November 26, 2005
Attenuate Goliath’s Customer Relationship Strength
This post is part of the overall posting “How Can David Beat Goliath?- Strategy #7: Attenuate Goliath’s Strength“:
Well-run large companies have many great customer relationships and the best spend a great deal of time maintaining and improving those relationships over time. The relationships result from all of the value-add points of contact that the customer has with the company including marketing, sales, professional services, and customer service contacts.
These relationships are valuable to the large company as they give the large company a better opportunity to have strong new product introductions. Also, customer relationships are similar to a bank account that you have to help you through tough short-term situations…your bank account is helpful getting you through a disaster such as an earthquake, hurricane, or job loss as a strong customer relationship is helpful getting you through a better competing product release, some issues with your product, or other temporary set-backs.
From the emerging growth company perspective, it is difficult to compete head-to-head with a large company that has built great relationships. This post examines the large company relationships with its customers and suggests focal points and activities that will help attenuate the large company relationship strength and, perhaps, give the emerging growth company an edge.
What is relationship?
When you boil down all of the issues relating to relationship, a great customer relationship means that the customer trusts the vendor to “do the right thing” for the customer.
The relationship gets stronger:
- the more the vendor activities are aligned with customer needs,
- the longer the relationship is in place with good results for the customer.
- the broader and more diverse the group (on both sides) involved in the relationship. The more points of contact you have at the customer and the more different “departments” that you have relationships with, the more robust the relationship.
- the more frequent the value-add contacts. The key here is that the contacts need to be considered “value-add” by the customer. You can easily hurt the relationship if you try to over-contact the customer and effectively waste his or her time. So long as the contacts are considered “value-add,” the more contacts the better from a relationship point of view.
- the more the customer-initiated contacts result in a positive outcome for the customer. Most well run large companies spend a great amount of time working on their proactive contact strategy, generally out of the sales and marketing units. But, the more difficult processes to design and execute are the processes that originate from the customer having an issue and the company needing to address it. Companies that have developed best practices at resolving customer-initiated issues have much better customer relationships!
- the more effective the contacts are at building relationship. As a general rule, in-person contacts beat video-conferencing which beats phone contacts, which beat e-mail and other electronic contacts. (Note that the costs to the vendor go in the opposite order.) This is not to say that you need in-person contact to build relationship, just that the more you move toward the electronic contact end of the spectrum, the more work you need to do to make sure that the contacts are building relationship.
Characterizing the large company customer relationships…
It is important for the emerging growth company to understand the strength of relationships that the large company has with its different customer segments. Below I offer some thoughts on how the elements of relationship work together to create various levels of customer relationship. This is greatly simplified, but offers up an approach for thinking through the relationships, which is the first step in developing a strategy that addresses them:
- Very Strong Direct Relationships– Large enterprise and large government sales that involve field sales staff and professional services staff selling, installing, configuring and training at the customer’s location generally produce very strong relationship bonds with the customers (assuming there is a positive outcome). These types of relationships are the strongest, as they hit on all the relationship points above.
- Solid Relationships– Direct telesales relationships with departments of large enterprise, municipalities, and small and midsized businesses can also create strong relationships (not as strong as field sales, but still strong). Also, indirect relationships that companies have through Distributor/VAR/Resellers or OEM probably fit into the solid relationship category if everything goes well (in this case, the large company needs a strong relationship with its channel partners and the channel partner needs a strong relationship with the end user).
- Virtual Relationships. Big Box retailer and Internet-based relationships are probably the weakest relationships, as they do not generally involve human contact (which helps drive the relationship). Nevertheless, a well-run virtual relationship can be developed if it is addressed correctly.
The large company also has the opportunity to develop stronger relationships if they have a solid teleservice approach to addressing inbound customer issues, regardless of the original sales approach. More on this point below.
Attenuating the large company relationship strength…
With the above points as a guide, there are a several leverage points for the emerging growth company:
- Aim directly at the large company relationships if you have a product set that is highly complementary to the large company. Also, get the large company to help you to the extent that your product or service helps sell their products. The best approach here is to get a small number of sales that sell through the large company’s products and then contact the large company to discuss ways that you might be able to work together.
- Aim at the set of prospects that the large company does not have relationships with or where the relationships are weaker. My comments above suggest that large companies have strong relationships with their customers, but this may actually be more perception than reality based on a study by Bain & Company. The study suggests that there is a significant amount of room for companies to improve: 80% of the companies surveyed believe they are delivering a “superior experience” to their customers, but only 8% of their customers agree with this statement. I actually did not need this study data, as I have wasted a lot of time on the phone trying to get customer service!
- Aim at the set of prospects that the large company has weaker relationships with. This generally means going after small and midsized businesses, municipalities, and consumers as the large company is using approaches that are less effective at building relationships with this group.
- Radically rethink your approach to serving your prospects and customers in all segments. I am a customer of Rackspace, as an example, who has a theme of “Fanatical Support.” Everything that they do supports this theme, and it works! With all of the possible newer approaches to customer relationships, including chat, e-mail, voice recognition in phone systems, online tutorials/FAQs/Training videos, there is no doubt that there are many approaches that can be developed to produce much better relationships with your customers and prospects. Take a look at David Teten and Scott Allen’s new book (The Virtual Handshake: Opening Doors and Closing Deals Online) to get some great ideas and examples on how to go about doing some of this.
I am a strong believer that emerging growth companies have a large opportunity to both attenuate the large company’s customer relationship strength and gain an edge, particularly if you examine the situation, focus on the right opportunities, and radically rethink your approach to serving your prospects and customers!