How to Build Customer Relationships: Crash Course Entrepreneurship #10

Summary

In this Crash Course Business episode, Anna Akana explores the importance of nurturing customer relationships for a thriving business. She outlines various types of customer-business relationships, from transactional to co-creation, and emphasizes the significance of adapting these relationships based on customer feedback and business capabilities. The episode uses examples like The Running Company and Salesforce to illustrate how different businesses cultivate long-term connections with their customers through personal assistance, loyalty programs, and community building.

Takeaways

• 🤝 The importance of nurturing customer relationships for a successful business is emphasized, highlighting that customers have certain expectations that businesses must meet.
• 💭 The script suggests envisioning the ideal customer relationship, including the level of commitment and type of interactions, before making decisions.
• 🏬 Transactional relationships are described as interactions limited to the moment of purchase, with no ongoing engagement between business and customer.
• 🛒 Self-service relationships allow customers to interact with a business's offerings without direct contact, such as at self-pump gas stations.
• 🤖 Automated self-service takes personalization a step further by using customer profiles to simulate a more personal relationship, like recommendations from algorithms.
• 💁 Personal assistance relationships involve direct communication with a real person for help during or after the sales process, enhancing the customer experience.
• 🔗 Dedicated personal assistance relationships assign a specific representative to each client, aiming to create a deeper, long-lasting bond.
• 🏅 Loyalty programs are introduced as a strategy to reward customers for their purchases and increase the cost of switching to another brand.
• 👫 Long-term relationships are built over time through regular interactions and can involve an emotional connection, as seen with die-hard brand fans.
• 🤝 Co-creation relationships involve businesses working directly with customers to develop products, relying on customer input and collaboration.
• 🌐 Online or real-life communities created by businesses allow customers to interact and share knowledge, strengthening their bond with the business.
• 🛠 Businesses should decide on the types of customer relationships that will work best for them based on their capabilities and customer preferences.
• 🔄 The script illustrates that customer relationships can evolve over time and businesses should be ready to adapt their strategies based on feedback.

Q & A

What is the primary focus of the video script provided?

The script focuses on the importance of nurturing relationships with customers in a business context, discussing different types of customer relationships and how they can be developed and maintained.

Why is it important to consider the type of relationship a business wants with its customers?

It's important because different types of relationships can influence customer satisfaction, loyalty, and the overall success of the business, allowing for tailored interactions and services that meet customer expectations.

What is a transactional relationship in business?

A transactional relationship is the most basic type, where a business only engages with customers at the moment of purchase, with little to no ongoing interaction or personalization.

Can you provide an example of a transactional relationship mentioned in the script?

An example given is a credit card machine that takes a percentage of a sale as a processing fee, with no direct interaction between the credit card company and the shoppers.

What is the difference between self-service and automated self-service relationships?

Self-service relationships involve no direct contact but provide equipment for customers to serve themselves, while automated self-service uses technology to recognize customer profiles and offer personalized experiences.

How does a personal assistance relationship differ from a dedicated personal assistance relationship?

In a personal assistance relationship, customers can communicate with a real person for help during or after the sales process, whereas in a dedicated personal assistance relationship, each client has a specific representative devoted to them.

What is the purpose of a loyalty program in a business?

The purpose of a loyalty program is to reward customers for their purchases, making it more costly for them to switch to another brand, thus encouraging repeat business and customer retention.

How do switching costs play a role in customer relationships?

Switching costs, which can be financial, temporal, or related to the hassle of changing, make it more difficult for customers to switch to another business, thus reinforcing loyalty and retention.

What is the significance of building a long-term relationship with customers?

Long-term relationships are significant as they foster a deeper bond with customers, often based on trust and shared values, leading to sustained loyalty and potentially higher lifetime customer value.

How can a co-creation relationship benefit a business?

A co-creation relationship benefits a business by leveraging customers' expertise and input in product development, leading to more innovative and customer-centric products that resonate with the market.

What is the role of communities in customer relationships as discussed in the script?

Communities play a role in customer relationships by providing a platform for customers to interact and share knowledge, which can strengthen their bond with the business and offer valuable feedback.

