Collaborative Versus Competitive 
Customer Relationships

By Lior Arussy

One of the challenge facing companies today is the trap of finding themselves in direct competition with their customers, fighting over the customer budget and its distribution. The customer and the company both target the same pot of gold and each fights for its rightful share. Customers want to spend the least amount for the product or service they seek, while companies seek to obtain the maximum price, hence, budget share, for the products or services they sell. Each intends to retain a majority of the pot and leave the other with the least amount necessary.

The pot of gold we are referring to is, of course, the customer’s money. In the current short-term, adversarial relationship, the customer is trying to retain most of his money and pay the minimum price necessary, while the company tries to charge as much as they can. This competitive situation locks companies and customers in a zero-sum game with a no-win resolution. The success of one side is the failure of the other. In most cases, both sides lose.

As much as companies refuse to admit and accept it, this is the nature of their current customer relationships:  a competitive struggle over price impacting the future level of trust, already shallow to non-existent.

In competitive relationships (the most prevalent type of relationship between customers and companies), the participants are adversaries - . Each protecting their own agenda at the expense of the other. Gain for one side means a loss for the other. Each side of the relationship has the preconceived notion that the other side wants to take advantage of them and is compelled to protect themselves from such an assault. These types of relationships are not prone to yielding longevity and commitment.  They are based on a one-time, casual interaction. No serious investment in the relationship is made, as repetitive experiences are not anticipated. And if they are, they are met on both sides with strong reluctance and with great reservations, ready for battle again.

The Collaborative Relationship: The good news is that there is another way to treat the relationship:  Rather as a collaborative, versus an adversarial and competitive, one. In a collaborative relationship, customers and companies are on the same side, seeing eye-to-eye on the value provided and price paid. They do not compete against each other; instead, each side takes the goodwill steps necessary to forge a stronger level of trust. Each side volunteers a bit from their stronghold to create a better relationship. Collaboration happens when both sides are convinced that the other side is not hostile, and has their best interest in mind.

Collaborative company/customer relationships are rare, but very profitable. They trust that the other side will do their best to delight, and treat them fairly. They are willing, rather than reluctant, participants. They look forward to the current, and future, interactions. They invest in the relationship expecting many delightful experiences. There is no battling over limited budgets and the customer is willing to pay a premium for the product. The company, meanwhile, generously provides more quality than expected. In collaborative relationship, it’s not just about understanding, but acting on that knowledge. Mutual investments are made in the relationship.

The customer’s interpretation of the commercial relationship is quite similar to the type of relationships they seek in their personal lives. Companies’ recognizing this and acting appropriately will unlock the potential of a collaborative relationship. Building this level of trust requires disciplined efforts across multiple dimensions of the relationship. These relationships have several dimensions, including:

  • Selective - Make the customer feel as if they are the only one you care about. Let them feel not like one-in-a million, but rather, one-of-a-kind.

  • Generous - Be generous with your products and services. This form of investment demonstrates your serious intentions for a long-term relationship.

  • Trustworthiness - Demonstrate to your customers that you trust them. Do not try to protect yourself to the point of insulting their integrity.

  • Mutual - Think about the relationship as mutual and allow the customer to contribute to the relationship. This mutuality should go beyond the money. Allow insight and feedback to be part of what shapes the relationship.

  • Passionate - Be ready to show passion. Loyalty is about emotions and you need to reciprocate. Deliver your experience through passionate people and you can create an amazing bond.

  • Privileged - Make the customer feel privileged to be in this relationship. Let them feel how special they are in the relationship.

  • Genuine - Are your experiences genuine or production line? The customers’ sensors are heightened due to previous disappointments. Make your relationships genuine and authentic.

  • Choice - Give your customer’s choice. Do not apply a one-size-fits-all or make decisions about what you think is good for them. Let them chose what they think is right. This demonstrates respect and allows you to maximize value.

  • Interactive - Instead of static experiences, think dynamically. The more the customer interacts with your experiences, the more personal they will become. Interactivity allows the customer to highlight their uniqueness and ownership of the experience.

  • Conversational - Talk to your customers. As with personal relationships, discussions are core to understanding and intimacy. Spend the time and develop dialogue mechanisms to build a true collaborative relationship.

Consider relationships like bank accounts. The more deposits you make, the more withdrawals you will be allowed. And in this bank, there is no permission for overdraft, although short-term loans may be made. Each dimension is a way to make deposits in the relationship account with the customer. The more you make, the better your account performs.

In any relationship, the selectivity dimension is critical. If everyone is allowed into the relationship, it becomes diluted and less attractive. The greater the number of participants, the lower the common denominator of the participants and the less the relationship can address specific needs, wishes, and expectations. Often companies, in the name of market share, develop relationships with many customers who inherently should not be their customers. These are people who will never appreciate the value proposition and will create constant friction. As such, they will constantly express this friction in the form of complaints requiring high maintenance. This high maintenance will come at the expense of the right customers.

A recent trial conducted by Progressive Insurance illustrates this concept of selectiveness. Progressive Insurance made an offer to automobile drivers for special computer chips to be inserted into their cars that measure their driving habits and behaviors. The chip records how far they go, their speed, and other factors. Those factors are then used to create a customized insurance policy based on the driver’s own patterns. Drivers have a choice of reviewing the chip results and accepting or declining an insurance policy based on the results. Although the jury is still out as to whether or not this trial will become an accepted practice, it clearly brings personalization and selectiveness to a new level. The driver is no longer part of a geography or age group, but rather treated as a completely, unique individual.

Being selective is about communicating to the customer that they are different and unique and part of an elite group. It is about dedicating more resources and attention to fewer relationships, rather than spreading yourself too thin with a few useless resources for too many customers.

Any one of the relationship dimensions above can demonstrate the intention of collaborative relationships over competitive relationships. In competitive relationships, companies and customers are locked into a single dimension of product and money exchange. Collaborative relationships are far richer as they encompass a multitude of dimensions like mutuality, interactivity, and selectivity. Recognizing, however, the nature of today’s relationships is an important step toward transforming them into collaborative relationships. Overcoming denial alone will go along way toward fixing the relationship and will help put it on the path of longevity and profitability.

Read other articles and learn more about Lior Arussy.

For permission to reprint or reuse this article, please contact Lior at [email protected].

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