How to Build Customer Relationships with the Business Model Canvas

Customer relationships are a key component of any successful business model, as they determine how you attract, retain and grow your customer base. In this article, we will explain what customer relationships are, why they are important, and how you can use the Business Model Canvas to design and improve them.

Key Takeaways

Customer relationships are the type and quality of interactions that you have with your customers throughout their journey with your product or service.

Customer relationships can have different goals and functions, such as customer acquisition, retention and growth.

Customer relationships can also have different characteristics, such as co-creation, community and personalization.

You can use the Business Model Canvas to design customer relationships by considering what type of relationships your customers expect from you, what type of relationships you want to establish with them, how these relationships fit with the rest of your business model and how costly they are to maintain.

You should choose customer relationships that match your value proposition, customer segments, channels and revenue streams, and experiment with different customer relationship strategies to optimize your business model.

What are Customer Relationships?

Customer relationships are the type and quality of interactions that you have with your customers throughout their journey with your product or service. They can range from personal and direct to automated and self-service, depending on your value proposition, customer segments, channels and revenue streams.

Customer relationships can have different goals and functions, such as:

Customer acquisition: how you persuade potential customers to choose your solution over competitors
Customer retention: how you keep existing customers satisfied and loyal to your brand
Customer growth: how you increase the value and frequency of purchases from existing customers

Customer relationships can also have different characteristics, such as:

Co-creation: how you involve customers in the development and improvement of your product or service
Community: how you foster a sense of belonging and engagement among your customers
Personalization: how you tailor your product or service to the specific needs and preferences of each customer

Why are Customer Relationships Important?

Customer relationships are important because they directly affect the customer experience, satisfaction, loyalty and advocacy of your brand. By building strong customer relationships, you can:

Increase customer lifetime value: the total revenue that you generate from a customer over their relationship with you
Reduce customer acquisition cost: the amount of money that you spend to acquire a new customer
Enhance customer referrals: the number of new customers that you gain through word-of-mouth recommendations from existing customers
Improve customer feedback: the quality and quantity of information that you receive from customers to improve your product or service
Strengthen customer differentiation: the degree to which your customers perceive your product or service as unique and superior to competitors

How to Use the Business Model Canvas to Design Customer Relationships?

The Business Model Canvas is a strategic tool that helps you visualize and communicate the key elements of your business model. It consists of nine building blocks that cover the value proposition, customer segments, channels, revenue streams, cost structure, key resources, key activities, key partnerships and customer relationships.

The customer relationships building block answers the question of how you get, keep and grow customers. To design effective customer relationships, you need to consider:

What type of relationships do your customers expect from you?
What type of relationships do you want to establish with your customers?
How do these relationships fit with the rest of your business model?
How costly are these relationships to maintain?

To answer these questions, you can use the following steps:

Identify your customer segments: who are your target customers and what are their needs, problems, goals and behaviors?
Define your value proposition: what value do you offer to each customer segment and how do you solve their problems or help them achieve their goals?
Choose your channels: how do you reach, communicate with and deliver value to each customer segment?
4. Determine your revenue streams: how do you generate income from each customer segment?
Design your customer relationships: what type and quality of interactions do you have with each customer segment throughout their journey with your product or service?
Evaluate your cost structure: what are the main costs involved in creating and delivering value to each customer segment?
Align your key resources, activities and partnerships: what are the main assets, processes and partners that enable you to create and deliver value to each customer segment?

Customer Relationship Examples

To illustrate how different types of customer relationships can be designed using the Business Model Canvas, let’s look at some examples:

Netflix

Netflix is a subscription-based online streaming service that offers a large variety of movies and TV shows. Netflix’s main customer segments are entertainment seekers who value convenience, choice and personalization. Netflix’s value proposition is to provide unlimited access to high-quality content that can be watched anytime, anywhere and on any device. Netflix’s main channels are its website and mobile app, where customers can browse, search and watch content. Netflix’s main revenue stream is the monthly subscription fee that customers pay based on their chosen plan. Netflix’s main customer relationship is self-service, meaning that customers can access the service without any human interaction. However, Netflix also uses personalization techniques such as recommendations, ratings and profiles to tailor the content to each customer’s preferences. Netflix’s main costs are content production and acquisition, technology development and maintenance, marketing and distribution. Netflix’s key resources are its content library, its streaming platform and its brand. Netflix’s key activities are content creation and licensing, platform development and improvement, data analysis and marketing. Netflix’s key partnerships are content providers, device manufacturers and internet service providers.

Starbucks

Starbucks is a global coffeehouse chain that offers a variety of coffee, tea and other beverages, as well as food and merchandise. Starbucks’s main customer segments are coffee lovers who value quality, convenience and community. Starbucks’s value proposition is to provide a premium coffee experience that can be customized to each customer’s taste and mood. Starbucks’s main channels are its physical stores, where customers can order, pay and enjoy their drinks and food. Starbucks’s main revenue streams are the sales of beverages, food and merchandise, as well as the fees from licensing and franchising. Starbucks’s main customer relationship is personal assistance, meaning that customers interact with friendly and knowledgeable baristas who prepare and serve their orders. However, Starbucks also uses co-creation techniques such as allowing customers to create their own drinks, as well as community building techniques such as offering free Wi-Fi, loyalty programs and social media engagement. Starbucks’s main costs are store operations, coffee beans and other ingredients, staff salaries and benefits, marketing and distribution. Starbucks’s key resources are its store network, its coffee beans and recipes, its staff and its brand. Starbucks’s key activities are store management, coffee roasting and brewing, staff training and development, marketing and innovation. Starbucks’s key partnerships are coffee farmers and suppliers, store landlords and franchisees, equipment manufacturers and distributors.

