Explaining Customer Relationships

The Business Model Canvas is a powerful tool used by millions worldwide, but many struggle with the Customer Relationships building block.

In this blog post, we will break down the concept of Customer Relationships and delve into 12 different types. Understanding these relationships is crucial for acquiring new customers and retaining existing ones. Using Steve Blank's Get, Keep, and Grow framework, you'll discover practical strategies to attract, retain, and grow your customer base.

What Are Customer Relationships?

Customer Relationships describe the connection between a company and the people who buy and use its products. This interaction can vary widely depending on the nature of the business and its customers.

Let's explore 12 types of Customer Relationships that businesses can establish, along with their advantages and disadvantages.

12 types of Customer Relationships

1. Transactional

Transactional relationships involve minimal interaction, usually centered around one-time or infrequent purchases. They focus on efficiency and convenience, allowing customers to complete their purchases quickly without extensive engagement.

Example: Buying ice cream from a vending machine.

Imagine seeing a Ben & Jerry's vending machine on a hot day. You insert your money, select your favourite flavour, and out comes your ice cream. This quick, efficient transaction requires no interaction with a salesperson and provides immediate satisfaction.

Advantages: Efficiency, quick sales, low engagement required.

Disadvantages: Lack of depth, minimal customer loyalty.

2. Automated

Automated relationships use technology to provide services with minimal human intervention. These systems utilize algorithms to personalize user experiences, such as recommending movies based on viewing history, making interactions feel tailored without direct human contact.

Example: Netflix's algorithm-driven recommendations.

You log into Netflix, and the platform suggests movies based on what you've watched before. The recommendations feel personalized and save you time searching for new content. This automated system enhances your viewing experience without any direct human interaction.

Advantages: Scalable, personalized experiences, low human intervention.

Disadvantages: Limited human interaction, potential for impersonal service.

3. Self-Service

In self-service relationships, customers independently use services or systems to fulfill their needs. This model empowers customers to take control, from selecting products to completing transactions, which can reduce costs and increase convenience.

Example: IKEA's self-service furniture shopping.

At IKEA, you walk through the showroom, choose your furniture, and pick it up from the warehouse. You then assemble it at home. This self-service model allows you to shop and complete the process independently, providing convenience and control.

Explanation: Advantages: Cost-effective, empowers customers, scalable.

Disadvantages: Minimal human touch, potential for customer frustration if issues arise.

4. Personal Assistance

Personal assistance involves direct interaction between employees and customers, providing personalized support and services. This high-touch approach helps to foster strong customer loyalty by addressing specific needs and offering tailored solutions.

Example: Apple's Genius Bar for personalized tech support.

At an Apple store, you schedule an appointment at the Genius Bar for help with your device. An Apple employee provides one-on-one support, troubleshooting issues, and offering personalized advice. This direct interaction helps build loyalty and trust in Apple's customer service.

Advantages: High customer satisfaction, builds loyalty.

Disadvantages: Resource-intensive, higher operational costs.

5. Co-Creation

Co-creation engages customers in the creation of products or services. This relationship leverages customer creativity and feedback, allowing them to contribute to product development, which can lead to innovative solutions and higher customer satisfaction.

Example: LEGO Ideas platform for customer-submitted designs.

On the LEGO Ideas platform, a fan submits a design for a new LEGO set. Thousands of people vote for the design, and LEGO decides to produce it. The designer earns a percentage of the sales, and the community feels involved in the creation process, enhancing their connection to the brand.

Advantages: High customer engagement, leverages customer creativity.

Disadvantages: Can be time-consuming, may require significant management.

6. Community

Community relationships are built around shared interests and active interactions. These relationships foster a sense of belonging among customers, encouraging them to engage with each other and the brand through forums, events, and social media.

Example: Adobe's creative forums and community pages.

Adobe users join online forums to share their projects, ask for advice, and participate in challenges. This community fosters a supportive environment where members learn from each other and feel connected to Adobe, strengthening their loyalty to the brand.

Advantages: Builds loyalty, fosters engagement through shared interests.

Disadvantages: Requires active management, potential for negative interactions.

7. Fans

Fan relationships are driven by customers' enthusiasm and loyalty for a brand. Fans often participate in exclusive events and clubs, becoming advocates for the brand and promoting it within their communities.

Example: Harley-Davidson's fan clubs and exclusive events.

Harley-Davidson enthusiasts join fan clubs, attend exclusive rallies, and proudly display their Harley gear. These fans are deeply loyal and actively promote the brand to others, creating a strong community of brand advocates.

