We often hear that history repeats itself. Some recent examples include: '60s funk rifts in Daft Punk's newest album, '70s fashion of bright, fun patterns, "vintage" filters for photographs, and the return to locally sourced produce.
The business world is experiencing this as well. Social media and smartphones have allowed consumers to share their experiences faster than ever.
Buying decisions are no longer based on just price or quality, but on the buying experience and word-of-mouth recommendations.
Welcome to the return of the relationship economy.
The fall and rise of the relationship economy
The relationship economy could last be seen in the age of our grandparents, the Silent Generation (born between 1924-1942). As Gary Vaynerchuk discusses in his book, "The Thank You Economy," business then was done based on relationships.
You went to the same store every day because the shop owner knew your name, knew what you wanted and made you feel like family. The buying decisions then were made partly on price, partly on quality, but most importantly the relationship you had.
Business owners took immense pride in their work, and their success hinged upon their reputation. In these days, you knew your neighbors and communities were tightly knit groups, making word of mouth the main form of news. A bad experience could cost a business owner not just a single customer, but the entire community.
The end of World War II also signaled the decline of the relationship economy. From the turn of the century, advances in technology had paved the way for rapid industrialization. The wars required factories to create products cheaper and faster than ever before, and once-expensive products like cars became affordable.
Baby boomers and their families began to live further outside cities, and the growth of suburbs resulted in the gradual decline of community. Family-run businesses were replaced by strip malls and chain stores.
Consumer buying decisions became more focused on getting the cheapest or newest item. Business owners began to focus more on their bottom line than the customer experience.
The '80s and '90s could arguably be the lowest point for customer service as businesses cut the perks, like bag boys and gas attendants, to increase the bottom line. As Gen Xers battled the recession of the '90s, price and convenience became increasingly important in consumers' buying decisions, and the Internet made buying even easier.
People could now find the cheapest price before even leaving their homes, and organizations focused exclusively on offering the lowest price possible. If someone had a bad experience, there was no one to complain to and companies had no need to provide a better experience as long as they had the best price available.
Then, in the early 2000s, Web 2.0 began: social media. Online communities began to form, and people — especially millennials — began to share their experiences. Beyond simple comments, people could share pictures and videos, post comments or questions, and get responses in real time. Suddenly, a bad experience did not lead to losing one customer, but hundreds or thousands.
The classic example of the power of social media occurred in 2008 when the lead singer of Canadian band Sons of Maxwell had his guitar broken on a United Airlines flight. After nine months of attempting to be compensated for the damage, he wrote the parody song "United Breaks Guitars," which has since been viewed over 13 million times.
United Airline's stock dropped 10 percent in the four days following the release of the video and they have since revamped their customer service policy.
In their 2012 Retail Outlook, Deloitte emphasized how the Internet and social media have impacted consumer-buying decisions in what they call Store 3.0. The Internet has not only made finding the best price easier, but it has also allowed consumers to become better educated on products.
Consumers go to a retail location merely to pick up a product they have already researched and reviewed online through consumer reports and feedback from social media. You can read a more detailed synopsis here.
Once again, consumers are discussing their experiences and thoughts regarding an organization's product or service, influencing each other's buying decisions. Clearly we are back in the relationship economy, but what does this mean for your business?
Selling in the new relationship economy
As mentioned above, consumers are now more educated on products and have already searched out the best price. When they contact us now, they have specific questions or concerns.
In other words, we can no longer be traditional salespeople pushing a sale but rather help them in making the buying decision. To do this, we need to understand the Triangle of Consultative Selling.
The foundation of the consultative sale is building trust between you and the client. There are four components to building trust:
- Expertise: You need to demonstrate that you are a true expert on the product or service the client is looking to buy.
- Transparency and credibility: Clients want someone who is honest, dependable, and can deliver on promises.
- Compatibility and collaboration: We buy from those we like and finding common interests help in building that rapport.
- Be there in tough times: Understand your client’s needs and act in their best interests.
The next level of consultative selling is building the relationship. Relationships, much like effective communication, are built on mutual understanding and comfort between individuals.
Following the steps above will help in starting the relationship, but you need to continue to nurture it. Doing this simply requires you to keep going back to the four components of building trust: be transparent and work with your client to find win-win strategies and follow through on your promises.
At the same time, we need to build value for our clients. There is an expected level of value, which is what draws clients to your business to begin with. It could be a warranty, price or similar services/offers that separate you from your competition. Failure to deliver this expected value leads to the breakdown and potentially the termination of the relationship.
To attract new clients and create loyal brand ambassadors out of your existing clients, you need to deliver unexpected value. One way to do this is to deliver an exceptional customer-service experience that goes the extra mile, whether it's sending them a birthday card or offering a surprise discount.
Finally, we reach the point where we can help clients buy. The client trusts us, knows we are experts, they see value in what we offer and are now considering:
- Did they treat me like a person?
- Did they ask me nonconfrontational questions to learn more?
- Do they understand my concerns and tailor their product/service to my needs?
- Did they demonstrate initiative, creativity and sensitivity?
- Most importantly, do they care about my business or my wallet?
This is where you can now help them feel comfortable in making the buying decision. Answer their questions, offer solutions, give them value, admit when you do not know and find them an answer. Be their BRO — business relationship optimizer.
Follow these steps and you will be a successful sales person in today's relationship economy. No longer are we dealing with customers who are just looking at the dollar and cents of a transaction. They are now evaluating their buying decision based on their entire experience.
Be a BRO, give them the confidence and support they are looking for, and you will turn a single purchase into a long-term client.
