Assessing Customer Loyalty through Relationships
by N. Ramasubramani

Customer loyalty is often viewed in terms of the strength of the relationship that a brand enjoys with the customer. In other words, if the customer's experience with the brand turns out to be satisfying, it is assumed that the customer will continue to stay with that particular brand. Needless to say, the product experience encompasses all the 'touch points' that the brand has with the customer. A major portion of the marketing manager's efforts are therefore, directed at providing the customer a uniformly satisfying experience across all the touch points. And the unstated assumption - with the attendant expectation - is that this exercise, in itself should manage the customer relationship and therefore build loyalty. This is definitely true in mass markets, now termed B2C. However, in the B2B space there is another component that is equally important and that is the relationship between the people involved in the transaction.

Relationships in B2B space

The human relationship factor plays a crucial role in shaping customer loyalty in the B2B space and in some cases, assumes an overriding importance. Advertising people were the first to recognise the importance of this and coined a special word to describe it: Client chemistry. Marketing people in the institutional space call it 'traction'. It is because of this awareness that marketing people in the B2B space spend a great deal of their time in cultivating strong relationships with key people in the customer organisations. So well recognised is this fact that, as you go higher in the hierarchy, the role definition tends to dwell more and more on your abilities to build relationships. Proof of this is the fact that today, organisations are screening prospective employees on their emotional intelligence, in addition to their other competencies.

Relationships matter

Good relationships impact your bottom line. They help you win major businesses. Very often, the 'comfort level' that a client has with a vendor decides how much business the vendor firm is awarded. This is not blasphemy. It is a sound business practice.

Good relationships often act as a buffer and help you get over rough patches that have a way of showing up unexpectedly. They help you avoid a loss.

Good relationships help you go beyond the client's brief. Does the client need only a loyalty solution? Or is the answer in a comprehensive relationship program? Good relationships help you glean insights like these.

Engagement Portfolio Matrix

Despite the awareness about the criticality of good relationships, there has not been too much of effort to analyse the strength of relationships in a business context. Loyalty models seem to have focussed mainly on the B2C space; providing a framework to analyse a customer's loyalty based on his purchase behaviour---namely recency, frequency and monetary indices of a customer vis--vis a particular brand. The objective of this article is to view customer loyalty from the relationship perspective and provide a possible framework to organisations which will help them analyse their portfolio in an objective way.

Engagement and Relationship

In any B2B situation, or wherever there is group selling behaviour, there are two kinds of relationships. One is a relationship that exists between two organisations: for the sake of clarity let us refer to these relationships as engagements. The second type is the relationships that develops between people working in these collaborating organisations: Let us call them relationships. Now we can look at the effect of individual 'relationships' on organisational 'engagements'.

Decisive Relationships and Dependant Relationships

The relationships that develop between people among people involved in B2B engagement can be classified under two broad headings: Decisive Relationships and Dependant relationships.

Decisive relationships are pivotal in nature and normally decide the fate of any relationship. Thus the relationship between the CEOs of two collaborating companies can and do normally impact the relationship between the two organisations. This is one example of a decisive relationship. By and large the relationships at the senior level in the two organisations fall in this category.

Dependant relationships are, as the name suggests, dependant on the first category. However, these are the wheels of the organisational engagement and keep it moving smoothly. The relationships between people at the operational level usually fall into this category. While they are dependant in nature, these relationships are often far wider, require continuous interactions and last but not the least, have the greatest potential for creating dissension.

An organisation has to ensure that both these types of relationships with its client base are strong, in order to ensure that it engagements with its clients are robust and productive. Strength or weakness in any one of these relationships could lead to less than optimal engagement and so a weakness in client loyalty. The following framework outlines the four types of engagements that an organisation could be having with its client base.

The four engagement types

Quadrant I - ATOLL:
In these engagements, the operational teams are relating to each other fairly well, while the relationship at senior levels is very weak. Such an engagement is under great threat because the customer or the client organisation can terminate the engagement any time. Secondly, no major gains can be reaped since there is no connect with the senior management in the customer organisation.

Quadrant II - PYRAMID:
The most productive form of organisational engagement, the pyramid engagement comes into being when the relationships at all levels are robust. While projects are facilitated by the strength of the decisive relationships, the dependant relationships are equally strong and carry them through to their logical conclusion. Such an engagement is difficult to derail and often provides the basis for new business opportunities.

Quadrant III - TOP:
Like a spinning top that remains only stable as long as it is spinning, these engagements are good as long as they last. Despite weaknesses at the dependant relationship level, it still produces results, but is highly unstable and unless the vendor organisation takes solid efforts to build the dependant relationships, will eventually falter.

Quadrant IV - POLE:
Neither the decisive relationships nor the dependant relationships are strong. There is no organisational engagement, though it may exist officially on paper. When you have a client on your list from whom you haven't got an order in quite a while, you know you have a pole engagement. The senior management levels do not see eye to eye on the strategic direction and the operational teams have no agreement on the short cycle projects or campaigns.

Conclusion

Individual relationships have a significant bearing on organisational engagements. They affect the way an engagement develops and could make the difference between winning and losing business. The engagement portfolio matrix provides a simple framework to assess the strengths of an organisation's engagements. In addition to pointing out the weaknesses in an engagement, the matrix also provides the broad direction of corrective action. And finally, it is easy to implement.


N. Ramasubramani (Ram) is a practicing loyalty manager from India. He works for Surfgold, which is a pan Asian Loyalty management company with world class IT clients such as Hewlett Packard, Microsoft, Advanced Micro Devices, Seagate and many more. He has more than 20 years of experience in marketing, advertising, brand building, direct marketing and online brand building. Visit www.surfgold.com or telephone:91-11-26511042/91-11-26515227 Mobile:9810774676 .

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Copyright 2004 by N. Ramasubramani. All rights reserved.

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