How does the script illustrate the evolution of customer relationships in a business example?

The script uses the example of Ashlyn's traveling bike repair service to show how understanding and adapting to customers' actual needs, rather than assumptions, can lead to the evolution of the relationship model and business success.

Outlines

00:00

🤝 Building Customer Relationships

This paragraph discusses the importance of nurturing the relationship between a business and its customers, similar to any committed relationship. It introduces the concept of different types of relationships a business can have with customers, ranging from transactional to long-term relationships. It explains transactional relationships where interaction is limited to the point of sale, self-service relationships where customers interact with the business without direct contact, and automated self-service that uses customer profiles for personalization. The paragraph also covers personal assistance relationships, where customers can communicate with a real person, and dedicated personal assistance for a deeper bond. Loyalty programs are mentioned as a way to retain customers by increasing switching costs. The paragraph concludes with the idea of co-creation, where businesses work with customers to develop products.

05:02

🌐 Diverse Customer Relationship Strategies

The second paragraph explores various strategies for building customer relationships, emphasizing that businesses can choose more than one type of relationship. It uses the example of YouTube, where the platform relies on user-generated content, and discusses the benefits of creating online or real-life communities for customer interaction and knowledge exchange. The paragraph suggests that decisions about customer relationships should be based on the business's capabilities and customer preferences. It provides a comparative analysis of two businesses, The Running Company and Salesforce, illustrating how each uses different relationship strategies such as personal assistance, loyalty programs, and community building to foster long-term connections with their customers. The 'Thought Bubble' section presents a case study of Ashlyn's traveling bike repair service, highlighting how she adapts her relationship strategy based on customer feedback, moving from personal assistance to a self-service model.

10:05

🛠 Adapting to Customer Relationship Dynamics

The final paragraph emphasizes the importance of aligning customer relationship strategies with the business's value proposition. It stresses the need for planning and adaptability in how a business interacts with its customers, using feedback to evolve the relationship. The paragraph outlines that businesses should start with a clear intention and be prepared to adjust their approach as needed. It also teases the next topic of discussion, which will cover various methods of communicating a business's value to its customers, including social media and traditional mail. The paragraph concludes by acknowledging the sponsorship of Google and the contribution of Thought Cafe for the graphics, and it invites viewers to support Crash Course on Patreon and to explore related社会学 topics in a Crash Course Sociology video.

Keywords

💡Customer Relationship

Customer relationship refers to the dynamic between a business and its customers, which is essential for business success. In the video, nurturing these relationships is likened to a committed partnership, emphasizing the importance of meeting customer expectations and developing the relationship as the business grows. Examples include various types of relationships, from transactional to personal assistance, each serving different business models and customer needs.

💡Transactional Relationship

A transactional relationship is a basic type of interaction where a business engages with customers only at the point of sale, without further engagement. The script uses the example of a credit card machine that takes a processing fee, illustrating a hands-off approach where neither party requires ongoing interaction.

💡Self-Service Relationship

A self-service relationship is one where the business provides the means for customers to serve themselves, with no direct contact. The video mentions self-pump gas stations and self-serve frozen yogurt shops as examples, where customers have the freedom to customize their experience.

💡Automated Self-Service

Automated self-service goes a step further by using technology to recognize customer profiles and personalize interactions. The script cites Goodreads and Hulu as examples, where algorithms suggest books or movies based on user preferences, simulating a more intimate customer relationship.

💡Personal Assistance Relationship

A personal assistance relationship involves direct communication with a real person for help during or after the sales process. The video mentions live chat features on websites as a modern example, providing immediate access to company representatives in a convenient manner.

💡Dedicated Personal Assistance

Dedicated personal assistance takes customer service to a deeper level by assigning a specific representative to each client, fostering a long-term bond. The script uses local tax accountants and insurance agents as examples, where personal relationships are maintained over time.

💡Loyalty Program

A loyalty program is a strategy used by businesses to reward customers for their continued patronage, making it more costly for them to switch to competitors. The video discusses how such programs can 'lock in' customers, with gym memberships and lunch spot loyalty cards serving as relatable examples.

