Business Services: Building Successful B2B Customer Relationships
As human beings, we rely on strong and lasting relationships to fulfill our personal happiness. There is plenty of research that suggests relationships impact us mentally, emotionally, and physically, with healthy relationships leading us to live longer, better manage stress, and improve our social well-being. This concept is no different in the business world.
Healthy business-to-business (B2B) customer relationships lead to top line growth, stability to manage disruption, and overall sustainability as an organization. Similar to personal relationships, every successful business relationship is built on a foundation of core virtues, such as integrity, transparency, and trust. However, while many business leaders understand the importance of relationships in a business context, many fail to think strategically about how to build and maintain these relationships.
Successful relationship management means taking advantage of your destiny by understanding where to play and how to win, then proactively evaluating each customer relationship across a multitude of factors. At Blue Canyon Partners, we have developed a methodology for analyzing customer relationship dynamics, as well as a range of relationship competency benchmarks to guide B2B firms along their customer relationship journey. Our insights on relationship management have helped our clients maintain and bolster: profitability, growth, stability, receptivity to innovation, and the evolution of customer relationships in new settings.
The health of a strategic relationship can be benchmarked against four relationship levels: supplier, preferred supplier, extended enterprise member, and partner. At the supplier level, relationships are centered on price, product specifications, and service specifications. Examples include a chemicals manufacturer supplying commodity based products, or a trucking company providing only shipping services from point A to point B.
At the preferred supplier level, the supplier-customer relationship is stable and consistent, exhibiting a high degree of familiarity and trust between the supplier and customer. The customer often receives special treatment, and, in return, the supplier gets a last look during a competitive bid.
At the extended enterprise member and partner levels, relationships are complex and multi-dimensional. At this level, the customer heavily relies on the supplier to keep the team on top through collaboration. Strategic business plans and investment decisions are shared and implemented in tandem. The difference between the extended enterprise member and a partner is partner level relationships may include more formal links between organizations including: cross ownership; shared investments in products, technologies, or brands; or explicit joint venture relationships.
A common example of a partner level relationship is seen in the EPC (Engineering Procurement Construction) world between Architects and Engineers, or a developer and construction company forming a long-term joint venture. Ultimately, a company must understand its customers, identify which customers to prioritize, and begin the journey to develop and strengthen its customer relationship at each level from supplier to partner.
From our perspective, customer relationships can be evaluated across three competencies. These competencies are: trust, implementation, and innovation. The trust competency is a way of analyzing the supplier-customer relationship; the implementation competency is a way of analyzing the firm’s ability to meet its promises and implement assignments from the customer; and the innovation competency is the ability of a firm to bring innovative opportunities to the customer.
These competencies form the basis of strategic relationships, which in turn form a Relationship Advantage. They all must be addressed to form a strong relationship, but their relative importance is contingent upon the context of the B2B relationship at hand. A common path to building these competencies is first setting a foundation in the trust competency, then moving to the implementation competency to sustain and complement the trust competency. Finally, the innovation competency is layered on after the trust and implementation competencies have been applied, to provide a critical third leg to support higher-level relationships and complete the customer relationship journey.
For a more in-depth look at building a Customer Relationship Advantage, please request our white paper:
How B2B Service Companies Can Drive Growth Through a Customer Relationship Advantage
By focusing on the competencies that matter most in B2B relationships, a business services company can capture the benefits of the Relationship Advantage, which include obtaining priority for new opportunities, having the last look in businesses, gaining insights into future product development, and having a collaborative response to disruption. Smart companies will understand the importance of relationships and be more than willing to reinvest some of the payoffs from growth to further strengthen customer relationships. By nurturing their relationship management competencies and enhancing their Relationship Advantage, these companies can continue to grow with their customers year after year.