• Print

Customer Relationships As A Competitive Advantage

Friday 23 May, 2003
Finding and creating a sustainable competitive advantage is the holy grail of every organisation. We all ask "How can we make ourselves so different from our competitors that they simply can't compete - now or in the future?"

The problem is that in today’s marketplace competition is fierce, with the window for competitive advantage shrinking as competitors quickly match each other’s offering. The feature that was new and innovative last year, is old hat today.

Against this backdrop some companies are looking long and hard at their customer relationships and how these very relationships may be the sustainable competitive advantage for which they have been looking.

To sustain a competitive advantage it needs to be difficult for your competitors to imitate or substitute, superior to the competitors, valuable and costly for your competitors to achieve. Managed in the right way Customer Relationships can have all these attributes. The best part is that this advantage is available across industries.

In order for an organisation to even consider building strong customer relationships, customer retention needs to be a top priority that is acknowledged and supported by everyone within the organisation. This will mean the difference between viewing your customers as valuable assets to be nurtured and retained or just anonymous numbers.

Why a customer relationship is a competitive advantage

  1. It's difficult for your competitors to reproduce a strong customer relationship

    It takes time to nurture and build a relationship with your customers. That investment by your customers in your organisation can’t be replicated except over a similar amount of time with one of your competitors. As they come to know you it’s easier for your customers to do business with you because they know your staff, your systems, your products. It’s just plain easier. That ease of doing business converts into a barrier for your competitor.

    This “ease” however, has a dark side: complacency. What applies to your customers also applies to you. After a while it’s easy for you to do business with them as well and that can lead to complacency. Many of us will know the feeling of being on the other end of the phone when a long time customer says “I’m sorry but we moved our business down the street.” You didn’t even know that they were looking because you were out looking for new customers, not looking after the ones you already had.

    Organisations that recognise the value of robust customer relationships build a relationship platform from day one with each new customer so that they can leverage customer loyalty in the long term. By consistently meeting customer needs and delivering on your promises, customers begin to trust your organisation. That trust must be reinforced over and over again.

    In the creation of trust, the management of customer complaints is critical. These must be resolved efficiently and effectively so that the relationship is not damaged by a poor customer experience.
  2. They often purchase more than one product

    In general, customers are susceptible to cross sell and up sell of your organisation’s products and services. They know and trust you and therefore it’s often an easy decision to buy more from you, than start a whole new relationship.

    Subsequently, through cross sell and up sell of your products and services, customers become more sticky and the barrier to exit higher as their product holdings increase. Now even if your competitor launches a better new product or service, the customer has to make the decision to change a series of purchase decisions. Unless the new product is overwhelmingly better, it’s more likely that the customer will stay.

    However, the multi-product customer also has a dark side - if a customer does decide to leave, they take with them a lot of business. The customer may drop all of their purchases if they become angered over a bad experience with a single product or service. Therefore, it is critical to provide appropriate, consistent customer service and contact to continuously nurture the customer relationship.
  3. It's more costly for your competitors to acquire your customers

    Competitors will need to have an extremely compelling offer and apply much effort in order to attract your customers and get them to defect. Factors such as better pricing becomes less fundamental as customers are less price conscious and focus more on premium service and meeting their needs, if they have a strong relationship with their existing provider.

Building the type of customer relationships that can spawn a competitive advantage does however, take effort by the organisation. Systems must be developed, processes employed and senior management must take responsibility to ingrain the importance of customer relationships deep into the organisation’s way of doing business.

Done correctly though it will be a key competitive advantage that will take many years for your competitors to copy, if indeed they can at all.

Author Credits

Adam Ramshaw, Genroe: Pragmatic customer retention strategy and implementation, email: aramshaw@genroe.com.au, Phone: 02 9802 2457, Web site: www.genroe.com.au
  • Print