Relationships are the interpersonal dynamics that define success or failure in everyday life. How these relationships are managed in a business context can mean the difference between profit and loss, Chris Wheatley explains
In the life and health sector, services are often said to be are homogenised, making it difficult for the consumer to differentiate between one service and another. The Association of British Insurers and the FSA have attempted to improve the situation, but distinguishing between different services remains a challenge. A requirement to stand out is relevant to both business-to-business and business-to-consumer services and products.
Set against a more challenging economic environment, aggressive competition and increasingly sophisticated customer requirements, the quest to entice a customer to 'choose you' becomes more complex.
The relationships formed between customer and supplier can be one source of competitive advantage. However, how these are managed, developed and ended is often overlooked in the course of everyday business.
The first stage in the journey is to change the way the interface with customers is perceived. Each time a company interfaces with a customer rather than think about a raw 'transaction' it should instead consider the customer's experience and how this can be the start of a relationship.
Increasingly, due to IT integration and the intuitive understanding of customer requirements, business-to-business service relationships are long-term. There is an opportunity here to establish relationships by creating an appropriate service environment. A team approach is a perfect solution, as the same suppliers may interface with the same customers on a daily basis. Implicitly, both learn each other's processes.
In a similar way, business-to-consumer relationships can become more virtuous the longer they last with the customer developing a relationship with the brand rather than an individual. Assuming that a consistently high quality service is given, this will provide the opportunity to sell additional products.
Building foundations
So, if it can be assumed that having a positive relationship with a customer is a good thing, then companies need to work out how good examples of these can be formed. Experience has shown that there are three fundamental contributions to long-term relationships. These are:
- Win-win nature - something has to be in it for both parties.
- Customer satisfaction from quality - all of the time.
- Trust who you deal with - and preferably like them too.
A win-win relationship is a terrible cliche, but it is more relevant now than ever. Whether supplier or customer, basic common sense should apply when constructing, servicing or ending a relationship. Ensuring every necessary step is taken to see the relationship from the other side and treating your counterpart as you wish to be treated pays dividends. In a climate of consolidation, companies never know when their supplier will become their customer and the balance of power will shift.
Sometimes, the termination of a business relationship is imperative. However, if this process is handled properly with termination meetings or conference calls, a unique insight can be gained which can offer a variety of ways to learn and improve.
'Service quality is a given' is business mumbo jumbo that is both overused and misunderstood. Firstly, quality is a perception. It is a relative measure that cannot be given a key points illustration or metric to. It is both personal and subjective. Everyday, people may have numerous experiences with service suppliers, all of which contribute to their view of what genuine quality service is.
Raising the bar
While going to the hairdressers and buying income protection (IP) are two very different experiences, a customer having a great haircut in the morning is likely to have heightened expectations about any other service they consume in the same day, including a completely different experience like buying IP.
So how do companies influence what customers think about quality?
A good place to start is clear, simple to understand technical information. Longwinded, convoluted jargon turns customers off and reduces the likelihood of a quality experience. Being explicit about what the service or product includes is a prerequisite. Where timescales are involved, it is important to be clear. In a business-to-business environment where service level agreements govern relationships, it is important to be unambiguous about what is required or offered.
For example, some organisations use 'number of days' as a service barometer without explicitly stating if they are working or calendar days. A simple misunderstanding like this can lead to a perception of bad quality.
In service relationships, every element of the service experience needs to epitomise quality. Insurance services designed for high net worth individuals need to have a corresponding degree of professionalism in the medical examination in order to align the expectation of the service with the reality.
Third party endorsement works best; there is no better advocate of a company than a satisfied customer who has been the recipient of a positive service experience.
Trust is a fundamental aspect of quality. It is the cornerstone of a long-term relationship. To achieve it, the customer needs to experience high rational and emotional satisfaction from the relationship. This allows loyalty to be created and differentiation to occur. This human behavioural response of trust can be a source of advantage that, once established, competition will find very hard to replicate.
Organisations must strive to achieve this while ensuring services are commoditised enough for sufficient profit margins to be made. So how can trust be influenced in the course of relationships?
From the start, a communal understanding of what is expected to be delivered as part of the relationship is required. As many variables as possible need to be explicit - there is no value in supplier and customer assuming they understand each other's requirements. Next, a good service supplier can tune into customer requirements. Increased trust can be established by getting to know customers and how their requirements may change,.
Reputation and image are the final components of developing and maintaining trust. If a company has a reputation as a provider of high quality technical staff, it must ensure all elements of its brands and associated services support this perception.
Many of these measures seem like common sense. That is because they are. But there is an alarming lack of attention in this area with complacency and ambiguous relationships often becoming the source of short-term pain and long-term damage.
Traditionally, relationships in the life and health sector are long-term so the role that quality and trust play in the relationship is likely to change over time. Changes in personnel, processes and customer requirements can distort and put the relationship under strain.
Trust can become a source of disequilibrium. Over time, a customer and supplier may develop a personal relationship creating the inability to be objective, leading to an acceptance of bad service or an unwillingness to go to tender to protect individual interest. Equally, it can lead to heightened and unrealistic expectations. Trust builds over time, but so can complacency.
Making it last
If managed properly, it is possible to achieve high trust and high quality in order to develop effective long-term relationships that can be virtuous for customers and suppliers. A number of methods that can best enhance the relationship are:
- Mapping the customer journey - find out where both the customer and supplier 'touch' and think about how companies can be more empathetic and understanding. Becoming obsessed with customer processes is a great way to show companies how they can improve.
- Manage customer expectations. Ensure there is no 'fuzziness'. A number of internal and external tools can help with this: operational service plans, detailing the specific relationship contact points; service delivery infrastructure; management information; and service levels. These provide a tangible barometer of the relationship. When things go wrong, 'service recovery plans' should be put in place, which detail the road to correction for the service recipient.
- Customer scorecards - giving an open view of the relationship from a 360 degs standpoint.
Relationships can be the best asset or the greatest threat for any business. The way they are managed and developed can be a key competitive advantage, or the undermining of the competitive position of the company. And a common sense approach to relationship strategies guarantees to increase the value of customer or supplier relationships.
Chris Wheatley is managing director of 3d Risk Solutions.
