To build relationships, it is necessary to first achieve this so that trust and credibility can be built, and to demonstrate what can be expected on an ongoing basis. Enterprises offer promotions as an incentive to try products and / or services on a trial basis before making full commitment as customers.
To build a relationship, the customer has to become a new user of the product and / or service, or switch to another supplier. The new supplier needs to be persuasive. Decisions to adopt a new supplier are often made on sentiment, and then rationally justified. The new supplier may first acquire only part of the new customer’s business, and must earn the remainder over time. It is not uncommon for customers to trade with multiple suppliers to encourage competition, especially at a price, but also as a hedge if quality declines, or if outages occur.
Relations between the parties go through four stages of development:
- Emerging – Some know each other with test transactions (both financial and non-financial)
- Growth – increase in size and / or transaction volume
- Maturity – Fixed position: Fixed size and / or transaction volume
- Decline – decrease in size and / or transaction volume
Non-financial transactions include updating account information and determining service delivery options. However, they may also relate to non-economic events such as parties invitations, receptions and seminars, and referrals.
The migration path is not linear. Due to changing circumstances or lack of commitment, some emerging and developing relationships do not reach their full potential, while some mature and shrinking relationships revert to the developmental stage. It can take time to build a relationship, but it can cause immediate loss beyond repair if reliability is lost.
The strength of a relationship is based on the degree to which the parties want to engage with each other, and applies to both financial and non-financial transactions. The strength of the connection goes through four stages of connection, mainly during the emerging phase of development:
- Formation – getting to know each other
- Divergence – Different opinions, disagreements and doubts
- Convergence – Cohesion, Acceptance and Agreement
- Association – Collaborative or cooperative performance
However relationships can return to the deviation phase at any time.
Parties can be:
- External supplier and customer
- Individuals within the enterprise with an internal supplier and customer relationship
- In some other relationships where they have to work together, either external or internal to the enterprise
If either party or both are enterprises, the connection is always between individuals. Two individuals may join separately within the same enterprise. Differentiation involves a desire to help, or to go beyond the call of duty.
Relationships between non-competitors are either collaborative or cooperative. In both cases, there is a general purpose or value. In collaborative relationships, the parties are dependent on each other; In cooperative relationships, the parties are independent.
Team members should have collaborative relationships because they are dependent on each other. Organizational units within enterprises must have collaborative relationships because the individuals within them must serve for a common purpose – mission and vision. However, in highly political environments where stated and enacted values differ, relationships are competitive as individuals fight for position and status.
A general contractor / subcontractor relationship is collaborative because both parties have a common objective – completion of the project on budget and schedule. The relationship between a retail enterprise and its customers is cooperative. The retailer wants or wants to sell products and / or services and the customer wants to buy or want them. Therefore, there is a general purpose. However, as long as no other form of relationship exists, retail and customers are independent.
In a financial transaction, a supplier provides a product and / or service that the customer wants or wants with a certain level of expectation. A financial transaction is an offer of an item in exchange for cash or credit (or barter). Price is the exchange price presented by the seller; Quality is perceived by the customer. When offered and considered to be of approximately equal value, the relationship is likely to be durable over time. When the perceived value is higher than the offering, there is an advantage to the customer, but over time the relationship may not be sustainable because the value is being given away. When the perceived value is lower than that offered, the supplier has a price advantage. However, until the supplier can differentiate further, customers may believe that they are being exploited. The customer may be able to obtain better quality or lower prices elsewhere, and thus the relationship may not be sustainable.
Relationships often exist within certain tolerance levels for quality and price, and service levels can be differential. In general, lifestyle ventures vary depending on service as owners are willing to put in extra effort to personally exceed personal expectations with additional labor costs.
Customers will often test suppliers with a “teaser” transaction before a major financial outlay occurs, and before any other supplier is recommended. However, “word of mouth” referral is the best way to start a relationship.
Building relationships is an entrepreneurial (entrepreneurial, leadership and management) competency.