THE BIG IDEA: Customer relationships are your greatest asset.
The single greatest asset your business has is your relationship with your customers. Erode it, and your business will play a Sisyphean game of trying to gain more buyers faster than your customers leave you.
The Purpose of Business
The relationship you have with your customers is central to the purpose of your business.
Peter Drucker wrote: “If we want to know what a business is we have to start with its purpose. And its purpose must lie outside of the business itself. In fact, it must be in society since a business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer.”
In other words, the business must find a potential need that exists within the society it operates and create the desire to fill that need in people. Before the business creates the need, it only exists as a potentiality.
Drucker continued his observations: “Because it is its purpose to create a customer, any business enterprise has two—and only these two—basic functions: marketing and innovation. They are the entrepreneurial functions.”
You create a customer by marketing a need to them—turning a potentiality into an actuality—and then fulfill the need through innovating a product.
Needs, as Maslow observed, cannot be entirely fulfilled. This lack of fulfillment creates a situation where the customer comes back to you over and over again to seek further fulfillment. This repetition creates a long-term relationship.
The Foundation of The Relationship
Through marketing you create an expectation and through the product you fulfill—or hopefully exceed—the expectation. Through marketing you create the potential for trust and through the product you actualize the trust.
The more often you create this cycle, the stronger the bond between the company and the customer becomes. But, it also becomes more dangerous to break it: The closer the relationship, the more the customer trusts you and the more betrayal will hurt.
This isn’t something to run from, but rather embrace. Trust is the key to all successful, healthy relationships.
Accelerating Relationship Erosion
Customers are continuing to place more and more value on the relationships they have with businesses. According to the February 2016 CMO Survey, customers will place more emphasis on product quality and service in the coming year.
Customers want you to show that you care enough about them that the products you sell live up to high standards and that your level of service reflects how much you care about them as individuals: things anyone would want out of any relationship.
But, according to the same study, the gap is widening between acquisition and retention: companies are acquiring customers at faster rates but they’re keeping less of them.
This stems from a lack of understanding what customers truly want from the business in the long-term. This erosion is a failure to understand the true purpose.
If the gap continues to widen, eventually there won’t be any customers left that an organization has the potential to satisfy.
Next week we take a look at how and why many organizations have failed to understand their customers for decades and are continuing down the same increasingly deadly path.
Until then, ask yourself: How well do you understand your business’s purpose? How strong is your company’s relationship with its customers? How likely are they to leave you for someone else?