As the year comes to a close it is important to review the relationships that made your company successful in the past twelve months. Customers, vendors, and employees are all likely contributors to your achievements over the past year. As you think about the year that has passed, determine who the best customers, vendors, and employees are and think strategically about your relationships and goals moving forward to 2018. This is an excellent time to express appreciation, which will strengthen the relationship moving into the next year.
This Topic of the Month addresses key business relationships and strategies for building and strengthening customer relationships as well as relationships with employees – recognizing them for their contributions to your business over the past year and looking forward to growing these relationships in the upcoming year.
Review Key Business Relationships
Whether you have a marketing plan geared toward maintaining existing customers, or are reviewing your customers for the first time, the year-end process is essential for strengthening your current relationships and moving forward. Take a step back and look at each customer as a part of the whole picture and a different perspective may emerge.
To begin the review of customers, make a list of the top 10-20 customers by ranking each customer according to their contribution of revenue to the company. A more comprehensive approach to ranking customers based on long-term value can be conducted using the Recency, Frequency, and Monetary value (RFM) model that ranks customers not only by their monetary contribution but also how frequently and how recently they purchased your products or utilized your services.1 These customers should receive special acknowledgement for their contribution.
Showing appreciation to these customers enhances the relationship, and creates long-term value to your business. Maintaining a happy customer and reinforcing that relationship is far more cost effective than recruiting new business. This customer evaluation process also highlights the customers that have declined in revenue over the past year, which may be an indication of product issues or customer service problems requiring attention and resolution.
Part of every business relationship involves a cost. The end of the year is also a good time to assess each customer’s profitability, especially those that seem to be consuming a large portion of your time. The following actions can be considered:
- Evaluate the cost of acquiring new customers. Understanding the costs required to get another new customer puts the value of your existing customers into perspective. Too often existing customers may be taken for granted or are undervalued. Remember that existing customers are usually your best source of additional revenue.
- Calculate revenues and costs per customer. Be sure to include the costs of returned products and overhead costs in the evaluation. The key is to apply fully-loaded direct costs to the revenue from the customer. Customer profitability is critical in evaluating the importance of retention. Portfolios of customers who have been around for a number of years often include customers who are not profitable or marginally profitable.
- Include in the profit analysis the intangible costs. Such costs might include stress on you or your staff of dealing with a difficult customer or one with unreasonable demands. Consider how that time, energy and stress might be better spent recruiting new, more profitable customers and the likelihood of success.
Overall this needs to be a fairly aggressive exercise. Honest analysis and honest evaluations are required, combined with decisive actions. A proper customer evaluation will set the business up for budget finalization and 2018 marketing plans. This exercise also puts an emphasis on the company’s strategy for customer retention and development the upcoming year.
A key relationship often overlooked and underutilized is customers that frequently promote your business and bring in new business throughout the year. Some companies reward these ambassadors with discounts on products or services, or pay a referral fee. At year-end it is important to review your company’s ambassadors and recognize them for their contribution. A satisfied customer is an incredible “unpaid” marketing participant.
3. Vendors and Suppliers
Vendors and suppliers have an impact on how well you serve your customers and the profitability of your business. A consistent quality and timeliness of products and services from your vendors and suppliers can save both time and money. Make a list of the top 5-10 vendors and suppliers by ranking them according to the amount of business done throughout the year and level of service provided. Recognizing them shows appreciation for their services and strengthens long-term relationships.
4. Business Referral Source
Referral sources for your company could include local networking events, other companies that have agreed to promote your company and refer potential customers to use your products or services, or other strategic partners. When reviewing your company’s referral sources begin by making a list of your company’s top 5-10 sources by ranking them according to the amount of business referred in the past year.
Strategies for Building Customer Relationships
All of the relationships above come back to one thing – saying “Thank You.” It has been said that “Gratitude confirms relationships.” During the year, relationships are built on the golf course, at lunches, or at social gatherings. At the end of the year, strengthening that trusted relationship can be done simply through the following:
- Cards. Sending all your customers, vendors and suppliers an e-card with holiday wishes is a great way to recognize their contribution to your company’s success without spending a great deal of money. E-cards also allow you demonstrate an appreciation for “green” values. For the list of top customers, ambassadors, vendors, suppliers, and referral sources sending a postal delivered holiday card with each staff member’s signature is a great way to show that you took the time to express your appreciation for their business relationship. However, knowledge of the relationship will help in determining what would be most appreciated.
