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A Guide to Managing Customer Relationships

David Gargaro
David Gargaro

Managing customer relationships is critical to retention and customer loyalty. Here's how to effectively manage customer relationships.

  • Managing customer relationships is a critical element of building a successful business.
  • Small businesses with strong customer relationships will see repeat business and improved word of mouth referrals.
  • Software tools like a customer relationship management (CRM) system can help improve customer relationships.
  • This article is for small business owners who want to improve customer relationships, build referrals, and establish brand loyalty.

You might have developed some great products or services to address a need for a specific market, but that does not automatically mean your business will be a success. Your customers will have a significant impact on how well your product or service sells. They care about what they're buying, how and where they buy it, and what happens after they make the purchase.

The growing power of the consumer means that companies must invest more resources in building and maintaining customer relationships. According to a recent customer expectations report, 79% of consumers care more about personalized service than personalized marketing, and 84% will go out of their way to spend more money with great experiences. As a result, companies must create better and more consistent customer experiences during every interaction with consumers.

To meet the demands for greater customer experiences, companies must focus on managing their customer relationships. Strong customer relations are essential for building customer loyalty and retaining current customers. This means understanding what is required to ensure top-quality customer relationships and create great experiences with your customers.

What are customer relations?

Customer relations describes how your company engages with customers with respect to improving the customer experience. This involves overcoming short-term challenges and developing long-term solutions that ensure customer success. The goal is to build a mutually beneficial relationship that begins before, and exists long after, the initial purchase.

While customer relations involve all parts of the business, it is most closely associated with the customer service department. This means that the customer service, customer success, customer support, and product development teams must contribute to building and maintaining the customer relationship. Customer relations includes the company's sales and marketing departments as well, as they interact with customers in numerous ways.

Customer relations consists of two functions:

  • Reactive functions: Addressing customers' reported issues (e.g., replying to customer complaints, working with customer support).

  • Proactive functions: Building long-term relationships with customers and establishing brand loyalty (e.g., providing product information, promoting discounts and special offers).

Note that customer service and customer relations are not the same thing; customer service is part of customer relations. Customer service is an inbound function – your company provides customer service in response to customer actions (e.g., a customer calls for support with a product). Customer relations involves both inbound and outbound functions – your company reacts to customer requests for assistance, and takes action to improve future customer engagement (e.g., your company sets up a customer help desk to address future customer calls). Customer relations are proactive, with the goal of creating a better customer experience.

Importance of customer relationship management

Customer relationship management is an essential part of ensuring the success of your business:

  • It helps to build a bond with customers, which reduces the amount of work involved in getting them to purchase from your company (compared to attracting new customers).

  • It increases the likelihood that customers will make additional future purchases.

  • It helps with building loyalty with your brand.

  • It provides customers with an image of your brand when they are looking for solutions to other issues, or when they are looking for options related to what you provide.

  • It helps with creating a stronger association between your company and the customers, which can help with smoothing over problems with products or in the customer relations process.

  • It encourages customers to promote your brand to friends, family members and colleagues, which will help to grow your business.

Key takeaway: Strong customer relations can improve brand loyalty and drive referrals, helping to grow your business.

Benefits of good customer relations

Customer retention

Improving customer relations means your company will have higher customer retention rates. Customers are more likely to stop purchasing a company's products or services if they have an unsatisfactory customer experience. Customers will overlook a company's mistakes when it puts in the effort to create a satisfying customer relations experience. Being transparent in your attempt to make things right will help with reducing churn. According to one study, increasing customer retention rates by 5% can increase a company's profits by 25%, so there is a financial incentive to build a positive customer relationship.

Customer loyalty

Maintaining a good relationship with customers over time makes it more difficult for competitors to capture your customers' attention. Repeat customers are more likely to make purchases than leads that have not been converted, which makes customer loyalty that much more valuable. Positive customer relations can increase customer loyalty as it gives customers an intangible incentive to make future purchases. According to Esteban Kolsky, CEO of thinkJar Research, 55% of consumers will pay more for a guaranteed good experience. This means that customer loyalty can generate consistent revenue over the life of the customer relationship.

Customer satisfaction

Most dissatisfied customers will not complain about a poor customer relations experience; they simply won't return to make another purchase. As a result, it's difficult to tell when customers are not happy with your business. Investing in customer relations can help to prevent these types of customers from unexpectedly ending their relationship. Creating open channels of communication that invite customer feedback can help with identifying customers' problems, which will enable your company to solve those issues and build customers' trust over time. Creating better customer experiences can also influence their purchasing decisions more than advertising and marketing.

Key takeaway: Good customer relations boost customer retention, customer loyalty, and customer satisfaction.

Types of customer relationships

Companies can have different types of customer relationships within a specific customer segment. Your company can establish a particular relationship with different customer segments depending on your goals (e.g., acquiring new customers, increasing sales). Different types of customer relationships include:

  • Transactional: The company has no relationship with the customer beyond that transaction (e.g., a retail kiosk in a mall or airport).

  • Self-service: The customer does not directly interact with the company, which provides the tools and processes required for the customer to help themselves (e.g., a gas station has self-service gas pumps and vending machines for customers).

  • Automated services: The company provides automated processes to support the customer's self-service (e.g., a hotel sets up personal online profiles according to their individual customers’ characteristics, and provides information based on their past purchases and interactions).

  • Long-term: The company interacts with the customer repeatedly and over a long period of time (e.g., a car dealership sells a car to a customer and provides regular service and maintenance over the life of the ownership of the vehicle).

  • Personal assistance: The customer interacts with the company through communications with the customer relations representative during or after the sale (e.g., a computer company enables customers to interact with customer reps through call centers, point-of-sale purchases and email interaction).