💡Long-Term Relationship

A long-term relationship with customers is built over time through regular interactions and often an emotional connection. The script highlights die-hard brand fans, like those of Patagonia, who support the company due to shared values and quality products, not just for the items themselves.

💡Co-Creation Relationship

In a co-creation relationship, businesses collaborate with customers to develop products, relying on the customers' input and creativity. The video uses YouTube as an example, where the platform provides the means for creators to produce content, almost all of which is user-generated.

💡Community

Creating a community around a brand is a way to strengthen customer relationships by providing a space for interaction and knowledge exchange. The script mentions The Running Company's free weekly running club and Salesforce's Dreamforce conference as examples of fostering community among customers.

💡Value Proposition

A value proposition is the promise of value a business offers to its customers, explaining why they should choose the product or service. The video uses Ashlyn's traveling bike repair service as an example, emphasizing the importance of aligning the value proposition with customer needs and being adaptable to feedback.

Highlights

The importance of nurturing customer relationships for a successful business is emphasized, drawing a parallel to committed personal relationships.

The concept of customer expectations and the necessity to meet them for business development is introduced.

Anna Akana presents the idea of envisioning the 'perfect' customer relationship, similar to daydreaming about a perfect partner.

Different types of customer relationships are outlined, starting with transactional relationships exemplified by credit card processing fees.

Self-service relationships are explained, where businesses provide the means for customers to serve themselves, like at self-pump gas stations.

Automated self-service is described, where personalized experiences are simulated through customer profiles, such as with Goodreads or Hulu.

Personal assistance relationships are detailed, where customers can communicate with a real person for support during or after sales.

The introduction of 'live chat' features on websites as a form of immediate customer service without the need for physical or phone interaction.

Dedicated personal assistance relationships are discussed, where a specific representative is devoted to each client, fostering a deeper bond.

Loyalty programs are explored as a method to reward customers and increase the cost of switching to another brand, thus retaining customers.

The concept of switching costs in maintaining customer loyalty and the role of customer happiness in promoting products is highlighted.

Long-term relationships with customers are discussed, where regular interactions and emotional connections are built over time.

Co-creation relationships are introduced, where companies work directly with customers to develop products, relying on customer input and chemistry.

Communities created by businesses, both online and in real life, are shown as a way to strengthen customer bonds and gather feedback.

The decision-making process for choosing the right type of customer relationship for a business is discussed, emphasizing the importance of aligning with business capabilities and customer appeal.

A comparison between two businesses, The Running Company and Salesforce, illustrates how different companies can cultivate similar types of customer relationships despite differing products and services.

The story of Ashlyn's traveling bike repair service is used as a case study to demonstrate the evolution of customer relationships and the importance of adapting to customer needs.

The conclusion emphasizes the importance of starting with a clear plan for customer interaction and being ready to adapt based on customer feedback.

Transcripts

Like any committed relationship, the relationship between a business and its customers needs

nurturing.

And that shouldn’t come as a surprise!

I mean, we’ve already mentioned customers over 100 times in this series.

We need customers to run a successful business, and naturally they’re going to have certain

expectations.

So we want to make sure we deliver on those expectations and develop those relationships

as our business develops.

I’m Anna Akana, and this is Crash Course Business: Entrepreneurship.

[Theme Music Plays]

So the first question we have to ask ourselves is: what kind of relationship do we want with

our customers?

We daydream about building our perfect partner for me it would be the body of Chris Evans

with the head of Chris Evans.

Or finding a BFF, so why can’t we do the same for our customer relationships?

You know, the level of commitment, kinds of interactions we want to have, or even the

medium we use to communicate.

There are lots of options to consider before making any decisions or jumping into anything.

The easiest type of relationship to build is no relationship.

If a business only engages with customers at the moment they make a purchase, or either

person could be a robot and nobody would notice, this is called a transactional relationship.

A good example is a credit card machine that takes 3% of a sale as a processing fee.

The credit card company never needs to see the shoppers, and the shoppers might not even

know that 3% of what they just paid is being sent elsewhere.

