Strengthening Key Business Relationships

As the year comes to a close it is important to review the relationships that made your company successful in the past twelve months. Customers, vendors, and employees are likely contributors to your achievements over the past year.  As you think about the year that has passed, determine who the best customers, vendors, and employees are and think strategically about your relationship and goals moving forward. This is an excellent time to express appreciation, which will strengthen the relationship moving into the next year.

In this resource, the Giersch Group discusses the best way to build and strengthen your relationship with these individuals, recognizing them for past contributions to your business and looking forward to growing the relationship in the upcoming year.

Review Key Relationships

Customers

Whether you have a marketing plan geared toward maintaining existing customers or are reviewing your customers for the first time, the year-end process is essential for strengthening your relationships moving forward. Taking a step back and looking at each customer as a part of the whole picture will allow for a different perspective.

To begin the review of customers, make a list of the top 10-20 customers by ranking each customer according to their contribution of revenue to the company. A more comprehensive approach to ranking customers based on long-term value can be conducted using the Recency, Frequency, and Monetary value (RFM) model that ranks customers not only by their monetary contribution but also how frequently and how recently they purchased your products or utilized your services.^[1] These customers should receive special acknowledgment for their contribution. 

Showing appreciation to these customers enhances the relationship and creates lifetime value. Maintaining a happy customer is far more cost-effective than recruiting new business. This process can also reveal the customers that have declined in revenue when compared to the prior year. Part of every business relationship involves a cost.  The end of the year is also a good time to assess each customer’s profitability, especially those that seem to be consuming a large portion of your time. The following actions can be considered:

1. Evaluate the cost of acquiring new customers: understanding the costs required to get another new customer puts the value of your existing customers into perspective. Too often existing customers are undervalued.
2. Calculate revenues and costs per customer. Be sure to include the costs of returned products and overhead costs.  The key is to apply fully loaded direct costs to the revenue from the customer. Customer profitability is critical in evaluating the importance of retention.  Portfolios of customers who have been around for a number of years often include customers who are not profitable or marginally profitable. 
3. Add to the profit analysis the intangible costs such as stress on you or your staff of dealing with a difficult customer.
4. Consider how that time, energy and stress might be better spent recruiting new, more profitable customers and the likelihood of success.

Overall this needs to be a fairly aggressive exercise.  Honest analysis and honest evaluations are required, combined with decisive actions. A proper customer evaluation will set the business up for budget finalization and next month’s discussion on marketing.  This exercise puts an emphasis on the strategy for the upcoming year. 

Ambassadors

A key relationship that not all companies maximize is customers that frequently promote your business and bring in new business throughout the year. Some companies reward these ambassadors with discounts on products or services or pay a referral fee. At year-end it is important to review your company’s ambassadors and recognize them for their contribution. A satisfied customer is an incredible “unpaid” marketing participant. Apple enthusiasts are a great example of this.

Vendors and Suppliers

There are often articles during the holidays about tipping your postmaster for their work throughout the year.  The same goes for vendors and suppliers.  These sources influence how well you serve your customers. A consistent quality and timeliness of products and services from your vendors and suppliers can save time and money.  Make a list of the top 5-10 vendors and suppliers by ranking them according to the amount of business done throughout the year and level of service. Recognizing them shows appreciation for their services and builds on long-term relationships.

Business Referral Source

Referral sources for your company could include local networking events, other companies that have agreed to promote your company and refer potential customers to use your products or services, or other strategic partners. When reviewing your company’s referral sources begin by making a list of your company’s top 5-10 sources by ranking them according to the amount of business referred in the past year.

Strategies for Building Customer Relationships

All of the relationships above come back to one thing--saying “Thank You.”  It has been said that “Gratitude confirms relationships.”  During the year, relationships are built on the golf course, at lunches, or at social gatherings.  At the end of the year, strengthening that trusted relationship can be done simply through the following:

1. Cards: Sending all your customers, vendors and suppliers an e-card with holiday wishes is a great way to recognize their contribution to your company’s success without spending a great deal of money. E-cards also allow you demonstrate an appreciation for “green” values. For the list of top customers, ambassadors, vendors, suppliers, and referral sources sending a postal delivered holiday card with each staff member’s signature is a great way to show that you took the time to express your appreciation for their business relationship. However, knowledge of the relationship will help in determining what would be the most appreciated. 