  • Dedicated personal assistance: The company assigns a dedicated customer representative to a specific client (e.g., a financial advisor with an investment firm works with high-net-worth clients).

  • Community: The company sets up an online community where its customers can share knowledge and help other members to solve their problems (e.g., a pharmaceutical firm sets up a community for diabetic patients who can talk about their issues and share best practices with other patients).

  • Co-creation: The company works with the customers to co-create value (e.g., an online book reseller invites customers to create favorite book lists and publish book reviews for other customers to enjoy).

Key takeaway: There are many different types of customer relationships. Understand which type of customer you are talking to and manage the conversation accordingly.

How to build positive customer relationships

It takes all parts of the organization to build positive customer relationships. As a result, your company should focus on the following key areas to ensure the whole company is on board with ensuring positive customer relations.

Put customers first

Ensuring positive customer relations begins with developing a customer-centric culture in your company. This involves focusing on the customers' success, as well as implementing long-term solutions. Creating a customer-centric business will motivate employees to help customers, as they will have a better understanding of their purpose and role in the process.  Some strategies that can help a company to become more customer-centric include:

  • Creating a customer journey map to lay out the buyer journey for the typical customer

  • Anticipating customers' needs at different steps of the relationship

  • Employing a customer relations executive to lead the development of customer relationship initiatives and processes

  • Creating an onboarding process for customers

  • Collecting customer feedback

  • Meeting with customers face to face

  • Being proactive with customer service

  • Implementing customer service tools and technologies

  • Thinking about the customer relationship after the purchase

Enable customers to serve themselves

While it would be ideal to customize customer relations for every consumer, its not practical or cost-effective to do so. Some customers would prefer to speak to a live customer relations representative, but you can help them in other ways and still ensure their satisfaction.

Technology enables you to provide customers with the tools to help themselves find solutions to their questions and issues at any time of the day. For example, you can implement chatbots on your website, which can provide visitors with information, guide them to the areas of your website that will help them find the answers they need, and link them to downloadable content. You can also use knowledge bases to address the most common customer questions.

Improve accessibility

Customers should have ready access to customer service and support teams to ensure a quality customer experience. According to a Microsoft survey, more than one-third of respondents said that their biggest customer service issue is not being able to get help from service staff when needed.

Self-service help desks should complement – not entirely replace – customer relations, service, and support staff as resources for helping customers with problems. Staff can use technology to reduce their workload and stress, but only a real person can provide human interaction and create a memorable customer service experience.

Measure customer satisfaction

You should track and measure your customer satisfaction levels to make sure they improve over time. Build feedback into your customer relations system. Regularly ask customers for feedback on their purchasing experience and interactions with customer relations. Track and measure your findings (e.g., customer satisfaction surveys, net promoter scores). Once you collect feedback data, act on the findings by improving upon areas of weakness identified in customer feedback. Continue collecting customer feedback and tracking the results to ensure that customer satisfaction scores improve.

Demonstrate appreciation for customers

You don't have to create grand gestures for every customer interaction. Providing customers with a positive experience and exceeding their expectations in small ways will go a long way toward building strong customer relationships.

Developing a loyalty program that rewards good customers for their patronage, and providing small tokens of appreciation for their business, will help to build consumer loyalty.

Commit to employee training

Your employees' interactions with customers is an integral part of creating a great customer experience. Therefore, they should be knowledgeable and skilled in their duties, as well as motivated to solve customers' problems.

Training employees in customer service and customer relations extends beyond their ability to perform their job functions. It should include elevating their soft skills (e.g., professional communication style, active listening, problem-solving).

Skill sets can vary widely from person to person across an organization. Therefore, it's important to invest in regular and continual training to ensure that all employees have consistent knowledge of your company's policies, procedures and standards. This will help to create a more consistent customer experience and improve customer relationships.

Establish a supportive workplace environment

According to research from Oxford University's Said Business School, employees are 13% more productive when they are happy. It makes business sense to create a more positive work environment. When customer relations representatives are more productive, they will be more able to quickly resolve customers' problems, which will improve customer satisfaction rates. At the same time, customers will be able to tell if a customer relations rep is in a bad mood, which will affect the tone of the customer experience.

Improve first call resolution rate

As previously stated, customers will pay more for a better experience from a company when making purchases. One metric that measures the quality of the customer experience is the first-call resolution (FCR) rate, which is the percentage of calls that are resolved in the first call (i.e., future follow-ups or additional touchpoints are not required).

A high FCR rate equals higher customer satisfaction. If customers have to make multiple calls or deal with more than one customer relations rep to resolve their issue, their frustration level will rise and they will become more dissatisfied with your service. Fewer calls and touchpoints also mean your customer relations team will be more efficient, as they will have to handle fewer calls over time. Ensuring that your service and support teams are equipped to solve issues on their own will mean better customer relations and happier customers.

Increase efficiency with software and technology

Improve customer relations by employing tools, technology, and software to help support and service manage high volumes of customer calls. For example, help desk software will help the customer service, support, and success departments to manage and improve customer interactions.

Customer relationship management software can track customer accounts and help to create more satisfying experiences, as reps will have access to more information about customers when dealing with them.

Key takeaway: Proactively create positive customer experiences by regularly soliciting feedback, implementing changes and consistently training employees in customer service skills.

Image Credit: DragonImages / Getty Images
David Gargaro
David Gargaro
Business News Daily Contributing Writer
David Gargaro is a content writer and copy editor with more than 20 years of experience in multiple industries, including publishing, advertising, marketing, finance, and small business. He has written on B2B-focused topics covering business technology, sales, marketing, and insurance. David has a Bachelor of Arts degree in English and Actuarial Science from the University of Toronto. He served as the managing editor of a small publishing company, and self-published a book called How to Run Your Company… Into the Ground.