Relationships are hard to define and even harder to quantify because no two are the same. Relationships contain multitudes of feelings, thoughts and emotions, and are constantly changing.
If you ask businesses how their relationships with their customers are, they'll probably have a general idea, through their conversations, feedback forms, customer service interactions. Or maybe you'll get a strange look, "How are my relationships with my customers? Well, they buy what I'm offering, so pretty good."
What differentiates a good relationship in the eyes of the customer to a bad relationship? Here are a few things:
- Does the company value my time? (How easy is their website to use?)
- Does the company care about my well-being? (Is their product good enough to take care of my needs? Will I hear from them if I tell them about issues?)
- Does the company make me feel good? (Are they pushy? What's their mission? Why them and not Amazon?)
Good luck trying to quantify these!
The good news is, you don't need to struggle to understand how your relationship is with your customers via psychoanalysis. You already have all the data you need.
Much like how a relationship between two lovers can be seen by their acts toward one another - small kindnesses, words of affirmation, patience, loyalty - a business can see the quality of its relationship with its customers through how a customer chooses to invest their finite energy and resources - their money.
A customer buying a widget isn't just a transaction. It's an affirmation, a conclusion at the end of a long chain of decisions, and vote of confidence in your company.
What's more powerful for a business than a customer buying a widget? The customer returning to buy another. Once a customer closes the loop - you have what they need, and they'd like you to continue helping them - you know your relationship with this customer has been established. Time to help it grow.
If a relationship with your customer is the chain of decisions they've made to invest their energy into your company, then one way to quantify the relationship is to add up all of these investments made by the customer over time (CLV).
Not only will this give you a measure of relationship strength, but you can see where the relationship is headed. If you normally see a good friend every day, but realize you haven't talked in a month, you know it's time to reach out and see how things are going. Why would this be any different for one of your customers?
"Customer lifetime value" is perhaps a misnomer, since it implies that customers are jugs of profit waiting for you to empty. What customer lifetime value actually helps you understand is: How well do you treat your customers, and how well do they treat you in return?
How do you measure the strength of your relationships with your customers? If you're not yet doing it, I suggest calculating your customer lifetime value and watching it closely, since it may be the biggest determinant of your business' (and your customers') future success.
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