How to Define the (Customer) Relationship: Crash Course Entrepreneurship #10
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How to Define the (Customer) Relationship: Crash Course Entrepreneurship #10

Like any committed relationship, the relationship
between a business and its customers needs nurturing. And that shouldn’t come as a surprise! I mean, we’ve already mentioned customers
over 100 times in this series. We need customers to run a successful business,
and naturally they’re going to have certain expectations. So we want to make sure we deliver on those
expectations and develop those relationships as our business develops. I’m Anna Akana, and this is Crash Course
Business: Entrepreneurship. [Theme Music Plays] So the first question we have to ask ourselves
is: what kind of relationship do we want with our customers? We daydream about building our perfect partner for me it would be the body of Chris Evans with the head of Chris Evans. Or finding a BFF, so why can’t we
do the same for our customer relationships? You know, the level of commitment, kinds of
interactions we want to have, or even the medium we use to communicate. There are lots of options to consider before
making any decisions or jumping into anything. The easiest type of relationship to build
is no relationship. If a business only engages with customers
at the moment they make a purchase, or either person could be a robot and nobody would notice,
this is called a transactional relationship. A good example is a credit card machine that
takes 3% of a sale as a processing fee. The credit card company never needs to see
the shoppers, and the shoppers might not even know that 3% of what they just paid is being
sent elsewhere. In love, transactional relationships are a
no-go, but here both sides are happy. Another fairly hands-off option is a self-service
relationship. This is where the business has no direct contact
with the customer but provides all the necessary equipment for customers to help themselves. Think self-pump gas stations or self-serve
frozen yogurt shops. The customers do all the work, but they get
to customize to their heart’s content. We can kick this up a notch by providing automated
self-service. Generally, this recognizes something about
the customer and can be personalized using customer profiles. Automated services can simulate a more personal
relationship, like Goodreads suggesting books or Hulu offering movie recommendations. Love those computer algorithms learning everything
about us… Some companies like to deliver an even more
personal touch with a personal assistance relationship — one where the customer can
communicate with a real person to get help during the sales process or after the purchase
is complete. This could happen in brick-and-mortar stores,
on the phone, by email, or some other way. I hear skywriting is making a comeback. Many companies are integrating a “live chat”
feature on their websites, like Internet or mobile phone providers. Live chats provide immediate access to a company
representative without the hassle of going into a store or the horror of a live phone
conversation. The next level is a dedicated personal assistance
relationship where each client has a specific representative devoted to them. You could even say they’re…going steady. The point is to create a much deeper bond
that will last a long time. This is possible in businesses that don’t
have millions of sales and expect to be with customers for a while. For instance, local tax accountants or insurance
agents usually maintain personal relationships with their clients. Then, there’s the modern-day classic: the
loyalty program. [If you don’t have at least 3 memberships
and punch-cards in your wallet right now HOW ARE YOU SURVIVING WITHOUT ALL THE DEALS?? Switching costs — like money, time, or plain
old hassle — are a way to describe how easy or hard it is for someone to switch loyalties
to another business. So loyalty programs reward customers for their
purchases and make it a little more costly to switch brands, so they return again and
again. It’s far cheaper to retain or “lock in”
previous customers than to start from scratch with someone new. Not to mention, happy customers also talk
about how happy they are with a new product. Kinda like those couples who just got together and they’re like SUPER obsessed with each other. Gym memberships are notorious for this. Maybe they give you a discount if you get
a friend to join, but to cancel you have to go all the way into their office and fill
out 1 or 2 or 15 forms. Or on a simpler level, maybe your favorite
lunch spot has a loyalty card and the feeling of getting closer to 12 punches and a free
sandwich makes you want to keep coming back. At the most involved end of the spectrum is
the long-term relationship. These are built with customers over time through
regular interactions and possibly with an emotional connection. This type of customer is like the die-hard
Patagonia fans who support the company over many years. They’re not just in it for the snazzy vests,
they believe in things like Patagonia’s environmental mission and the quality of the
clothing. But also the snazzy vests. Might as well put a ring on these folks. But sometimes a business isn’t necessarily
the expert providing everything to its customers, it’s a conduit for greatness. In a co-creation relationship, companies don’t
rely on a lot of in-house innovation and instead work directly with customers to develop products,
which relies on some great chemistry! You almost never see videos created by YouTube
employees — creators like us are making almost all of the content. And finally, a business can also rely on customers’
expertise by creating communities online or in real life. In these spaces, customers can interact and
exchange user knowledge, which can end up strengthening their bond with the business
that brought everyone together! Not to mention, it’s an opportunity to stay
