Towards a Customer Relationship Model

How much should a tech business invest in relationships?

Photo: Reena Kapoor ( Instagram: @1stardusty )

This is Part 7 in a blog series on Customer Relationship Marketing

In my previous post, I explored the three main factors that define the relationship equity between a tech company and its customers, namely, relationship quality, which measures depth; relationship composition, which measures power; and relationship coverage, which measures reach.

Building high-quality direct relationships, ensuring the right composition of such relationships, and achieving the coverage of such relationships in the market can be very expensive for a tech company. A good portion of the sales and marketing budget of a tech company can be directly attributed as an investment in customer relationship (CR) equity. However, we can not tell from these factors which of these are necessary to a specific company and how much resources should be invested in each of these areas.

So, the critical question is how much should a tech company invest in people relationships?

Need For A Customer Relationship (CR) Model

To address this question, we need to create a customer relationship model for a tech company. This model establishes the scope of relationships necessary to a tech company’s business model and only then determines the specific factor of relationship equity in which a company should invest for growth.

It is important to realize that the three factors alone or together can not tell us the scope of business relationships needed. By scope, we mean how much do relationships matter to a tech company’s business model? What is the intensity of relationships demanded by the tech company’s business model (relationship orientation) based on where the customers are in their journey with the tech company (relationship stage)?

Together, the relationship orientation and stage govern the scope of relationships warranted by a tech company. They describe the normative scope of equity a tech company should build in people relationships. Too little, and the business suffers; too much, and the effort is squandered.

First, let us look at a tech company’s relationship orientation — or intensity — towards business.

Establish Your Business Relationship Orientation

Each business has a different orientation towards customer relationships. Some need multiple high-touch, ongoing intense relationships within a customer account, while others need a few sporadic self-service, or low-touch, relationships or perhaps none at all. For a tech company, this relationship orientation — intensity — can be established based on where the company falls on two axes: customer lifetime value (LTV) and the nature of the tech offering.

The level of customer LTV limits how much is economically feasible for a company to invest in people, whereas the level of offering complexity determines how much is economically necessary to invest in people, in order to support technology evaluation, usage, and adoption among customers.

For each of these four quadrants, we can describe the orientation or intensity of relationship through an example persona taken from our personal lives.

“Expert Consultant”

• A tech company selling high-priced, complex solutions to large accounts fits in this group when the product requires expertise to deploy, pricing is complex, and it takes time to deliver business value.
• In such situations, the company needs to build a set of high-quality relationships in sales and customer service (depth) with the right composition (power) within an account with access to champions and influencers to achieve and sustain success.
• Usually, such relationships between the tech company and the customer span quarters and years and are hard to dislodge by others.
• Palantir is a good example today of such a company. Their data products require deep partnerships between customer engineering and privacy teams. Their relationship orientation is that of an “expert consultant.” Such product complexity demands an “expert consultant” relationship with customers.

• In their own words: Palantir Foundry offers a range of data protection functionalities that have been developed in close partnership with our customers over the years and now enable them and others to comply with complex laws, such as the EU GDPR and the California Consumer Privacy Act (CCPA).
• In our personal lives, an analogous relationship intensity is the one we have with our financial advisor, who knows more about us than our friends and neighbors.

“Service Coordinator”

• At the opposite end, tech companies with simple tech offerings and low customer LTV have the relationship orientation of a service coordinator. Such companies need to invest in minimal relationships, mostly to coordinate continued usage of products among the users.
• The key factor is to maintain relationship reach across as many customers as feasible through programmatic coordination.
• Most developer tools fit in this category. Each tool is used for a specific purpose by a core set of users, often a team, to build a software artifact or solve a software problem. Initially these tools may be free and often have low LTV.
• JFrog, a devops platform, is a recent example of this.
• While such tools can grow to be critical to a business (e.g. Stripe and Twilio), they begin with a developer community-focused, self-service relationship orientation offering great documentation, clear pricing, self-guided learning, and asynchronous support.

• In our personal lives, this is similar to our relationship intensity with a corner convenience store: self service and convenience trumps everything else.

