My post on Being Beaten on Price? Three Ways to Fight Back triggered another comment from Don Hill. That’s very gratifying because it was Don’s comment to an earlier blog post that triggered my post in the first place. Don’s comment about the dangers of complacency in long-term relationships reminds us that this is just one symptom of the dark-side of long-term relationships; whereby the closer and longer-term the relationship, the greater the influence of negative factors on it.
Relationships do change as they mature. Kent Grayson and Tim Ambler in a paper entitled The Dark Side of Long-Term Relationships in Marketing Services shows just how dangerous this can be if the dark side is not managed effectively.
The dark side comes about because of a number of factors, including, not managing the trade-off between short and long-term benefits, too strong a personal relationship that prevents issues being tackled, and too close integration that prevents new and better alternatives being considered. All of these factors contribute in different ways to the dark side. Erin Anderson and Sandy Jap in a paper entitled The Dark Side of Close Relationships suggest a number of ways to suppress and remedy each of the three factors.
Balancing Short & Long-term Benefits
Relationships need to be constantly worked on to ensure that benefits remain balanced. This requires continuous review to make sure the relationship hasn’t become stale, and to introduce new ideas and opportunities. One way to do this is by rotating staff every few years. This prevents complacency setting in and introduces new ideas that rotated-in staff bring with them. It also requires continuous review to ensure that profitability hasn’t been eroded by the reduced prices that long-term customers often expect. Focussing on profitability rather than on revenue is the key.
Managing Personal Relationships
Close relationships are by their nature personal. But they shouldn’t rest on a single person. Instead, they should be developed based upon a number of people who each play a key role as it grows. Often, as we have seen in the previous job rotation example, the people involved should change over time as the relationship’s needs change. Focussing on potential losses if the relationship turns sour also helps to identify the right people who should be involved to ensure that the dark side is kept at bay.
Maintaining Business Flexibility
Relationships shouldn’t just rely on personal contacts. Investments of various kinds, e.g. specialised staff, capital infrastructure and other difficult to withdraw assets, provide a barrier to easy exit from a relationship and an incentive to fix it if the dark side rears its head. So does developing joint strategies and common goals, which provides an agreed reference point should difficulties arise. Together, they provide an incentive to ensure that business integration remains close, but not so close that partners get locked into an increasingly less flexible and less effective relationship.
There are obvious benefits of developing close, long-term relationships with customers. The early work on the benefits of customer loyalty by Fred Reichheld has become one of the dominant logics of CRM, despite more recent evidence from Werner Reinartz that many of the loyalty benefits claimed do not exist universally. But these kind of relationships carry problems of their own. You need to manage these potential problems just as much as you need to manage all the positive aspects of relationships if they are to thrive and to stay profitable
What do you think? Are you managing the dark side of your longest-term relationships? Or has the dark side already destroyed the profitability of those very customers you thought were your best?
Post a comment and get the conversation going.