In love, transactional relationships are a no-go, but here both sides are happy.

Another fairly hands-off option is a self-service relationship.

This is where the business has no direct contact with the customer but provides all the necessary

equipment for customers to help themselves.

Think self-pump gas stations or self-serve frozen yogurt shops.

The customers do all the work, but they get to customize to their heart’s content.

We can kick this up a notch by providing automated self-service.

Generally, this recognizes something about the customer and can be personalized using

customer profiles.

Automated services can simulate a more personal relationship, like Goodreads suggesting books

or Hulu offering movie recommendations.

Love those computer algorithms learning everything about us…

Some companies like to deliver an even more personal touch with a personal assistance

relationship -- one where the customer can communicate with a real person to get help

during the sales process or after the purchase is complete.

This could happen in brick-and-mortar stores, on the phone, by email, or some other way.

I hear skywriting is making a comeback.

Many companies are integrating a “live chat” feature on their websites, like Internet or

mobile phone providers.

Live chats provide immediate access to a company representative without the hassle of going

into a store or the horror of a live phone conversation.

The next level is a dedicated personal assistance relationship where each client has a specific

representative devoted to them.

You could even say they’re...going steady.

The point is to create a much deeper bond that will last a long time.

This is possible in businesses that don’t have millions of sales and expect to be with

customers for a while.

For instance, local tax accountants or insurance agents usually maintain personal relationships

with their clients.

Then, there’s the modern-day classic: the loyalty program.

[If you don’t have at least 3 memberships and punch-cards in your wallet right now HOW

ARE YOU SURVIVING WITHOUT ALL THE DEALS??

Switching costs -- like money, time, or plain old hassle -- are a way to describe how easy

or hard it is for someone to switch loyalties to another business.

So loyalty programs reward customers for their purchases and make it a little more costly

to switch brands, so they return again and again.

It’s far cheaper to retain or “lock in” previous customers than to start from scratch

with someone new.

Not to mention, happy customers also talk about how happy they are with a new product.

Kinda like those couples who just got together and they're like SUPER obsessed with each other.

Gym memberships are notorious for this.

Maybe they give you a discount if you get a friend to join, but to cancel you have to

go all the way into their office and fill out 1 or 2 or 15 forms.

Or on a simpler level, maybe your favorite lunch spot has a loyalty card and the feeling

of getting closer to 12 punches and a free sandwich makes you want to keep coming back.

At the most involved end of the spectrum is the long-term relationship.

These are built with customers over time through regular interactions and possibly with an

emotional connection.

This type of customer is like the die-hard Patagonia fans who support the company over

many years.

They’re not just in it for the snazzy vests, they believe in things like Patagonia’s

environmental mission and the quality of the clothing.

But also the snazzy vests.

Might as well put a ring on these folks.

But sometimes a business isn’t necessarily the expert providing everything to its customers,

it’s a conduit for greatness.

In a co-creation relationship, companies don’t rely on a lot of in-house innovation and instead

work directly with customers to develop products, which relies on some great chemistry!

You almost never see videos created by YouTube employees — creators like us are making

almost all of the content.

And finally, a business can also rely on customers’ expertise by creating communities online or in real life.

In these spaces, customers can interact and exchange user knowledge, which can end up

strengthening their bond with the business that brought everyone together!

Not to mention, it’s an opportunity to stay up-to-date on what people who care about your

product are saying.

If people are complaining about a glitch or sharing innovative uses in these communities,

that’s awesome feedback!

So after we know the options, we want to decide which customer relationships will work for

our business.

Only one thing to do: spin the wheel of relationships and let fate decide!

Well... no...

Sort of.

All of the decisions we’ve made so far about our business -- from choosing a legal structure

to getting customer feedback -- have involved asking key questions and listening to trusted

advice.

So figuring out what relationships we want to nurture is no different!

And just like you might have multifaceted relationships with a parent, a friend, a partner,

and the coffee barista that works at your local shop on Thursday mornings, customer

relationships aren’t mutually exclusive.

So go ahead and pick more than one for your business!

