselling and ask others to emulate the
techniques and tactics these employees use. However, such incentive programs
are kept strictly under wraps because if a customer gets to know about them, it
may break the tenuous relationship of trust between the customer and the
customer representative.
Typical Upsells that
you may have experienced can be;
·
Asking a customer if he would like to add a drink or fries to
his order at a Fast food restaurant.
·
Convincing a customer who is getting his laptop fixed that he
should get more RAM, or a bigger hard drive installed.
·
Suggesting to a customer getting their phone fixed that they
should upgrade to a newer version of the handset.
Typically there are
two techniques that successful upsellers often utilize;
1. Successful upsellers
are often researchers and observers who get to know the customer profile,
particularly focusing on their economic, demographic, preferences and social
aspirations. This helps the upseller to customize his pitch to the taste of the
customer.
2. Another technique
common among upsellers is the use of fear. By letting the customer know that
the product may go out of stock due to demand or getting them to buy after
sales services or warranties for expensive items by letting on that the product
is sensitive and needs to be handled by expert hands.
CATEGORIES
OF CUSTOMER RELATIONSHIPS
Customer relationships
can be divided into six main categories that may overlap for an organization
relating to different customer segments.
Category 1: Personal
assistance
This type of customer
relationship is characterized by the human touch. Customers have the
opportunity to interact with a sales representative while they are making their
purchase decision or with a customer services representative for after sales
services.
Category 2: Dedicated
personal assistance
This type of
relationship takes personal assistance to the next level by assigning dedicated
customer care representatives to the customer. This kind of relationship takes
some time and finesse to develop and is characterized by the representative
knowing traits of the customer that he uses to customize the customer
experience with the company. Banks will often assign a single point of contact
to important customers with long-standing relationship with the bank and a high
net worth.
Category 3:
Self-service
The Do It Yourself
model has been getting more and more popular as organizations seek cost cutting
measures that will reflect in the prices given to customers. In this kind of
relationship, the company provides all the tools a customer needs to service
themselves.
Category 4: Automated
services
Automated services are
the next level of self-service by providing machinery and processes that
increase the convenience for customers to perform services themselves. These
kinds of services are usually much more customized and use a customer’s online
and buying behavior to create a profile that is then used to provide
suggestions to the customer to enhance his/ her shopping experience. Hence,
automated services in many ways can be likened to personal assistance because
of the customization that goes into the experience.
Category 5:
Communities
In today’s social
media driven environment, communities are a wonderful way for companies to
understand their consumers, get insights into their habits, perspectives and
create a platform in which customers can get together and share knowledge and
experiences. In this way, not only does the company form a personal
relationship with its customers, but these bonds are strengthened by the
additional relationships customers form with one another. Glaxo SmithKline is
an example of this kind of a relationship. When the company launched a new
weight-loss drug, it gave customers a platform to form communities that helped
it understand the problems that overweight people face as well as.
Category 6:
Co-creation
Companies are
increasingly changing the nature of the customer relationship by involving them
in the design and even creation of the end product. This gives customers
greater ownership over the product and service and often results in the
creation of product or brand champions in the market. Amazon encourages
customers to publish their book reviews on the web-site so readers can find
people with similar tastes and evaluate what they thought of particular books
before making purchase decisions. YouTube depends entirely on its customers to
create the content that enables the website to boast being the largest video
sharing website in the world.
CASE
STUDY
Starbucks
Starbucks focuses on
creating a long-term relationship with its customers and has largely been
successful in this endeavor. By making itself so widely available to its
consumers through its unique atmosphere that is uniform across outlets, it
assures customers of the same wonderful experience regardless of where they are
getting their coffee. Hence, customers have completely integrated Starbucks
into their lives. In addition, Starbucks has also created mobile apps and
loyalty apps that ensure that customers keep coming back more by providing them
with surprise reciprocity and spending on them.
Google vs. Facebook in
Customer Relationships
Google and Facebook have
scores of customers across the globe and are therefore not dependent on any one
segment to keep their business going. This means that both companies are
completely free to set their prices, which customers have to go along with
because both companies hold the power in their hands. Both companies engage in
the Do it Yourself relationship by creating self-serve auction based Ad
products, making the companies “Price Deciders” rather than the more typical
“Price Accepters”.
Google has had no one
customer segment that has accounted for more than 10% of its revenue, making it
completely independent. Facebook earned 12% of its revenue in 2011 through
Zynga, a provider of social game services and the maker of popular online games
like Farmville, Texas Holdem, Chefville, etc. However, despite these revenues
instead of Facebook being dependent on Zynga, Zynga is more dependent on Facebook for its
revenues.
No comments:
Post a Comment