Advantages: Strong brand advocacy, high customer loyalty.

Disadvantages: Can be challenging to maintain enthusiasm, potential for exclusivity issues.

8. Dedicated Personal Assistance

This involves high-touch, individualized attention to cater to specific customer needs. It provides a personalized service that goes beyond standard support, offering bespoke solutions and assistance.

Example: American Express's concierge services for Platinum Card members.

As a Platinum Card member, you call the American Express concierge to book a last-minute flight and hotel for a business trip. The concierge handles all the details, providing a seamless and personalized experience that reinforces your loyalty to the service.

Advantages: Builds strong loyalty, personalized service.

Disadvantages: Highly resource-intensive, expensive to maintain.

9. Long-Term

Long-term relationships involve ongoing interactions aimed at sustained customer engagement. These relationships focus on providing continuous value through regular updates, support, and customization.

Example: Salesforce's subscription-based CRM software with continuous updates.

Your company subscribes to Salesforce for its CRM needs. Over the years, Salesforce provides regular updates, new features, and dedicated support, ensuring that your company continues to derive value from the service and remains a loyal customer.

Advantages: Sustained engagement, predictable revenue.

Disadvantages: Requires ongoing value delivery, potential for customer fatigue.

10. Switching Costs

Switching costs create barriers that prevent customers from changing providers. This relationship model relies on making it financially or logistically challenging for customers to switch to a competitor.

Example: T-Mobile's phone installment plans.

You buy a new smartphone through T-Mobile's installment plan, which requires you to stay with the carrier until the device is paid off. The potential impact on your credit score and the hassle of switching providers make you more likely to remain a T-Mobile customer.

Advantages: High customer retention, difficult for competitors to lure customers away.

Disadvantages: Can create customer resentment, limits flexibility.

11. Direct

Direct relationships involve direct interaction between the company and the customer without intermediaries. This model allows the company to maintain full control over the customer experience and foster stronger connections.

Example: Tesla's direct sales through its website and showrooms.

You buy a Tesla directly from their website and pick it up at a Tesla showroom. This direct relationship ensures you receive consistent information and a seamless purchasing experience, strengthening your connection to the brand.

Advantages: Full control over customer experience, builds strong relationships.

Disadvantages: Requires robust infrastructure, higher operational costs.

12. Indirect

Indirect relationships involve intermediaries such as distributors or retailers. This model expands market reach by leveraging partners' networks but may result in less direct control over the customer experience.

Example: Most other car companies.

Most car companies, like Ford or Toyota, sell their vehicles through a network of dealerships. These dealerships handle the sales process, provide customer service, and manage vehicle maintenance. While this allows the car companies to reach a wider audience, they have less control over how customers are treated and the consistency of the sales experience.

Advantages: Expands market reach, leverages partners' networks.

Disadvantages: Less control over customer experience, potential for diluted brand message.

This is a LinkedIn post I created on 10 types of Customer Relationship

Multiple Customer Relationships in Business

Customer relationships are always changing and growing. Most businesses use more than one type of relationship to meet different needs. So it’s definitely combine multiple customer relationships.

How Does It Work?

Diverse Customer Segments: Different customers want different things. A bank might give personal help to wealthy clients but offer self-service for others.

Multiple Channels: Companies connect with customers in many ways. A tech company might have automated online help, a community forum, and personal support.

Complementary Services: Combining relationships makes the experience better. An online store might suggest products automatically and offer chat support.

Example: Apple

• Personal Assistance: Genius Bar for tech support.
• Self-Service: Website for browsing and buying.
• Automated: App for tracking orders and recommendations.
• Using different customer relationships helps businesses meet various needs and create a better overall experience.

Getting, keeping and growing customer relationships

What is Get, Keep, Grow?

Get, Keep, Grow framework is a tool for managing customer relationships. It helps businesses attract new customers (Get), retain them (Keep), and encourage them to spend more or refer others (Grow).?

Steve Blank (the father of modern entrepreneurship education) invented Get, Keep, Grow and wrote about it in his book The Startup Owner's Manual.

Why is it Important?

This approach is crucial because it ensures a business isn't just focused on gaining new customers but also on keeping existing ones happy and increasing their value to the company.

How Does It Work?

Get: Attract new customers through marketing, social media, and referrals. The aim is to get people interested in your product or service.

Keep: Retain customers by providing excellent service, engaging with them regularly, and creating loyalty programs. The goal is to keep them satisfied and loyal.

