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Issue Date: November 2006

Greater return on relationship investment

1 November 2006

Business is about retention, referral and increased spending. It is about knowing your customers and understanding that different industries require different ­relationships to maximise profit.
Statistics quoted by the Database Marketing Institute in a recent paper on targeted relationship building indicate that customer retention rates can increase to 60% after three years of focused relationship building. To make his point about the value of relationship building, the paper's author, Arthur Hughes, uses the example of a company with 200 000 customers to show that a gain of $10 million is achievable simply through implementing focused and effective relationship building programmes.
While never easy, building relationships in certain verticals requires more input and nurturing than in others; just as particular customer segments need more or less attention. This is readily evidenced in the information communication technology (ICT) space, where software vendors must approach relationship building in a different way to hardware vendors.
The reason for this: widgets. Technology hardware is reasonably well defined. Users of any description require a screen consisting of a minimum number of essential components. Screen and graphics cards must be able to perform particular tasks. While products vary in their capabilities and value for money, they are essentially 'box-dropped' into a user's lap. There is no need for the user to be pampered or coerced into buying something s/he already knows is needed. Any relationship building that goes on is performed largely by the sales person who wishes to sell as much of the product as quickly as possible. Value is determined by volumes and brand strength.
However, software vendors must take a different approach. In this space, value lies in building relationships that highlight the nature of the partnership between customer and vendor. The goal is to prove the product's and vendor's merits through more than just technical specifications. To convince each customer to return or to refer business, you need a combination of a great solution and even better service and support. In a market that is fickle and demanding of an enormous investment in relationships, there is great value in maintaining a number of smaller relationships that are deeply committed.
Heart and mind
Relationships between software vendors and customers are greatly influenced by the people on the ground. Each and every project is fraught with problems, despite all efforts to keep processes and implementations smooth. There could be delays both within and outside your control; problems with change management negatively impact rollout; there may be bad blood between senior people at the customer and the vendor; or people could simply be having a bad day.
Take into account the people involved in any given project. More than that: consider psychological and emotional issues that they bring to the table, inadvertently or not. It takes only one person to make a relationship, partnership or project untenable.
As a software vendor, you strive to create fruitful relationships with customers that need your services. But while building relationships is essential, a dash of realism always comes in handy. After all, this is business and it would be unrealistic to embark on the creation of philanthropic relationships. As much as your organisation exists to make money, so too does the customer's. They are not in business for the sole purpose of implementing your software and they do not necessarily want to establish a long-term commitment to you.
Therefore, take this into consideration when you begin your relationship building. Understand what the client needs from you on all levels. Must there be constant ego stroking or would it be better to provide only the basics? Does the customer want a partner or simply a supplier; and how much of the risk does he want you to accept in your mutual dealings?
Relationships, by their very nature, are unstable and unique from one person or organisation to the next. There is no silver bullet that you can use to seed them with to make them consistent, reliable, positive and always profitable. Instead, software vendors must aim for degrees of stickiness. This is achievable through refining and enhancing your products constantly, producing results for the customer and remaining unwaveringly consistent.
Appreciate your customers and their needs; understand their markets, challenges, strengths and goals; and then work with them, not at them, to maximise return on your investment. It is an ongoing process of doing a good job, getting along with right people and making yourself indispensable.
Chris Wilkins, joint CEO of DVT Cape Town
Chris Wilkins, joint CEO of DVT Cape Town
For more information contact Chris Wilkins, DVT Gauteng, +27 (0) 21 467 5400,

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