“Specialist Fixer”

• This relationship orientation applies to tech companies with high complexity of their tech offerings but low customer LTV. Such companies need to invest in short, credible relationships to ensure rapid product deployments to achieve success with minimal need for ongoing engagement.
• The key factor is relationship depth to get things done right once with occasional specialist support if needed.
• Purpose-built specialist SaaS products in various complex categories like security and martech fit this characteristic. As the recent list of the top 27 marketing tech tools suggests, each tool category (e.g. web analytics, email optimisation, and social media management) has a specific purpose that requires an expert user to master the tool to solve a specific problem.
• Hubspot is an example of a marketing tool that offers ongoing value to campaign marketers but requires expertise to customize for complex situations.

• In our personal lives, this is similar to our relationship intensity with an auto services shop: we don’t need one often, but when we do, they better fix the problem.

“Concierge Guide”

• Tech companies with simple tech offerings but with high customer LTV have this relationship orientation. Such companies need to invest in a few powerful relationships to ensure that customers continue to value their product long after it is deployed and in use.
• The key factor is access to a few powerful relationships to ensure ongoing championing of the technology within the customer.
• Tech companies that offer AI and automation tools and applications fit this orientation. With multiple use cases, such products have a high LTV at a single account. UIPath and Automation Anywhere are companies in the fast-growing category of robotic process automation (RPA). They implement dozens of use cases in which rote steps of business operations (such as data entry) are replaced by programmable bots.

• Their relationship orientation is based on their power to direct their customers through different use cases. The recent S1 of UI-Path confirms this method: they start small with a simple use case and then expand in a high-value account with additional use cases.
• In our personal lives, this is similar to our relationship intensity with a hotel concierge: a few guided interactions can lead us to better experiences.

So, a tech company should establish the relationship orientation for their business early in the game. This sets the stage for how much to invest in relationships across all functions. Switching relationship intensity is very hard for a company. Once investments have been made in people and processes to be a “service coordinator,” then becoming an “expert consultant” may take years — and vice versa.

Map Your Relationship Stage to Customer Journey

The second aspect of relationship scope depends on where the tech company is in its journey with the customer. Clearly, as customers move from becoming aware of the tech product, to purchasing it, to using and extracting value from it, to becoming a satisfied advocate for it, the company increases investment in relationships commensurate with each stage. Typically, the relationship investment increases slowly, becoming the highest when the customer realises the value from the product.

As an interesting aside, this relationship investment by stage mirrors the Brand Story and the Hero’s Journey.

So, a tech company should map where they are in the customer journey. This may be done at a market, segment or account level. An early stage company with a need for high intensity relationships may map their journey for each of their top customer accounts. A late stage company with a need for low intensity relationships may map this for each of their market segments.

Why this matters is simple: the stage of the customer journey determines the business tactics needed to build the relationships. In one case, marketing investment in broad awareness may be needed to initiate a large number of low-intensity relationships, while in another case, investment in customer support teams may be more critical for a few high-intensity relationships.

Put Together Customer Relationship Model

We can put these pieces together to now answer the question: how much should a tech company invest in relationships? Your customer relationship model determines the scope of relationships for your business model, which in turn establishes the customer relationship equity needed based on the three critical factors of relationship depth, power, and reach.

Now that we have all the elements of a customer relationship model, we can begin to ask the following questions: How should a tech company audit its existing relationships using this model? How do different relationship models drive different growth pathways? Where and when do we invest in relationship equity to achieve growth? Ultimately, what drives all relationship models? I shall turn to these questions in my next post.

Key Takeaways

• The three factors of customer relationship equity — quality, composition and coverage — cannot tell us how much a business should invest in relationships. For that, we need to determine the scope of relationships necessary for a business.
• The scope is set by the intensity of relationships demanded by the tech company’s business model (relationship orientation) along with where the customers are in their journey with the tech company (relationship stage).
• Putting this together creates a customer relationship model that sets the scope of relationships for a specific business. This model establishes the investments needed to achieve the critical measures of relationship equity: depth, power, and reach.

References

• AI Multiple: Top 67 RPA Usecases/Applications/Examples [2021]
• Haije: Top 27 Tools for your Martech Stack in 2020
• Palantir: Business Model
• Palmatier and Sridhar: Marketing Strategy
• Stackshare: The Top 100+ Developer Tools 2019

This is Part 7 in a blog series on Customer Relationship Marketing

Part 1: Who is the Customer in Business Marketing?

Part 2: Key Customer Relationships for Tech Offerings

Part 3: Orchestrating Three Pathways into Business Customers

Part 4: The Hidden Purpose of Customer Relationships

Part 5: Pursuing Business Growth with APIs

Part 6: What is Customer Relationship Equity