"Transactional" Or Long-Term?
There’s a lot of
discussion about businesses taking “short-term” views of their interactions
with customers. Most of the time, it’s
portrayed as a “bad” thing, but it may be a deliberate strategy…
Businesses exist to make money by selling goods or services
to a chosen “target” customer group at a convenient time and place and at a
price that they are willing to pay. If
businesses wish to grow and prosper over the years, received wisdom is that
they should take a “long-term” view of how they go about their business.
Another, less appreciated approach, is that the way a
business goes about its day-to-day activities is governed by a set of “core
values” which guide the actions of all employees. Programmes such as “Customer First” are
necessarily short-term programmes which attempt to correct a failing of these
core values and institute new long-term ones.
“Transactional” generally means approaching on a transaction-by-transaction
basis with no consideration to the previous business received from/given to or to
the future potential value of a customer/vendor. Focus is solely on that particular deal. One might describe it as an “in it for the
minute” attitude where the overriding concern is maximising the value (or
minimising the cost) of the deal to the vendor OR buyer.
Transactional approaches occur:
- When long-term relationships don’t matter or the customer/vendor has no choice but to obtain/sell goods/services from/to a particular supplier.
- When people make high-value, one-off purchases/sales.
Examples of the first case are: government services, some utilities
or any situation in which there’s little/no competition or high barriers to
entry. Examples of the second could be the
purchase of a car or house. For a business,
they could be the purchase of new equipment.
Generally, if you want to be in business for the long run, a
transactional approach may not work for various reasons:
- Your competitors may be prepared to take a long-term view.
- Unhappy customers will gravitate to someone who’s ready to accommodate them.
- Your business’ reputation may suffer.
- It’s contrary to human nature (staff won’t be happy working in such an environment).
A transactional approach does not work in situations where relationships are key to the continued
health of a business. These may be
relationships with:
- Buyers/customers
- Suppliers/vendors
In short, if your business depends on repeat sales or purchases, both sides must feel they’re benefiting. At one extreme, some businesses (e.g. certain
supermarkets) adopt the approach of always providing the lowest possible price
and/or great service, relying on high sales volumes generated by repeat
customers to offset the low margins that they make on sales. At the other, high-end producers of luxury
goods rely on their brand name and quality along with excellent service to
justify higher margins to discerning customers who may purchase less
frequently.
In the end, it boils down to what you perceive as your business’ values, market, customer base and product.
I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Customer Care, Selling, Strategy
posted by William Martin @ 10:49
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