Four principles for successful, long-term customer relationships
Build Trust, Value, and Personal relationships, while lowering Cost to have successful, long-term customer relationships.
Welcome to A Founder’s Life for Me! I’m Alek, and I provide practical recommendations on how to build your company (or career) through my experiences building tech companies. To get free access to all past and future posts, please subscribe.
Why I’m writing this now
After eight years of experience working with customers, I’ve built a four-part framework for successfully managing customer relationships. I apply it daily through my consulting work. My startup, SolidlyAI, also helps teams automatically apply the framework to their customer relationships. Strong customer relationships mean longer relationships (aka renewals) and expanded opportunities (aka cross-sells). I’m writing this now because I wanted a simple mental model that I can bring to my working relationships.
You’ll leave this article with an understanding of the four core principles I use to build successful long-term customer relationships.
Four principles for a successful customer relationship
Without wasting any time, here is my four-part framework for a successful customer relationship:
Trust - is the customer confident that you will deliver what you promise?
Value - are you solving a valuable problem for the customer?
Personal Relationships - does the customer enjoy working with you?
Cost - what will they give up (i.e., money, time, effort)?
If you had asked me at the start of my career, I would have said there were only two principles: “value” and “cost.” Over time, I’ve learned the importance of “trust” and “relationships.”1 Now, let’s brings all four principles together into a single equation for a strong customer relationship:
This equation provides you with a framework to think about building successful customer relationships. Put simply, you will acquire and retain customers if:
you have a personal relationship with them
trust is high
you provide value
your cost is low
You won’t acquire or retain customers if the opposite is true. In today’s newsletter, I’ll explain why I believe each of these are fundamental principles to any successful customer relationship. In the coming weeks, I’ll deep dive into each principle with stories and learnings I’ve gained over the years of working with customers. To receive those stories straight to your inbox, please subscribe for free below.
Trust directly impacts your ability to achieve the promised outcome.
Typically, a customer relationship is organized around some customer expectations. For example, I’ve worked on long-term customer relationships in support of:
driving revenue through business intelligence (BI) and analytics
building a content platform to sell online educational courses
providing a SaaS platform to increase revenue and lower costs through A/B tests
These were outcomes that the customer paid my company to deliver, but all of these still required something from the customer (Cost). If the customer loses trust that you’re going to deliver on what you’ve promised, they will be less willing to invest in the work you’re doing. Whether it’s money, or just time, if the customer disengages, this will hurt your ability to effectively deliver on what you promise.
For example, in a current consulting relationship, I “drive revenue through BI and analytics,” I’m working in partnership with members of the C-suite to understand what’s important to them and answer relevant business questions. If they focus on driving revenue in one line of business, that’s where I focus. If they focus on driving revenue through other lines of business, I shift my priorities accordingly. This takes my customer’s time, but they know it will be worth it because they trust that I’ll be able to deliver what I’ve promised (driving revenue through BI and analytics).
If, for whatever reason, the customer did not trust that I would deliver on my promise to drive revenue through BI and analytics, they would disengage. As a result, I wouldn’t know where to focus. I would work hard to uncover insights, but I might answer questions nobody cares about without understanding the priorities. I could find a way to drive revenue, but in practice, it’s not feasible or not a priority.
So, in customer relationships, trust is crucial because it often directly impacts your ability to achieve the promised outcome. I’ll expand on specific approaches and stories in my newsletter about building customer trust. I’ll also talk about how you can inspire trust before (sales) and during (delivery) a customer relationship.
Solve valuable problems for customers.
If the customer trusts you’ll deliver what you promise, the question becomes, “Is what you are promising valuable to them?” If your output isn’t valuable, they won’t care to invest their money or time. If it is valuable, then they will.
In my newsletter about solving valuable problems, I’ll provide a framework to help you consider whether you are solving a valuable problem. Until then, to learn how to iterate toward a valuable problem quickly, you can check out my prior newsletter, “The Fastest Way to Validate Business Ideas.”
Customers will work with you if they like you.
Every good thing that has ever happened to me in my career has come from people in my network with whom I’ve built positive, long-term relationships. My first startup was acquired because a friend (and reader, thanks again, Chris!) introduced me to someone at a company in the same problem space as GBA. My first consulting relationships came from people I met at Mastercard. Leads for future consulting relationships and customers for SolidlyAI have all come from introductions from other people I know. Generally, being liked leads to more opportunities.
If the customer likes working with you, they’ll default to continuing the relationship. You still need to provide value, but it’s usually worth sacrificing some value to build a positive personal relationship. When I started consulting, I figured, “The customer’s time is valuable. They don’t want to be talking to me. So, let’s dive right into what we need to discuss.” Over time, I learned the importance of building more personal relationships with customers. Instead of transactional conversations, I had more fun on customer calls because I inserted humor and brought more of myself into the conversation.
I’ll expand on building customer relationships in a later newsletter. Before then, I do want to say, to do this effectively, you need to build relationships with authenticity. If you are saying or doing things to get something out of the person, you’re doing it for the wrong reason. I’ve given examples of how relationships have benefitted me over my career; these relationships have benefitted me because they were built from a place of authenticity. The “what’s in it for me” was that I had fun with these people and enjoyed getting to know them.
Lower costs for happier customers.
If your customer trusts you’ll deliver a solution to a valuable problem and likes working with you, then all that’s left is the cost. Cost can come in many forms:
Time and effort - how much time is this going to take them?
Patience - how long will your output take to deliver?
Inertia - will this require them to learn new things or work in new ways?
Money - how much money will it cost?
You are more likely to have a positive, long-standing customer relationship if your “price” is low. This doesn’t necessarily mean you must be “cheaper” financially. You can lower your cost in other ways by:
taking as much as possible off of their plate (lower time and effort cost)
faster delivery of the output (lower patience cost)
getting your output as close as possible to “plug and play” with how they already do things (lower inertia cost)
As with all of the above, I will expand on how I think about costs in a later newsletter. But I’m a huge proponent of reducing costs in non-financial ways. If you leave all else equal, you can build a stronger relationship (or even charge more) by making things easier on your customer.
Apply the four principles of a successful, long-term customer relationship.
My four core principles for any successful long-term customer relationship are trust, value, personal relationships, and cost. You want trust, value, and personal relationships to be strong. You want the cost to be low. You can apply these principles to any working relationship. Regardless of your role, you probably have some form of “customers.” They might be internal to your company, or external. If you apply all four of these principles, you’ll be able to build and expand customer relationships that last.
Recommendation: As you’re working with customers, build trust and solve valuable problems. Develop personal relationships along the way. Lower the “price” your customer needs to pay. “Price” decreases don’t necessarily need to be monetary. Ultimately, combine all of these for strong customer relationships.
If you are interested in more content like this, subscribe through the link below. If you want to discuss how to apply this, email me at newsletter@alekhagopian.com.
There is a valid argument that the equation should just be “Customer Relationship Strength = Value - Cost” because everything simplifies down to those two principles in the end. However, I like to break out trust and relationships in my model because it forces me to intentionally invest in those areas.