Investing in Long-term Relationships

By Thursday March 25th, 2010

At the core of all sales and marketing success is a strong relationship with your customer. You create trust, loyalty and expectation because of quality and consistency. However, sales and marketing are often approached with an ROI mindset, with no emphasis on customer lifetime value.

At the core of all sales and marketing success is a strong relationship with your customer. You create trust, loyalty and expectation because of quality and consistency. However, sales and marketing are often approached with an ROI mindset, with no emphasis on customer lifetime value. Let’s use the following example: We’re running a marketing campaign for our floral shop. Our campaign budget is $10,000. This will get our “beautiful bouquets for $30” message out to 20,000 potential customers and will end up selling 200 flower bouquets in the month following the campaign. So when adding up the 200 flower bouquets sold at $30 each, our total ROI is $6,000 or 60% (this is simplified, we’re not considering costs of labor, goods, etc). We decide to discontinue the campaign because we’re not exactly thrilled with the 60% ROI. But are we considering the long-term value of this campaign? The lifetime value of customers reached through the campaign may far exceed the immediate ROI.

Let’s look at it differently. We’ll use a method that some call ROC (return on customer). With this approach, we consider our sales and marketing budgets based on the long-term potential of each customer relationship, not just the immediate return. Instead of considering a 60% return on one-time sales from the campaign, let’s increase our rate of return by investing more time and resources in cultivating strong relationships. Now we’re focusing on quality and long-term value, not volume and immediate cash ROI. With ROC we’re now focused on each customer’s value based on a number of things including: positive customer response, brand awareness, immediate sales, lifetime referrals, and (don’t forget) lifetime sales for maintaining the relationship. Months after the campaign, you reach out to the 200 customers who purchased a bouquet and 30 of them place another order over the phone. Now your ROI is 69%. Over the next year, you keep an organized record of all of your follow-up with customers and realize that you received 130 new orders and 65 return orders as a result of the campaign. At the end of the year, you calculate your ROI (or should we say your ROC) to be $12,750 or 127.50%. How does that affect the way you approach your budget for future campaign efforts, not just in dollars but in terms of customer relations? You’re likely to invest more of both.

This ROC approach can be carried over to non-customer relationships. In the case of a strategic partnership for example, we can call it ROR or return on relationship (no more 3-letter acronyms, I promise). Consider ROR the lifetime value of each sales agent relationship, partnership or sponsorship you invest time and money into. In 2009, many businesses limited outside relationships to focus internally.  In doing so, they stopped going the extra mile for strategic partners and halted participation in activities that didn’t reap an immediate cash reward.  Why would these things (which often do not come with a price tag) take a back seat when business is tight?  If anything, it should be more important to join forces with partners, provide resources for each other, make connections, communicate issues and guide each other to solutions during challenging times. It’s during these times that companies should be more creative than ever in finding new relationships, new channels for engagement, and focusing on ways to help someone else first.

When it comes to cutting back, consider revising your one-way sales pitch and costly traditional advertising spending that lacks the follow-up efforts. Instead, invest in as many substantial conversations as possible, where you’ve done your homework and identified collaborative opportunity before taking action.

Some Strategies

Organize your partner network and reach out to them often
You probably have a mental list of go-to partners for help with promotion, advice, or teaming up for a project.  Take that mental list and put it to work, often.  It’s easy to stay within your bubble and only ask for the feedback that fluffs your feathers, but the best way to push a great idea or kick a bad one is by putting it out in the open.

Don’t be afraid to help someone else first

Don’t ever wait for someone else to prove they’re willing to help you. Take initiative and be a connector, facilitating a conversation or a meeting and hopefully creating a mutually beneficial relationship between two of your contacts. As a simple and effective measure, take 20 minutes a week to come up with 5 opportunities to make email introductions. Instead of just sending someone a name, email address and phone number, provide both parties with background information and recommendations. Let them decide how to proceed. It’s a great way to impress a new partner, client, or show an old friend that you’re still pushing for them.  Keep track of your activity and after a month or two, evaluate your efforts. Have your investments and generosity circled back around? I’ll bet you’ll say, “yes”.

Sales, like marketing, is a 2-way connection process that should benefit your customers immediately
Putting too much “pitch” into your sales and marketing efforts could be damaging to your relationships with potential customers. Approach these efforts as an opportunity to create a message to engage your target customers, gauge their interests and improve their experience with your brand. If you’re not connecting with customers and driving response in the form of website engagement, user submissions, a contest or reward, a survey or even simply asking them questions that matter, you’re missing out on the second half of a 2-way conversation.

Don’t think of your next sales or marketing campaign as:
1) reach out
2) persuade customers
3) execute transaction

Instead, use it as an opportunity to:
1) inform and entice
2) create conversation
3) ask questions, request feedback and participation
4) organize and respond
5) find a solution
6) follow-up

You’ll notice that more people want to talk to you, learn about what you can offer and the “transaction” will come naturally and with a higher lifetime value. In other words, they’ll be more willing to buy from you years from now.

If you’re going to join a new organization or sponsor an event, do it passionately
Successful marketing may require finding new channels, and sometimes that means building your own. Join networks that you’re uncomfortable stepping into and brainstorm ways to partner with existing forums for business development. You might find there’s a sponsorship, partnership or development opportunity that has potential to grow your network and launch your business forward. One more thing: if you decide to sponsor an event or organization, devote yourself.  Join the group, give feedback, attend the small events or team meetings- whatever it takes to get you active. When you’re part of the group and care about the outcome, you’ll be more productive in finding ways to maximize your sponsorship or membership dollars.

More reading:

ROI is good, but ROC is better?

Should you be measuring you ROR instead of ROI?

Partner Relationship Management (PRM ) and Why it Matters

Customer Lifetime Value (definition)

More on Customer Lifetime Value

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About the Author

Jason is co-founder and CEO of Brolik, a digital agency in Philadelphia. As an entrepreneur, Jason is passionate about helping other business owners navigate the complicated journey of owning a business and developing marketing strategies to grow their brand.
Follow @jaybrew on Twitter or connect with Jason on LinkedIn or Google+