Welcome to this issue on the "Customer Relationships" building block of the business model canvas.

By the end of this issue, you will have a better understanding of:

• The importance of the "Customer Relationships" building block in the business model canvas

• The different types of customer relationships and their characteristics

• Real-life examples of each type of customer relationship

• How to apply these strategies in your own business

Estimated read time: 3 minutes

The building blocks of the business model canvas

1. Key Partnerships

2. Key Activities

3. Key Resources

4. Revenue Streams

5. Cost Structure

6. Value Proposition

7. Channels

8. Customer Relationships

9. Customer Segments

Types of Customer Relationships

• Transactional: This means there is no real relationship between the company and the customer. The company interacts with the customer on a transactional basis.

• Self-service: In this type of relationship, a company maintains no direct relationship with customers. It provides all the necessary means for customers to help themselves.

• Automated services: This type of relationship mixes a more sophisticated form of customer self-service with automated processes.

• Personal assistance: This relationship is based on human interaction. The customer can communicate with a real customer representative to get help during the sales process or after the purchase is complete.

• Communities: Companies can use user communities to facilitate connections between community members and better understand their customers.

• Long-term: This means a long-term and maybe even deep relationship is established between the company and the customer. The company interacts with the customer on a recurring basis.

• Co-creation: Some companies engage customers to assist with the design of new and innovative products, or solicit customers to create content for public consumption.

• Dedicated personal assistance: This relationship involves dedicating a customer representative specifically to an individual client. It represents the deepest and most intimate type of relationship and normally develops over a long period of time.

• Switching costs: This refers to the barriers or costs that a customer may face if they want to switch to a different company. Companies can use switching costs to create a stronger relationship with their customers, as it may be more difficult for the customer to switch to a competitor.

Real-Life Examples

Here are some real-life examples of companies using each of the customer relationship forms:

• Transactional: A kiosk at an airport typically has a transactional relationship with its customers, as there is no real interaction or relationship beyond the transaction itself.

• Self-service: Many fast food chains, such as McDonald's, use self-service kiosks for customers to place their orders. Customers can help themselves by using the kiosk to place their orders, pay, and pick up their food at the counter.

• Automated services: Amazon's personalized recommendations for products are an example of automated services. The website's algorithms use customer data to make personalized recommendations based on past purchases and browsing history.

• Personal assistance: A store with a customer service desk, where customers can go to ask questions or get help with their purchases, has a personal assistance relationship with its customers.

• Communities: GlaxoSmithKline launched a private online community when it introduced alli, a new prescription-free weight-loss product. The community allowed users to exchange knowledge and solve each other's problems and helped the company better understand the challenges faced by overweight adults.

• Long-term: A subscription-based service, such as a gym membership or a streaming service, typically has a long-term relationship with its customers. The company interacts with the customer on a recurring basis, as the customer continues to pay for the service over a longer period of time.

• Co-creation: LEGO Ideas is a platform that allows LEGO fans to submit their own ideas for new LEGO sets. If an idea is selected, the creator receives a percentage of the sales. This is an example of co-creation, as LEGO is engaging its customers to help create new products.

• Dedicated personal assistance: A private banker serving high-net-worth individuals would have a dedicated personal assistance relationship with their clients. The banker would be dedicated specifically to serving the needs of these individual clients and would maintain a deep, personal relationship with them over a long period of time.

• Switching costs: A mobile phone carrier that offers a contract with a discounted phone and a lower monthly fee for a certain number of months is creating switching costs for its customers. If a customer wants to switch to a different carrier before the contract is up, they may have to pay a fee to cancel the contract or buy out the remainder of the term. This can make it more difficult for the customer to switch to a competitor and helps the mobile carrier build a stronger relationship with its customers.

How I applied these

In one of my companies that provides project management training, we have implemented a variety of customer relationships to cater to the needs of our target customer segments. These include:

• Transactional: The training company offers single, one-time classes or workshops that are available for purchase online or in person. These classes have a transactional relationship with the customers, as there is no ongoing interaction or relationship beyond the transaction itself.

• Self-service: The training company has a range of online courses and resources available for customers to access and complete on their own. These resources include video tutorials, downloadable PDFs, and interactive quizzes.

• Automated services: The training company uses a learning management system (LMS) to deliver its online courses. The LMS tracks each student’s progress and provides personalized feedback and recommendations based on their performance. In the future, the company plans to further enhance its automated services to include personalized feedback in 2025.

• Personal assistance: The training company offers in-person coaching and consulting services, where customers can work one-on-one with a project management expert to get personalized help and guidance.

• Communities: The training company has created a private online community for its students and alumni to connect, share knowledge, and ask for help. This has been a valuable resource for its students and has helped the company build strong relationships with them.

• Long-term: The training company offers certification and other long-term training programs that require a commitment from the customer over a longer period. These programs include regular meetings or check-ins with a coach or mentor.

• Co-creation: The training company has already engaged in co-creation with its customers by working with B2B customers to design an HR program, which they then attended.

• Dedicated personal assistance: The training company offers a VIP package for its customers, which includes a dedicated project management coach or mentor who is available to provide personalized guidance and support throughout the duration of the program.

TLDR

In this issue of the business builder we:

• Discussed the importance of the "Customer Relationships" building block in the business model canvas.

• Explored the different types of customer relationships, from transactional to long-term, and provided real-life examples of each type.

• Gave tips and strategies for building strong customer relationships in your own business.

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- Luqman