Imagine you are selling a used car. Now, imagine your surprise that the person who wants to buy it is your brother. How would that be different from selling your vehicle to a stranger? Would you haggle as hard?
(Now, to be fair, if it was my brother Neil, my answer is yes.)
People act differently in various types of relationships and transactions. This distinction between these two types of situations is something that psychologists have studied, and the subject of our recent podcast. The way people interact with each other in transactions can apply to how people interact with firms.
For our discussion, we characterize relationships into two types, Relational and Transactional. There are advantages and disadvantages to each of these relationships from a firm’s perspective.
- Relational types are long-term and built on an emotional connection and brand loyalty, with a focus on value rather than price.
- Transactional relationships are one-offs and focused on rational comparators, with an emphasis on price and WIFM (what’s in it for me).
Consider the used car example. When you’re selling it to your brother, you recognize that this is one point in a much longer relationship. It feels as if there’s a higher level of responsibility. With family, you feel responsible if anything goes wrong. In my case, every time I saw them, I would worry something had gone wrong with the car. In other words, you treat family and close friends differently, and you feel more responsibility in that transaction.
However, the last person I sold a car to had a very different feel. While I wasn’t trying to stick it to them, I was far more concerned with what was good for me than for them.
We engage with most companies at a transactional level. You want to maximize your utility for the purchase, and they are looking to maximize their profit. Then, everybody walks away happy—and there’s nothing wrong with that.
There are advantages to these Transactional relationships. For example, your business might go under if you treat too many people like family and not enough like customers. However, there are advantages to Relational transactions, also.
First You Must Decide What You Want
One way of deciding what relationship style is most appropriate for you in your business is the long-term nature of the interaction. If it is something that requires customers to decide to go with you again and again, then a more relational perspective can help.
This relationship is the basis for most b2b organizations. Salespeople form long-term relationships with clients because every quarter, their customers have to buy their new supplies for the next three months. That relational transaction perspective can help when it comes time for the salespeople to hit quarter-end numbers.
The length of the interaction is one factor that can drive this Relational versus Transactional perspective. But it’s not the only one because there are relationships that you and I engage with and have for a long time that is still very transactional. I am speaking, of course, about internet service providers (ISP).
I have long and acrimonious relationships with my internet service providers (I have two, one in England and one in the States). After all this time, I still consider myself in a Transactional relationship with them. If I could get an advantage in any dimension using any other provider, I would do it in a heartbeat. In other words, I have no loyalty to the ISP, and they have none to me.
On the contrary, I have a Relational arrangement with other firms that I buy from far less frequently. My Mont Blanc pen, for example. I don’t buy one every month as I do with internet service, but when I need a fancy pen, I do not shop around. I buy a Mont Blanc.
It’s All About Human Relationships
So, with the understanding both types of relationships have their advantages, what should you do? Treat it like a human relationship. Start by answering the following two questions:
- What is it about other human beings that draw people towards them, that makes them want to form relationships with them?
- What are the business equivalents of that?
We talked about the danger of doing business with family because it leaves you with fewer options than working with strangers. In some ways, that is what you are choosing here. If you want a relationship with customers, there are things that you can’t do anymore. You are pursuing Relational instead of Transactional, so choose with your eyes open.
From a business perspective (and to be clear), creating a Relational interaction means investment. It means spending time and money. However, what you are gambling on is building this relationship in the long term.
For example, when I worked in telecom, I was in the business arena, and we used to negotiate long contracts with clients, usually around three years. The competition used to know that the deal was coming up for renewal and would go after our clients.
Now, we were never going to be the cheapest in the marketplace. Our offer and value proposition was based upon this Relational type of interaction. We were over and above with our service. However, our competition could be cheaper by sticking to the terms of the contract. However, we discovered our clients didn’t realize the benefit that they were gaining with us. As a result, customers would make their decision based on price, and we lost.
We changed our approach. We wrote down all the things we did for clients that were over and above. For example, if they called us after hours with a problem and we went to see them to troubleshoot, we didn’t charge for it. So, we began listing examples of this type of service and assigning a dollar amount to it. The list had a profound effect going forward in winning business. We were, in a sense, turning a Relational interaction into a Transactional one.
We had loads of customers say, “We didn’t realize you did all this! If only you’d told us that in the first place then we wouldn’t have ever left.” It was a lesson for us, and we started thinking about it from that perspective. Articulating all the Relational benefits as Transactional interactions converted many of those customers into more of a Relational type mindset with us.
Are You Speaking the Right Language?
At my company, we were dealing with large organizations. You might be, too, and if you aren’t working with big firms, you might be dealing with different people in an organization. When you are dealing with multiple groups or people within an organization, they may be speaking different decision languages. You have people who are into a Relational type and others Transactional. We learned to recognize that we were dealing with both parties.
Consider the following when you are interacting with your customers:
- Do you know what your customers’ mindset and perspective are?
- Are you speaking to them in the language that they understand?
- Can you talk to them from the perspective of what’s essential?
Speaking to your customer in the language of their decision is essential. Your customers are expressing a particular cognitive language to themselves as they’re making a decision. If you are talking a completely different style, you’re going to rely on them to do the translation—and they might not get it right.
There is No “Right” Relationship for Every Situation
We had a podcast recently about trust. We talked about the idea that trust is a nice, ethical, and moral thing to use as a basis for your interactions. It’s a good idea.
However, from a business perspective, there are instances where it is essential to have trust as a foundational component and times where it isn’t important at all. As a business leader, you need to decide what are the advantages and disadvantages of each of these.
There are instances where it makes more business sense not to strive for that relationship. Or where, from a customer’s perspective, it can feel creepy. My colleague received a handwritten thank you note on a plane during a flight thanking him for being part of their loyalty program. However, instead of feeling appreciated, he felt like it was weird. He admits that it might only be his problem, but regardless, he didn’t like it, so it had the opposite of the intended effect.
Pushing this Relational perspective onto unwilling customers can be to your detriment. You need to find that line where customers welcome forming that relationship with you without it seeming pushy or overbearing.
Relationships are tricky, whether it is with your brother who wants to buy your used car or with customers who view your relationship differently than you do. While there is no perfect type of relationship that works for all transactions, there are some fundamental principles that will carry you through. Most of all, you need to communicate in the language of your customer to reach an understanding, or you could end up being confused about why they took their business elsewhere.
To hear more about Relationship Types and How to Use Them in more detail, listen to the complete podcast here.
What customers say they want and what they really want are often different things. It is vital to know what drives value for your organization. Our Emotional Signature research can tell you where you are compared to other organizations and what to focus on to drive value for your customers. To learn more,please click here.
Hear the rest of the conversation on Relationship Types and How to Use Them on The Intuitive Customer Podcast. These informative podcasts are designed to expand on the psychological ideas behind understanding customer behavior. To listen in, please click here.
If you enjoyed this post, you might be interested in the following blogs and podcasts:
DO YOU USE THE RIGHT MEASURES FOR YOUR CX?
HOW FRICTION CAN BE GOOD FOR CUSTOMER EXPERIENCE
THE CRITICAL SKILLS THAT ALL CUSTOMER-FACING TEAMS MUST HAVE
Colin Shaw is the founder and CEO of Beyond Philosophy, one of the world’s leading Customer experience consultancy & training organizations. Colin is an international author of six bestselling books and an engaging keynote speaker.
Follow Colin Shaw on Twitter @ColinShaw_CX