Grow: Increase customer value by:

• Upselling: Offering customers a more expensive version or an upgrade of what they are already buying. For example, suggesting a premium version of a service they use.
• Cross-Selling: Recommending related products that complement their current purchase. For example, if a customer buys a phone, suggesting they also buy a case.
• Referrals: Encouraging customers to refer friends and family by offering incentives. Happy customers can bring in new customers, often with a bonus for both parties.

This framework helps businesses create a balanced strategy for sustainable growth.

Get, Keep, Grow Case Study: Monzo

Monzo, a digital bank from the UK, is an excellent example of a company that strategically built its customer relationships. Here's a detailed look at how Monzo used various strategies to attract, retain, and grow its customer base using the Get, Keep, and Grow framework.

Monzo’s ex-ceo, Tom Blomfield, wrote a detailed blog about how they grew the company in the early stages.

Get: Attracting Customers

Early Stages and PR Strategy: Monzo started in February 2015 with a bold mission to build a new bank. The company focused heavily on public relations to generate interest and create a buzz. Early press coverage in outlets like TechCrunch, The Guardian, and Bloomberg helped build hype even before the product was available to the public. Monzo's founders actively engaged with journalists, explaining their vision and building relationships, which paid off in extensive media coverage.

Scarcity and Exclusivity: In 2015, Monzo launched an “Alpha” version of its prepaid debit cards, capping the number of users at 3,000. The scarcity of these cards created a sense of exclusivity. Early adopters were excited to be part of something new and innovative, which helped spread the word. This exclusivity strategy was inspired by the early tactics used by Gmail, which made users feel special and eager to join.

Viral Growth Mechanics: In 2017, Monzo introduced “Golden Tickets,” a referral system that allowed existing users to invite friends to skip the waiting list and get a Monzo account immediately. This tactic leveraged the excitement and satisfaction of current users to drive new signups. About 40% of Monzo's new users in 2017 came from these referrals, significantly boosting their growth at no extra cost.

Keep: Retaining Customers

Community Engagement and Transparency: Monzo placed a strong emphasis on community and transparency. The company hosted over 100 in-person events in 2016, including hackathons and community meetups, to engage directly with users and gather feedback. Monzo also published a transparent product roadmap and regularly updated customers on the company's progress and challenges through blogs and social media. This openness built trust and loyalty among users.

Product-Driven Growth: Monzo focused on creating a genuinely great product with features like real-time spending notifications, easy bill splitting, and a user-friendly app interface. These features not only attracted new users but also kept existing customers engaged and satisfied. Monzo also introduced peer-to-peer payments, making it easier for users to transfer money to friends and family, further embedding the product into users' daily lives.

Grow: Expanding Customer Value

Crowdfunding and Customer Investment: Monzo ran a successful ￡1m crowdfunding campaign in early 2016, which sold out in 96 seconds. This campaign not only provided necessary funds but also turned customers into investors, deepening their commitment to the brand. The crowdfunding campaign was designed to maximize participation, capping individual investments and giving customers early access to invest before the general public.

Building a Strong Brand: Monzo's brand was built on the values of community and transparency. The company's commitment to these values was evident in its actions, from the way it handled the name change from "Mondo" to "Monzo" to its open communication with customers. This strong, authentic brand resonated with customers, making them proud to be associated with Monzo.

Upselling and Cross-Selling: Monzo grew customers by offering upgraded accounts and a referral program where both parties received financial incentives. By leveraging satisfied customers to bring in new ones, Monzo was able to expand its user base effectively. Upselling premium accounts with additional features like travel insurance and higher savings interest also helped increase the value extracted from existing customers.

Filling out the Customer Relationships building block on the Business Model Canvas

Customer relationships are always evolving, and most businesses use more than one type of relationship to meet different needs. To effectively fill out this section of the Business Model Canvas, you need to understand customer expectations, define strategies for getting, keeping, and growing customers, and summarise these on the canvas.

Step 1: Understand Customer Expectations

Start by researching what types of relationships your customers expect. Conduct surveys, interviews, and other market research to gather insights. For example, do your customers value personal assistance, self-service options, community engagement, or a mix of these?

Step 2: Define Strategies for Get, Keep, and Grow

When you zoom into the Customer Segment and Value Proposition Canvas building blocks of the Business Model Canvas with the Value Map and the Customer Profile. We can do something similar with Customer Relationships building block. Use a 3-box grid to map out specific strategies for each phase. Here are some tactics you can use in each phase. Use some or a combination of these.?