- Gifts. Another way to strengthen relationships with your top customers and business referral sources is to send a holiday gift. For some customers it may be appropriate to send a physical gift to their place of business. For others, a gift certificate is a great way to acknowledge their contribution and strengthen the relationship.
- Holiday Party/Open House. Inviting your key customers and referral sources to your place of business or an appropriate event venue is a great way to stay in touch with customers and allow for time to discuss the past year and enjoy food while socializing. While holiday parties are a great way to strengthen business relationships, limiting the consumption of alcohol is also important to ensure that everyone is remembered in the best light possible. In this regard, a two-hour holiday reception can be more effective than a longer party.
- Personal Meal. Most companies have a few top referral sources and customers that really contribute a great deal to the company’s success. Taking these few individuals out to lunch or dinner can be the best way to strengthen these relationships for the coming year. This also allows for an opportunity to discuss your company’s strategy for the upcoming year and how they might participate.
Strengthen Employee Relationships
One of the most important, if not the most important, business relationships are with your employees. Throughout the month of December there is often a rush to finish the year strong and schedule all the necessary business around employee holiday vacations and celebrations. It is important to remember to schedule sufficient time for employee performance reviews and to acknowledge their contribution to your company’s success in the past year.
Employee reviews should be conducted annually at a minimum. While quarterly feedback sessions are “best practice” and very helpful in staying ahead of emerging issues, the year-end review is a great tool to evaluate the strengths of each employee, set goals for the upcoming year and show appreciation for their effort during the current year. Following the employee review, the next step is choosing the best way to show each employee appreciation. While deciding how to reward your employees can be difficult, it need not be costly.
Strategies for Building Employee Relationships
Depending on the resources of the company, below are some ideas on how to show appreciation to your employees while sending the desired message.
- Cards. Giving each employee a holiday card with a personalized (hand written) “thank you” message is a great way to acknowledge their specific contribution in the past year. This helps to reinforce commitment to their work and builds the relationship to the business.
- Gifts. A small gift given to each employee is good way to say thank you without showing favoritism for some employees. It is important to send a consistent message.
- Bonus. In addition to an annual merit increase, end of year bonuses will go a long way to show employees that their hard work paid off and that the company values their contribution to its success. Bonuses should be based on company profitability as well as individual performance. It is important that employees understand that it is a performance-based bonus, and not a holiday gift.
- Party. An office holiday party may be just the thing that brings the team together. Throughout the year employees need a chance to socialize with their coworkers, and possibly their families, to build the office morale. While employees in a small business may interact closely with each other and management on a daily basis, a holiday lunch away from the office allows appreciation to be expressed and received in a different atmosphere.
- Time off/Scheduling. Allowing your employees to take time off during the holidays is a great way to acknowledge hard work and provide them an opportunity for relaxation and restoration prior to the New Year.
As 2017 draws to a close, in the midst of all the “busyness” of the holiday season and finishing the year strong, don’t forget to recognize and show your appreciation to the individuals – customers, vendors, employees and others – who made your company successful in the past twelve months. This is a critical step to positioning yourself to maximize your company’s success in 2018.
 Gianfagna, Jean. 7 Ways to Improve Your Marketing Strategy with RFM Analysis. 24 March 2011. http://www.gianfagnamarketing.com/blog/2011/03/24/7-ways-to-improve-your-marketing-strategy-with-rfm-analysis/
Articles for Further Reading
- Strengthen Business Relationships by Going Offline – This article highlights other ways to communicate with key business relationships without using the internet. http://www.writtenbysumer.com/blog/2011/11/strengthen-business-relationships-bygoing-offline/
8 Ways to Show Workplace Gratitude Without Spending a Dime. https://money.usnews.com/money/blogs/outside-voices-careers/articles/2017-11-22/8-ways-to-show-workplace-gratitude-without-spending-a-dime