Maximizing Profit With Long-Term Business Relationships
Why the financial security of your service-based business depends on strong client relationships.
Dollar for dollar, a new customer is more expensive to acquire and serve than a repeat customer. What does that tell you? Customer retention strategies are wildly important to the growth of your company. So, to increase profitability within your existing client base, your company needs to develop long-term relationships with each client you serve.
Every successful organization must differentiate itself from the rest of the market in some way. Your competitive advantage needs to be something that not only attracts new customers but also keeps past customers around for the long haul. The challenge is not only to outshine the competition, but also to ensure that your services remain a top priority among all other business expenses that owners need to budget for. The results you produce need to make a substantial impact on the business.
Many businesses operate in a state of constant stress, dangerously dependent on their ability to close new deals month after month. Meanwhile, an elite minority of companies take the time to establish themselves as trusted advisors to the organizations they serve. Businesses that prioritize service excellence at the core of all they do end up sticking around long after their competitors are gone.
To make your company irreplaceable, you need to understand why the most successful businesses are retained long after the initial scope of work is completed.
How Does Your Customer View Your Relationship?
People do business with those whom they know, like, and trust. To be known and liked is the job of your marketing department. Trust is formed over time by consistently delivering on your offer. The way that you follow through on your commitments will dictate how your clients view your organization.
In all, there are five levels of sales relationships;
- Approved Vendor
- Preferred Supplier
- Solutions Consultant
- Strategic Contributor
- Trusted Advisor
Most business-to-business (B2B) relationships are strictly transactional. They begin and end at the sale and lack any meaningful connection. Organizations who find themselves in these situations are known as approved vendors – in other words, available and well-suited to get the job done. An approved vendor is the lowest level sales relationship that you can have. Here, there is no true competitive advantage, and your service is viewed as an undifferentiated commodity. As soon as you choose to compete on price, you lose your identity and quickly become little more than a number on a list. This is a dangerous place to be. If the majority of your clients see your business as an approved vendor, long-term growth for the company is in jeopardy.
As your company builds brand equity with a specific customer, it may establish a position as a preferred supplier based on a reputation for success. However, relationships based on your previous work and reputation are still very superficial and situational. At this stage, you risk being unseated as soon as your current project finishes. To build a lasting relationship, you need to bring more than your reputation to the table.
If your customer regularly engages with you because of the specific product knowledge and implementation insights that you offer, the chances are that they see your organization as a solutions consultant. A deep understanding of your solution and its most efficient application can elevate you past the level of a mere supplier. At this stage, you don’t just deliver an excellent service, but you coach your customers and educate them on the best use of the solutions you build.
Once your company can deliver value outside of a specific service offering, clients will begin to view you as a strategic contributor. You establish your status at this stage by offering insight into business challenges that involve multiple stakeholders within the client organization. A strategic contributor can influence results across multiple projects that promote synergy within the organization as a whole.
When a client feels that you have served them faithfully over an extended period of time, then you are well on your way to becoming a trusted partner. At this stage, you are a deeply-integrated, long-term contributor whose expertise influences decisions made across many divisions of the client business. At this stage, winning more business is easier because your guidance influences the scope of each new project, the timelines, and who needs to be included to accomplish the goal. When your customers view you as a trusted advisor, you become tough to replace.
Here’s the truth. Your company will be valued relative to the size of the problems that you solve. Spend time getting to know the internal and external drivers that motivate your clients, then leverage that information to deliver an insightful and memorable experience. It’s one thing to sell your services during a sales pitch. It’s another thing to exceed expectations on a project and secure a long-term relationship as a trusted advisor.