Get (attract new customers)

• Promotions: Offer exclusive deals, discounts, or limited-time offers.
• Referral Programs: Encourage current customers to refer friends and family with incentives.
• Targeted Advertising: Use social media ads, Google AdWords, and other targeted advertising methods.
• Content Marketing: Create valuable content like blog posts, videos, and infographics to attract potential customers.
• SEO: Optimize your website for search engines to increase organic traffic.
• Partnerships: Collaborate with other businesses to reach new audiences.

Keep (retain existing customers)

• Product Development: enhance and innovate offerings
• Customer Support: Provide excellent support through various channels like phone, email, and chat.
• Engagement: Regularly update customers with newsletters, blogs, and social media posts.
• Loyalty Programs: Implement programs that reward customers for repeat business, such as points systems or exclusive offers.
• Community Building: Host events, webinars, and forums where customers can connect and share experiences.
• Personalization: Tailor communications and offers based on customer preferences and behavior.
• Feedback Loops: Continuously collect and act on customer feedback to improve products and services.
• Collaboration: Involve customers in the product development process through co-creation and beta testing.
• Technology Integration: Leverage new technologies to enhance product features and capabilities.
• Exclusive Access: Provide access to exclusive products, services, or content for loyal customers.

Grow (increase customer value)

• Upselling: Encourage customers to purchase a premium version of your product or service.
• Cross-Selling: Recommend complementary products or services that enhance their purchase.
• Referral Incentives: Offer additional rewards for customers who bring in new customers.
• Product Bundling: Create bundles of products or services that provide more value together than separately.
• Subscription Models: Introduce or enhance subscription services to provide ongoing value and convenience.

Step 3: Summarise on the Business Model Canvas

In the Customer Relationships block, use a concise title that encapsulates your strategy, such as "Personal Assistance, Self-Service, and Community Engagement."?

Remember we are trying to use the Business Model Canvas to tell a story. The best stories only include the most important details. Don’t go into more detail than is necessary for the story you are telling.?

You will do a lot of preparatory work to get to this simple version but you don’t need to show all your workings.?

Otherwise we will cause people to experience “cognitive murder” as Alex Osterwalder (inventor of the Business Model Canvas) likes to call it. When you show too much information to someone and it overloads them.?

Let's keep things simple, visual and practical.

One tool you can use to zoom into the Customer Relationships building block on the Business Model Canvas is the Customer Connection Canvas Add-on by Hani W. Naguib.

The impact of Customer Relationships on the Business Model Canvas

What you decide to do with your customer relationships impacts the rest of the building blocks on the Business Model Canvas. All the building blocks are connected; you can't make a change to one without it affecting the others. Additionally, the type of customer relationship your customers want might not always be the best fit for your business. Finding a balance is crucial.

Questions to Consider

When defining your customer relationships, consider the following questions to ensure alignment with other building blocks:

Value Proposition: How do the customer relationships enhance or support your value proposition?

• Are they adding value to your customers' experience?
• Are they aligning with what makes your product or service unique?

Channels: How do your chosen customer relationships align with your distribution and communication channels?

• Are they compatible with the ways you reach and interact with your customers?
• Are they efficient in utilising your existing channels

Customer Segments: How well do the relationships match the needs and preferences of your different customer segments?

• Are you addressing the expectations of all significant customer groups?
• Are there segments that require different types of relationships?

Revenue Streams: How will these relationships impact your revenue?

• Will they lead to increased sales or customer retention?

Key Resources: What resources are necessary to establish and maintain these relationships?

• Do you have the necessary human, financial, and technological resources?

• Do you need to get intellectual property rights?
• Will you need to invest in new resources?

Key Activities: What activities are essential to support these relationships?

• Are there new activities you need to undertake?
• Can you leverage existing activities to support the relationships?

Key Partnerships: Will you need to form new partnerships to support these relationships?

• Are there partners who can help you manage these relationships effectively?
• Are existing partners capable of supporting the new or enhanced relationships?

Cost Structure: How will these relationships affect your costs?

• Are the costs sustainable in the long term?
• Can you optimize or reduce costs while maintaining effective relationships?

Watch this video next about 6 Types of Customer Relationship.

About the Author - Nick Himo

My name is Nick Himo. I’ve spent the last 10 years helping organisations understand and apply the Business Model Canvas. I’ve worked with companies like Google, American Express, Lego and Novo Nordisk. I was also fortunate enough to spend 3 years working alongside the inventor of the Business Model Canvas, Alex Osterwalder, at Strategyzer.

If you would like help to map out your Business Model Canvas, set up a strategy call with me.