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Kenneth W. Keller: Taking the leap from ‘dating’

Inside Business

Posted: March 3, 2009 11:44 p.m.
Updated: March 4, 2009 4:30 a.m.
 
The first responsibility of an entrepreneur is to develop a business model that works. This means having a long-term relationship between the two parties (supplier and customer), multiple revenue streams and multiple product lines.

Most businesses "date" their customers. This describes a short term relationship; transactional in nature with no penalty for termination. It can end for many reasons or no reason at all. Either party just walks away.

The more successful businesses "marry" their clients. By taking the leap from "dating" to "marriage," the customer becomes a client. There is a big difference between the two. It's a gap as large as asking someone to go out with you to dinner for the first time Saturday night or planning a three week vacation in the summer of 2010 to celebrate 20 years together.

When the business and a client are married, both gain over the long term. Over time, trust is established and it grows, deepening as both partners in the relationship look out for the other. There is almost always a penalty for terminating the relationship.

Another way to demonstrate this concept is by using an example that can be related to. Since a majority of the economy is in services, let's use the mortgage broker to compare and contrast the daters versus those who marry.

Mortgage brokers don't always have the best reputations, especially of late. But a transactional broker is one who believes that you, the customer, will only make a single purchase and as a result, once that transaction is done, you'll never hear from them again.

These brokers search for the best deal not necessarily for their customers, then make every effort to convince the customer how good it is.

If the lender is offering the broker an incentive, this kind of broker sees that as an opportunity to make additional money quickly, regardless of the fact that the product being might not be right for the customer. These brokers are interested in closing the deal as quickly as possible, so that they can move on to the next customer. They are in a volume business, not so much interested in quality, certainly not interested in any type of relationship beyond the closing of the transaction when the money they earned will be received.

Contrast the transactional broker with one who is interested in building a relationship. This broker understands that making a purchase of this size could very well be the largest financial one in the life of their client and proceeds with caution, taking care to educate the client as to the steps in the process along with pitfalls that might be encountered. They are side by side with you in the purchase of this property, not some disinterested third party simply interested in making money as quickly as possible.

This kind of broker believes in delayed gratification, because it is more fitting to have the right financial product for the financing of the client's purchase than one motivated by lender incentives. This kind of broker pays careful attention to the details, making sure that the paperwork is correct. But the relationship doesn't end once the closing of the transaction takes place and the broker gets their money.

The broker who has married their clients works past the closing and into the future to evaluate the value of this significant purchase, working on an ongoing basis to maximize the value of this important asset. As a client, you hear from the broker regularly. This kind of broker doesn't call when they want to sell you something; they call you when you need to know something important that has implications. They are in contact with you because they are looking out for you over the long-term. This kind of broker is a trusted advisor, one you would refer without hesitation to others; one you would and do use yourself ongoing.

The relationship broker makes money from the relationship, but the money is earned by providing services over a period of years rather than over a period of weeks. This kind of broker realizes that it costs a lot more to find a new client (up to seven times more) than to keep an existing one happy and referring.

You don't have to be in the mortgage business to understand businesses with successful business models are less likely to be struggling today have satisfied clients who continue to refer suitable clients through good times and tough times, and are considered a trusted advisor to their clients.

What can you do to marry your clients? Maybe it is time to rethink your business from the ground up.

Kenneth Keller is president of Renaissance Executive Forums, which brings business owners together in facilitated peer advisory boards. His column represents his own views and not necessarily those of The Signal.

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