2. Gifts: Another way to strengthen relationships with your top customers and business referral sources is to send a holiday gift. For some customers it may be appropriate to send a physical gift to their place of business. For others, a coupon code or gift certificate is a great way to acknowledge their contribution and strengthen the relationship.

3. Holiday Party/Open House: Inviting your key customers and referral sources to your place of business or an appropriate event venue is a great way to stay in touch with customers and allow for time to discuss the past year and enjoy food and socializing. While holiday parties are a great way to strengthen business relationships, limiting the consumption of alcohol is also important to ensure that everyone is remembered in the best light possible.

4. Personal Meal: Most companies have a few top referral sources and customers that really contribute a great deal to the company’s success. Taking these few individuals out to lunch or dinner can be the best way to strengthen these relationships for the coming year.  This also allows for an opportunity to discuss your company’s strategy for the upcoming year and how they might participate.

Strengthen Employee Relationships

Employee Performance Reviews

At year-end, there is often a rush to finish the year strong and schedule all the necessary business around employee holiday vacations and celebrations. It is important to remember to not rush past employee reviews and to acknowledge their contribution to your company’s success in the past year.

Employee reviews should be conducted annually at a minimum.  The year-end review is a great tool to evaluate the strengths of each employee, set goals for the upcoming year and show appreciation for their effort during the current year. Following the employee review, the next step is choosing the best way to show each employee appreciation. While deciding how to reward your employees can be difficult, it need not be costly.

Strategies for Building Employee Relationships

Depending on the resources of the company, below are some ideas on how to show appreciation to your employees while sending the desired message.

1. Card: Giving each employee a holiday card with a specific thank you message hand written is a great way to acknowledge their contribution in the past year. This gesture reinforces their work and builds the relationship to the business.
2. Gift: A small gift that each employee receives is good way to say thank you without showing favoritism for some employees. It is important to send a consistent message.
3. Bonus: End of year bonuses will go a long way to show employees that their hard work paid off and that the company values their contribution. Bonuses should be based on company profitability as well as individual performance. It is important that employees understand that it is a performance-based bonus, and not a holiday gift.
4. Party: An office holiday party may be just the thing that brings the team together. Throughout the year employees need a chance to socialize with their coworkers and possibly their families to build the office morale. While a small business may interact closely on a daily basis, even a holiday lunch away from the office allows appreciation to be expressed and received in a different atmosphere.
5. Time off/Scheduling: Allowing employees time off during the holidays is a great way to acknowledge hard work and provide them an opportunity for refreshment prior to the New Year.

Actions

1. Review top 10-20 clients.
2. Review top 5-10 vendors/suppliers.
3. Review employees.
4. Show your appreciation through desired media.

Articles for Further Reading

1. Strengthen Business Relationships by Going Offline – This article highlights other ways to communicate with key business relationships without using the internet. http://www.writtenbysumer.com/blog/2011/11/strengthen-business-relationships-by-going-offline/
2. Using Twitter to Strengthen Business Relationships – This article highlights five reasons to use twitter to communicate with key business relationships as well as tips for how to and how not to use Twitter: http://www.tripwiremagazine.com/2011/05/using-twitter-to-strengthen-business-relationships.html
3. 5 Most Effective Holiday Marketing Ideas for Your Online Business – This article discusses five ways to increase marketing effectiveness around the holidays. http://biznik.com/articles/5-most-effective-holiday-marketing-ideas-for-your-online-business

 [1] Gianfagna, Jean.  7 Ways to Improve Your Marketing Strategy with RFM Analysis.  24 March 2011. http://www.gianfagnamarketing.com/blog/2011/03/24/7-ways-to-improve-your-marketing-strategy-with-rfm-analysis/

For more information, please visit the Giersch Group at http://www.gierschgroup.com/ or contact us at prosper@gierschgroup.com