Just don’t forget to ask about the dog

Speak to any broker about client relationships and you will probably hear phrases like “the client comes first” and “relationships are key” repeated in a mantra-like fashion. But what happens when that relationship turns into a friendship? And what happens if that friendship turns sour?

According to Dr Julie Robson from the business school at Bournemouth University and co-author of the report ‘Too close for comfort: The potential pitfalls of being too close in marketing relationships’, there has been too much emphasis on relationship building. “People have not really thought about what the downside could be.”

Robson believes that close relationships with clients can often be more trouble than they are worth. She argues that sometimes the time and money spent on cultivating a good business relationship can be disproportionate to the value the client brings to the business, and can lead to unnecessary social and financial costs, such as spending time with clients outside work and buying birthday cards and gifts.

“People don’t tend to think about the negative aspects because they are so focused on developing that relationship and securing that business,” she says.

In some cases, Robson argues, developing excessively close relationships stops brokers from coolly assessing the value of the contractual relationship.

“It reduces competition because business isn’t moving around as much,” Robson explains.

“That can be good and bad, but I think sometimes you should lose business because it is unprofitable.” She also points out that customers who are friends with their brokers may expect to be protected from any necesssary price rises.

Getting too close can also reduce innovation, Robson argues, as brokers are less likely to remodel existing contracts if they feel they have already forged a bond. “If the relationship isn’t as close, you will be trying to look at new ways to build on it,” she says.

Furthermore, close relationships can lead to unrealistic expectations on the part of the client. “There is a danger you cannot satisfy what the customer wants. Then they leave or the relationship is damaged in some way,” she says.

She points out that clients can often blur the boundary between what is expected from a business partner and from a friend. Her research revealed that one client routinely rang her broker asking for shopping advice, while another expected to be visited while in hospital.

Failure to meet such expectations can lead to a “tipping point” where the relationship falls apart and the client becomes more price-sensitive. Robson’s research reveals that one broker lost business after a client rang him on a busy day expecting him to commiserate on the death of his dog. When the broker asked if he could call back, the customer became angry, the relationship disintegrated and he took his business away when he was offered a better price elsewhere.

“This case is quite illuminating because the broker response was ‘I don’t insure the dog’,” she says. “But obviously the customer sees the broker as part of his life and someone he can depend on.”

She says that even if staff meet customers’ expectations, it still can have a negative effect on the business in the long term. Clients can become attached to particular members of staff; they then take that business with them when they move on. “There can be things in contracts to stop that happening, but clients do tend to follow individuals.”

So how can such trappings be avoided?

Robson believes that brokers should ensure that several staff have contact with each client. “Try to increase the number of contacts you have within a broker’s office and share the responsibility. Prevent that close relationship from developing and retain that customer if a member of staff leaves.”

She argues that brokers need to assess fully the value and worth of a business relationship.

“It is about being clear what the relationship involves and about segmenting your clients, looking at which ones you are prepared to invest a lot in, those that have the potential, and those that don’t.” In short, a healthy working relationship is one where the benefits are mutual.

“It is something you really need to have in your mind up front when you periodically review what you want to get out of the relationship and what you are prepared to give. It is about striking that balance.” IT