Monthly: May 2013

Bill Nichols

6 May 2013

Bill Nichols

Managing Velocity: When You Can’t Do Right for Wrong in Client Relationships

006 (May 2013)

Know the feeling?  Everything is going swimmingly with your ‘significant other’.  Then something flips.  At first you’re barely aware.   Your ‘five minutes late’ meets a surprising chill.  Next come monosyllabic replies to calls and texts.   Then a task not done properly prompts a rant.  Finally jokey remarks kindle major conflagration.

Baffled?  You’re watching relationship dynamics and the power of relationship velocity (‘RV’, direction and speed) as it accelerates.   It’s well founded in psychology and personal relationship studies. And it offers retention-focused agency managers a critical missing link.

Key new research (*) adds the RV measure to established understanding about the value of tracking client relationship levels (the ‘goodwill’ bank account).  In brief it means that inter-firm client-agency actions have no absolute value.  Speed and direction affect their impact.  Payback when clients have positive RV will far exceed the agency’s return when it is already sliding down the slippery slope.

This makes intuitive sense.  Personally flowers may be a happy bonus in good times but rarely a ‘get out of jail’ card.  In business, a sales tip off may score well in positive mode but an expensive client lunch is an unlikely salvation when the brown stuff is flying.

Where We Were

First what we already know.  As I’ve written extensively elsewhere e.g. (http://astrophel.co.uk/wp-content/uploads/2013/01/Making_Most_Loyalty_PSMG_January_2010.pdf), each client relationship is best understood in terms of it its own ‘goodwill’ bank account.  Keep that account positively in the black and you can foster many desirable outcomes. These range from exclusive preference/retention to public word-of-mouth promotion.   It will also allow you to survive a major failure without suffering account loss.

But once let it slip into the red? Then even the simplest error or issue can cause major problems.  Ultimately a parting of the ways.

This ‘bank’ model integrates two major streams of research.  The first confirms the critical role of commitment and trust in securing long-term business outcomes (account renewals, profitability, additional projects).   The second demonstrates that just like personal relationships, our inter-firm liaisons have a developmental cycle over time (honeymoon, growth, conflict etc.).

All fine and helpful.  But, for all that, the ‘goodwill’ bank account is a static concept.  The absolute level or stage of a relationship only helps so far.  We can check when we wish but we won’t necessarily see movement.

Tellingly firms that have worked with the goodwill bank-account tend to find most useful the early-warning indicators that I call ‘empowerment’.  These track, for example, a tendency to growing client micro-management vs. increasing freedom to get the job done.  They may catch the ‘turn of the tide’.

What’s To Do?  

So what’s going on?   According to the research, the power of trust weakens over time.  It may continue to increase but like an over-used drug without the same positive effects. It’s necessary but not sufficient to deliver continued relationship growth.

In personal terms, this is the ‘comfort zone’:  we take the ‘significant other’ for granted.  In account terms likewise. We tick the boxes, do the job (yes probably a good job) and issue the invoices!   In both cases we cease to work at and learn about the relationship.

So what to do?  Every top client-handler I know rightly highlights the importance of frequent client dialogue.  But it is depth and progress – as much as frequency – that really count.  They offset the weakening impact of trust.  To use the techno-speak, we need to recognise that our ‘bilateral communications capability’ actually creates a form of individual account IP.   Accumulated knowledge and established ways of exchanging information serve to create flexibility and adaptability.  They allow us to refresh.  To see growth and new opportunities on both sides. In short to sustain positive relationship velocity.

Sound frustrating? Too much like hard work?  The challenge for agency ceos is to make hard-worked retention just as sexy as winning the next new business pitch. Otherwise ‘sudden chills’ will continue to translate into ‘major conflagrations’.   When you can’t seem to do right for wrong!

-ends-

(*) Palmatier, R., et al (2013), Journal of Marketing 77 (1) 13:30.