There’s also no ideal mix, and we’re not here to tell you exactly what you’ll need

to do as an entrepreneur.

What works for one business in one region might not work somewhere else.

Let’s compare two businesses: The Running Company, an Australian brick and mortar shoe

store with several locations, and Salesforce, a massive tech company that sells cloud-based

software to other businesses to help them manage their customer relationships.

Both want to cultivate a long-term relationship with customers.

The Running Company needs repeat customers to compete with the big department stores.

And Salesforce needs to convince customers to continue using their software and pay for

subscriptions and updates.

The Running Company has personal assistants to make sure customers have a great experience

in the store and want to return.

Salesforce has account managers who provide dedicated personal assistance to each client,

by being available to help with whatever problems come up, along with online demos for immediate

troubleshooting.

Both businesses also want to lock-in customers with loyalty programming.

The Running Company offers exclusive online products for those who join and other member-only

running-related content.

Salesforce’s customers are other businesses, and when a business adopts an entire platform,

it can be very expensive and time-consuming to shift to a different platform.

So switching costs are already high, and their loyalty programs look a bit different.

They might take business representatives out when they come to town, or provide a discount

if you pay for your subscription annually instead of monthly.

These days a lot of businesses are trying to build communities centered on their brands

as part of their customer experience.

Each Running Company location offers a free weekly running club open to all speeds, as

well as events throughout the year.

Salesforce has started putting on their annual Dreamforce -- a massive tech conference in

San Francisco, California meant to bring together over 200,000 users and enthusiasts.

So even though these two example businesses couldn’t be more different in the products

and services they offer, they actually have the same basic types of relationships.

Presumably, they decided on those relationships by carefully considering what they were capable

of and what would appeal to their customers.

Let’s do this ourselves in the Thought Bubble.

Ashlyn wants to start a traveling bike repair service.

She’s outfitted her own bike with a special cart that holds all her tools and unfolds

to be her repair station.

When people need her, they tweet their location, she confirms the appointment, and away she

zips!

Basically, Ashlyn’s value proposition is providing fast and efficient bike repair that

comes to the customer.

It’s simple, mobile, tech-savvy, and appeals to a target market of athletic, busy, techno-literate

cyclists aged 25-to-45.

For the first few months, her natural personal assistance relationship is keeping a lot of

cyclists happy and she thinks she’s building some great long-term relationships.

From chatting with her customers while she works, Ashlyn learns that many are looking

for new trails to try and fellow bikers to ride with.

She decides to build community by leading free evening rides around town and hosting

DIY clinics on how to do basic bike maintenance.

And she designs helmet stickers with her sporty logo.

It’s going great!

Well… sort of.

Turns out what customers actually wanted wasn’t a long-term relationship, but to be empowered

to fix their own bikes.

So her clinics are packed, but she’s not getting any tweets.

Not even a half-hearted chirp.

To keep pedaling forward, Ashlyn needs to let her customer relationships evolve.

She decides that for a smaller fee, she’ll show up and anyone who’s taken her class

can use her tools -- like her air pump or special bike wrenches -- to do basic maintenance.

So she’s cultivating a self-service relationship with her customers.

And now that she’s got them hooked, she could start charging a small fee for her classes

or evening group rides with a loyalty program where the 5th one is free.

Thanks, Thought Bubble!

There’s no right answer, but engaging in some human-centered thinking about what would

work -- or is working! -- for our customers can help us make sure we’re on the right

track.

Basically, our value proposition should never be far when we’re trying to build a business.

The bottom line is: begin as you mean to go on.

Plan how you’ll interact with your customers and get ready to react to feedback if you

find the relationship has evolved.

Next time, we’ll discuss all the ways you can let your customers know how amazing you

are, from social media to snail mail.

Thanks for watching Crash Course Business, which is sponsored by Google.

And thank you to Thought Cafe for the beautiful graphics.

If you want to help keep Crash Course free for everybody, forever, you can join our community

on Patreon.

And if you want to learn more about different social groups and relationships from a broader

perspective, check out this Crash Course Sociology video: