Relationship-building Strategy 3: Increasing Termination Costs

A third way to build deeper exchange partner relationship commitment is to increase relationship termination costs—that is, ratcheting up the “price” one might pay for ending the alliance.  While this strategy must be deployed with sensitivity and caution, it can be an effective method for solidifying relationship bonds.

In any business relationship, there is a cost connected with ending the association.  Sometimes, the cost is near zero, while other times the cost can be quite high. 

For example, on the low side, consider the termination costs of switching toothpaste.  While some people may defend to the death their choice of brands, for most of us, there is relatively little pain or inconvenience in switching to another offering.  From a toothpaste manufacturer’s perspective, termination costs are very low.  There is relatively little pain Procter & Gamble can inflict on you should you decide to ditch your tube of Crest for the siren call of a competing brand. 

On the high termination cost side, consider Southwest Airlines (the “company plane” for many of us road warriors) and its association with Boeing.  Southwest’s entire fleet of aircraft is comprised of some variant of the Boeing 737.  Fleet standardization is a fundamental part of Southwest’s overall business strategy as having a single-model fleet allows them to keep costs low through uniform training, maintenance, operating procedures, etc.  Imagine the “termination costs” of switching airplane suppliers in Southwest Airline’s case.  At this point, it would be nigh impossible. 

Clearly, relationship termination costs can have a strong impact on relationship commitment (though not trust, particularly).  In business, termination costs are frequently contractual, but emotional and psychological termination costs are also very real and very powerful.

Termination Costs as a Strategy

Companies and salespeople should look for ways to increase the “pain” associated with a prospect buying from another vendor, or with a customer switching solutions.  We are NOT saying salespeople should invent ways to try to maliciously punish prospects for not buying or customers for leaving.  We have seen historically, on rare occasions, an angry salesperson attempt to seek petty retribution for losing a fair deal.  This is ridiculous behavior that should never be tolerated in any circumstance.  

Instead, salespeople should make sure: 1) the rules of engagement and disengagement are clearly defined for all parties involved, and 2) such clear value and problem resolution is delivered to the exchange partner that it would be uncomfortable for them to no longer have access to it. 

One way to achieve this is through contractual agreements—a formalized approach to termination cost management (part of the salesperson’s “rules of disengagement” responsibility).  Take your cell phone provider as an example.  If you read the fine print of the contract you’ve signed, you will see it allows you to terminate your service before the contract term expires.  However, you’ll also see there’s a hefty fee to pay if you do it.  Unless you’re really miffed at the provider, you’ll probably just keep the service until the contract expires because the termination costs are too high. 

On the flip side, formal contractual incentives may also be used to increase termination costs.  For instance, some companies offer discounts for first-time buyers, or enhanced customer support options that may only be available in exchange for a renewed or extended purchase agreement.  Even government buyers don’t like passing on “deals” when they can get them.  As such, there is a cost associated with passing up these special offers, even if it manifests itself in the form of an incentive. 

Outside of the contract, there are steps that can be taken to increase termination costs.  Go back to the previous section and think about the list of possible relationship benefits we all seek:  knowledge/expertise, future gain, mutual connection, network access, fame/notoriety.  If you have been really successful in building any of these elements with a prospect or partner, then the removable of these could carry with it a certain degree of pain—clearly a termination cost.  It is actually possible for a salesperson to serve as such a valuable source of positive benefits that the exchange partner would be negatively impacted by the loss of the personal connection.

A word of caution is in order here.  You should be very careful with the deployment of this particular strategy.  If a line is crossed and the customer perceives “coercion” is taking place, you’ll weaken the relationship, not strengthen it.  The exchange partner may put up with you as long as absolutely necessary, then drop you like a hot potato at the first opportunity.  No one likes to feel manipulated or forced into a corner.  Deployed gingerly, however, increasing termination costs can be a useful component of an overall relationship-building plan.

All the best,

Lorin

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Sales Relationship Building Strategy 2: Enhancing Relationship Benefits

In our previous post, we looked at the first strategy for building better sales relationships–leveraging shared values.  Our second strategy is to enhance our personal value to prospects or customers, otherwise known as “relationship benefits.”

Defining Relationship Benefits

This strategy entails focusing on creating clearly recognizable relationship benefits. Simply put, relationship benefits relate to the old “what’s in it for me” question in a business relationship.  While prospects and partners don’t want to feel you’re only hanging around for your own selfish personal gain, they don’t have any trouble desiring something from the relationship for themselves. 

Relationship benefits stem from a variety of areas.  Let’s place ourselves in the shoes of the prospect or partner and examine just a few of the more powerful ones:

Knowledge/expertise.  As a prospect, I might derive some benefit from a relationship with you if you bring some unique knowledge or expertise to the table that will make my life easier or make me look good to people important to me.

Future gain.  I might want to build a relationship with you if I can foresee some future role you might play in my life.  Perhaps someday I will hit you up for a job reference or you’ll reveal your secret fishing spot to me?

Mutual connection.  I might find it beneficial to develop a relationship with you if we share a mutual relationship (particularly one of some importance to me).  Since you’re best friends with my boss’ wife, it would behoove me to play nice.

Network access.  This is similar to the mutual connection benefit source, except you and I may not currently share a connection.  I might find it beneficial to have a relationship with you because I know you’re well-connected to others whose interests parallel mine.    

Fame or notoriety.  Sometimes it’s just cool to say you know someone due to their status or notoriety.  I might desire a relationship with you because you are a known success in your industry, you write a widely-read blog, or you just won an Oscar.

Strategies for Building Relationship Benefits

Examining closely each of the possible benefits above can give you clues on how to enhance prospect or partner relationship benefits.  These sources of relationship benefits rarely occur by themselves, but are instead typically interconnected.  In fact, the best strategy to employ as a salesperson is to create and leverage as many of these benefits as possible in tandem. 

Take, for example, your humble blog authors and our approach to building relationship benefits for our sales consulting business—Galain Solutions, Inc. 

Rick and I have extensive experience and success in leading government sales and marketing organizations which reinforces our story as offering solid knowledge/expertise.  We are publishing a book, are regular contributors to Sales & Marketing Management magazine online, and have received media attention because of our expertise.  This enhances our fame/notoriety.  Because of our experience, reputation and other efforts, we have developed a strong network of government sales professionals and government officials.  With a strong network comes a high likelihood of us sharing a mutual connection with our prospects, a regular occurrence for us (particularly in certain segments of the market in which we have deep experience).  Finally, considering all these elements together, it is reasonable for a prospect to conclude there might be some future gain associated with working closely with us through a consulting engagement (they’d be right).

By examining closely and building intentionally your own “levers” for enhancing relationship benefits, you’ll find prospects and customers looking to you as a valuable resource.  When this happens, prospects call you (no cold-calling), customers stay loyal, and referrals are made–all key elements to sales success.

Next time, we’ll look at another relationship-building strategy–increasing termination costs.  Until then, happy hunting.

All the best,

Lorin

For a FREE report entitled “Five Sales Rules to Break when Selling to the Government” email info@galainsolutions.com or visit http://www.galainsolutions.com.