Most companies know what their customers buy, when they purchase and where. But few truly understand why those customers buy—why customers choose to have a relationship with companies to begin with.
Business leaders need to step back and more clearly define what customer relationships mean to them. A clearer understanding of customer relationships helps align the tools a company uses with the strategy it is pursuing. Defining customer relationships is a necessary step in delivering what customers truly want—and driving business results.
The Oxford dictionary offers two notable definitions of relationships: 1. “the way in which two or more people or things are connected or the state of being connected,” and 2. “the way in which two or more people or groups regard and behave towards each other.” We believe that the second definition is the most useful in the context of the brand-customer relationship.
Let’s consider the metaphor of personal relationships. The value of relationships with friends and family isn’t based on the amount of money they spend when they are with you. It’s not even based on the number of interactions you have with them. A colleague or acquaintance you see every day probably isn’t more valuable than a friend or a family member you see infrequently. The value of relationships is based on something much deeper.
More data = better relationships?
To keep up with rising consumer and market expectations, an ever increasing number of companies are now prioritizing becoming customer-led. The race towards customer-centricity is driving some the biggest trends in business technology. The customer relationship management (CRM) market, for instance, reached $26.3 billion in 2015—up 12 percent from the previous year. Another trend is business intelligence, which experts believe will reach $20.8 billion in market value by 2018.
The race towards customer-centricity is driving some the biggest trends in business technology.
One motivation for adopting these technologies is the data they provide—data that, companies hope, will help them strengthen their relationship with customers. But is the underlying assumption—that data is key to more meaningful customer relationships—correct?
Not really. As I discuss above, interactions alone don’t showcase the true value of relationships.
Why then do the tools companies use to get closer to their customers focus on the number and size of transactions? Many systems, such as CRM, measures the number of transactions a customer has with a brand. Loyalty program software does something similar, tracking how much people spend with a company.
These tools are important in understanding the customer journey, but they have a blind spot: they mistakenly assume that transactions are synonymous with relationships. But, in fact, customer relationships aren’t defined by a series of transactions.
Move beyond transactions
A brand’s ability to meet rising consumer expectations depends on having an authentic relationship with its customers. Without that, it becomes prohibitively expensive to deliver better products, improve customer experience or create effective campaigns.