up-to-date on what people who care about your product are saying. If people are complaining about a glitch or
sharing innovative uses in these communities, that’s awesome feedback! So after we know the options, we want to decide
which customer relationships will work for our business. Only one thing to do: spin the wheel of relationships
and let fate decide! Well… no… Sort of. All of the decisions we’ve made so far about
our business — from choosing a legal structure to getting customer feedback — have involved
asking key questions and listening to trusted advice. So figuring out what relationships we want
to nurture is no different! And just like you might have multifaceted
relationships with a parent, a friend, a partner, and the coffee barista that works at your
local shop on Thursday mornings, customer relationships aren’t mutually exclusive. So go ahead and pick more than one for your
business! There’s also no ideal mix, and we’re not
here to tell you exactly what you’ll need to do as an entrepreneur. What works for one business in one region
might not work somewhere else. Let’s compare two businesses: The Running
Company, an Australian brick and mortar shoe store with several locations, and Salesforce,
a massive tech company that sells cloud-based software to other businesses to help them
manage their customer relationships. Both want to cultivate a long-term relationship
with customers. The Running Company needs repeat customers
to compete with the big department stores. And Salesforce needs to convince customers
to continue using their software and pay for subscriptions and updates. The Running Company has personal assistants
to make sure customers have a great experience in the store and want to return. Salesforce has account managers who provide
dedicated personal assistance to each client, by being available to help with whatever problems
come up, along with online demos for immediate troubleshooting. Both businesses also want to lock-in customers
with loyalty programming. The Running Company offers exclusive online
products for those who join and other member-only running-related content. Salesforce’s customers are other businesses,
and when a business adopts an entire platform, it can be very expensive and time-consuming
to shift to a different platform. So switching costs are already high, and their
loyalty programs look a bit different. They might take business representatives out
when they come to town, or provide a discount if you pay for your subscription annually
instead of monthly. These days a lot of businesses are trying
to build communities centered on their brands as part of their customer experience. Each Running Company location offers a free
weekly running club open to all speeds, as well as events throughout the year. Salesforce has started putting on their annual
Dreamforce — a massive tech conference in San Francisco, California meant to bring together
over 200,000 users and enthusiasts. So even though these two example businesses
couldn’t be more different in the products and services they offer, they actually have
the same basic types of relationships. Presumably, they decided on those relationships
by carefully considering what they were capable of and what would appeal to their customers. Let’s do this ourselves in the Thought Bubble. Ashlyn wants to start a traveling bike repair
service. She’s outfitted her own bike with a special
cart that holds all her tools and unfolds to be her repair station. When people need her, they tweet their location,
she confirms the appointment, and away she zips! Basically, Ashlyn’s value proposition is
providing fast and efficient bike repair that comes to the customer. It’s simple, mobile, tech-savvy, and appeals
to a target market of athletic, busy, techno-literate cyclists aged 25-to-45. For the first few months, her natural personal
assistance relationship is keeping a lot of cyclists happy and she thinks she’s building
some great long-term relationships. From chatting with her customers while she
works, Ashlyn learns that many are looking for new trails to try and fellow bikers to
ride with. She decides to build community by leading
free evening rides around town and hosting DIY clinics on how to do basic bike maintenance. And she designs helmet stickers with her sporty
logo. It’s going great! Well… sort of. Turns out what customers actually wanted wasn’t
a long-term relationship, but to be empowered to fix their own bikes. So her clinics are packed, but she’s not
getting any tweets. Not even a half-hearted chirp. To keep pedaling forward, Ashlyn needs to
let her customer relationships evolve. She decides that for a smaller fee, she’ll
show up and anyone who’s taken her class can use her tools — like her air pump or
special bike wrenches — to do basic maintenance. So she’s cultivating a self-service relationship
with her customers. And now that she’s got them hooked, she
could start charging a small fee for her classes or evening group rides with a loyalty program
where the 5th one is free. Thanks, Thought Bubble! There’s no right answer, but engaging in
some human-centered thinking about what would work — or is working! — for our customers
can help us make sure we’re on the right track. Basically, our value proposition should never
be far when we’re trying to build a business. The bottom line is: begin as you mean to go
on. Plan how you’ll interact with your customers
and get ready to react to feedback if you find the relationship has evolved. Next time, we’ll discuss all the ways you
can let your customers know how amazing you are, from social media to snail mail. Thanks for watching Crash Course Business,
which is sponsored by Google. And thank you to Thought Cafe for the beautiful
graphics. If you want to help keep Crash Course free
for everybody, forever, you can join our community on Patreon. And if you want to learn more about different
social groups and relationships from a broader perspective, check out this Crash Course Sociology


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