The Basics of Customer Relationship

1. What are customer relationships?
2. Why should you maintain your customer relationships?
3. Success factors for a successful customer relationship
4. What phases of the customer relationship are there?
5. The different types of customer relationship
6. Conclusion: Customer relationships are complex, but essential

Satisfied customers are the best advertising - this marketing wisdom brings the importance of customer relationships to the point. Because in a world where the product selection is growing and the competition is getting tougher, it is more important than ever to take care of the relationship with your own customers. A company that understands and meets their needs will be successful in the long run. In this article, we therefore take a close look at the mystery of customer relationship: What aspects does the term cover at all? Why is the customer relationship more relevant today than ever before? And what phases does such a relationship go through? We clarify these and other questions in the following lines.

What are customer relationships?

Customer relationship is understood as the interaction and the relationship between a company and its customers. This relationship is about understanding the needs and desires of the users and offering them a positive experience. The goal from a company perspective is to build a loyal and long-term business relationship through customer satisfaction. Furthermore, a good customer relationship serves to steadily improve one's own services and products and adapt them to the requirements of the market. The individual phases of this relationship are also referred to as the customer lifecycle. In the cosmos of customer relationships, there are other, similar terms such as customer loyalty, the marketing funnel (or short funnel) and that of customer relationship management (CRM). To better understand, we differentiate the four terms from each other in the following:

Difference: Customer relationship & customer loyalty

Customer relationship and customer loyalty are two terms that are closely linked, but describe different aspects.

The customer relationship describes the interaction and relationship between your company and your customers. In contrast, customer loyalty describes the loyalty of your customers to your brand. Here it is about the consumers remaining loyal to the company and preferring it over other competitors. Customer loyalty arises from a positive customer relationship and the feeling that the company understands the needs of the consumers and offers them added value. High customer loyalty contributes significantly to your company being successful in the long term.

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Difference: Customer relationship & funnel

The customer relationship and the marketing funnel are both concepts that describe how people interact with a company and what phases they go through. The difference lies in their focus:

The customer relationship includes all phases that your customers go through while they are in contact with your company. This includes the phases from the first attention to the possible loss of your users. It is about understanding how the relationship between you develops over time and how this relationship can be improved in order to bind the customers and offer them a better experience.

The marketing funnel, on the other hand, describes the phases that your customers go through as soon as they are approached by your company, up to the purchase of your product. The funnel thus describes rather the process of selling and how to get potential customers to make a purchase decision. So it is part of a successful customer relationship, but the latter goes far beyond that.

Difference: Customer relationship & Customer-Relationship-Management

Also closely linked to the topic of customer relationship is the term customer relationship management. This is a method for managing and optimizing customer relationships. CRM thus includes the management of customer data, customer segmentation, the analysis of sales data, the automation of processes and the support of marketing and sales activities. CRM software allows you to manage your customer relationships by collecting, storing and analyzing data to improve interaction with your users.

Why should you maintain your customer relationships?

So much should be clear by now: A successful customer relationship helps your business to be successful in the long term. But why exactly is that the case? We look at the reasons for this in the following:

• Loyalty: Satisfied customers often remain loyal to a company and tend to buy further products from a brand later.

• Expanding your customer base: Word of mouth is still an not to be underestimated success factor for your business. If your customers are enthusiastic about your product and pass this on, this can easily lead to your clientele expanding without a great effort for you.

• Lower costs: Having loyal customers is also advantageous in terms of costs: acquiring new customers is significantly more expensive than convincing existing customers to make another purchase.

• Data analysis: A successful customer relationship helps you improve your business in the long term: The data and analysis that arise from your relationship with the consumers help you identify optimization potential.

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Success factors for a successful customer relationship

If you want to build a successful relationship with your customers, you should keep the following factors in mind:

1. Communication: Open and transparent communication is the key to a successful customer relationship. It is about understanding the needs and concerns of the customers and responding to them.

2. Listening: A company that can listen well can better understand the needs of the customers and offer them better solutions.

3. Trust: Trust is the basis of every relationship – this also applies in the business world. Your company must show your customers that it keeps their interests in mind and offers them high-quality products or services. In addition to this, the topic of data protection is also of central importance here.

4. Flexibility: Your company must be flexible and be able to adjust quickly to changes in order to meet the needs of the customers.

5. Service orientation: This point ties in with the topic of flexibility: Excellent service is a must for a successful customer relationship - especially when things aren't going so smoothly from the customer's perspective.

6. Personalization: A company must be able to make individual offers that are tailored to the specific needs of the customers.

7. Availability: Not only your products, but also the contact persons in your company should be quick and easy to reach for your customers.

What phases of the customer relationship are there?

The relationship with your customers can be divided into different phases. These phases are also referred to as the customer lifecycle. Depending on the industry and source, this cycle is sometimes divided into 5, sometimes into 6 phases. Also the names for the individual phases can vary. However, the basic orientation of these phases is largely identical. We introduce you to the customer lifecycle based on 6 phases:

1. Attention: At the beginning of your relationship, your goal is to make consumers aware of your product or service. Depending on the product and target group, this is done through push or pull marketing.

2. Orientation phase: At this point in your relationship, it's about potential customers getting more involved with your product and considering a purchase. Accordingly, a success factor here is that interested parties get enough information and arguments that justify a purchase in their eyes.

3. Purchase: If the orientation phase was successful, you move into the purchase phase. Here the interested parties become active and convert to active customers. It is important that the purchase process runs smoothly in order to offer a positive user experience.

4. Bonding: This phase is especially critical, because after the purchase, customers often lapse into inactivity. After all, the transaction is initially finished for them. Therefore, it is important now to maintain the bond by creating incentives to continue dealing with your brand.

5. Recapture: The aim of the recovery phase is for your customers to make another purchase. Direct, personalized approach helps with this.

6. Loyalty/loss: Depending on how the other phases have gone, you build up a loyal customer relationship over time. These customers remain loyal to your brand and are incredibly valuable for the success of your company! On the other hand, due to poor user experiences, the worst case can occur and you lose customers - possibly forever.

The different types of customer relationship

Customer relationship is not the same as customer relationship. Depending on the industry and the type of your product or service, there can be differences in the relationship with your customers. Just like with the individual phases, the designations and content priorities vary depending on the source. A well-known model to distinguish the types of customer relationships is the business model canvas by the Swiss economic theorist Alexander Osterwalder. It distinguishes 6 types of customer relationship:

• Personal support: This relationship consists in supporting your customers by your employees. This support takes place during the sale and/or afterwards.

• Dedicated personal support: If personal care takes place even closer to your customers, one speaks of dedicated personal support. This is the case when the care is provided by sales employees who are responsible for all needs and questions of a certain group of customers.

• Self-service: Self-service describes the type of relationship that results from indirect interactions between your company and the customers. This includes providing tools that enable your users to serve themselves easily and effectively.

• Automated services: Automated services are a personalized version of self-service that is capable of recognizing individual customers and their preferences.

• Community: A community platform enables direct interactions between different customers and your company and promotes the exchange of knowledge and solutions to problems.

• Co-creation: Co-creation refers to the direct involvement of customers in the end result of your company's products or services, creating a particularly personal relationship.

Conclusion: Customer relationships are complex, but essential

The relationship with customers is not always easy. Consumers want to be wooed authentically and supplied with first-class services and products. It helps enormously to be aware of the individual phases of the customer relationship and to optimize them. The right CRM software makes a grateful contribution to this, with which you can serve and manage your customers even better. In any case, you should aim to lay out your customer relationship for the long term.