Tips

Choose customer relationships that match your value proposition, customer segments, channels and revenue streams.

Use different types of customer relationships for different customer segments or stages of the customer journey.

Experiment with different customer relationship strategies and measure their impact on your key metrics.

Customer Relationship BMC: A Statistical Report

Customer relationship is one of the key components of the business model canvas (BMC), a tool that helps entrepreneurs and managers to design, analyze and improve their business models. Customer relationship describes the type and quality of interaction that a company establishes with its customers, and how it influences their satisfaction, loyalty and profitability.

In this report, we will present some statistics about customer relationship BMC in the global market, based on data from various sources. We will also provide some examples of successful customer relationship strategies from different industries.

Customer Relationship Types and Motivations

According to the BMC framework, customer relationship can be classified into several types, depending on the nature and degree of interaction between the company and the customer. Some of the common types are:

Personal assistance

The company provides human support to the customer, either before, during or after the purchase. This can be done through face-to-face visits, phone calls, emails or online platforms. For example, a consultant who advises a client on how to use a software product, or a salesperson who helps a customer choose a product in a store.

Dedicated personal assistance

The company assigns a dedicated representative to each customer, who maintains a long-term relationship and provides personalized service. This is common in high-end or complex products or services, such as financial advisory, legal services or enterprise software.

Self-service

The company provides no direct human support to the customer, but enables them to access the product or service on their own, through automated processes or platforms. For example, a customer who buys a book from an online store, or a user who downloads an app from an app store.

Automated service

The company uses technology to provide personalized and automated service to the customer, based on their preferences and behavior. For example, a website that recommends products based on the customer’s browsing history, or a chatbot that answers common questions from customers.

Communities

The company facilitates the creation and maintenance of communities of customers who share common interests, values or needs, and who can interact with each other and provide mutual support. For example, a social media platform that connects users with similar hobbies, or a forum that allows users to exchange tips and feedback about a product or service.

Co-creation

The company involves the customer in the creation or improvement of the product or service, by soliciting their ideas, opinions or contributions. For example, a software company that invites users to test new features and provide feedback, or a clothing brand that allows customers to design their own clothes.

The choice of customer relationship type depends on several factors, such as the customer segment, the value proposition, the cost structure and the revenue streams of the business model. However, in general, customer relationship can be motivated by three main goals:

Customer acquisition: The company aims to attract new customers and persuade them to choose its product or service over other alternatives in the market. This can be done by offering incentives, discounts, free trials, referrals or other marketing strategies.
Customer retention: The company aims to keep existing customers and prevent them from switching to competitors or substitutes. This can be done by providing high-quality service, loyalty programs, rewards, feedback mechanisms or other retention strategies.
Customer expansion: The company aims to increase the value of existing customers by encouraging them to buy more frequently, more volume or more variety of products or services. This can be done by offering cross-selling, up-selling, bundling or other expansion strategies.

Customer Relationship Statistics

Customer relationship is not only important for creating value for customers, but also for creating value for the company. According to various studies and surveys, customer relationship has a significant impact on key business metrics such as customer satisfaction,
customer loyalty, customer lifetime value (CLV), customer acquisition cost (CAC), customer churn rate (CCR), revenue growth and profitability.

Here are some statistics that illustrate the importance and benefits of customer relationship:

According to Bain & Company , increasing customer retention rates by 5% can increase profits by 25% to 95%.
According to Harvard Business Review , acquiring a new customer is five to 25 times more expensive than retaining an existing one.
According to Gartner , 80% of future revenue will come from 20% of existing customers.
According to Temkin Group , loyal customers are five times as likely to repurchase, five times as likely to forgive,
seven times as likely to try a new offering and four times as likely to refer.
According to Zendesk , 74% of customers feel loyal to a brand after having just one positive experience with it.
According to Salesforce , 76% of customers expect companies to understand their needs and expectations.
According to HubSpot , 93% of customers are more likely to make repeat purchases with companies that offer excellent customer service.
According to American Express , 33% of customers will switch to a competitor after just one bad service experience.
According to PwC , 32% of customers will stop doing business with a brand they love after one bad experience.
According to Accenture , 52% of customers have switched providers in the past year due to poor customer service.

Customer Relationship Examples

To illustrate how customer relationship can be implemented in different industries and contexts, here are some examples of successful customer relationship strategies from various companies:

Amazon

The e-commerce giant is known for its customer-centric culture and its relentless focus on improving customer experience. Some of its customer relationship strategies include: offering free and fast shipping, providing a wide range of products and services, using artificial intelligence to personalize recommendations and offers, creating a loyal customer base with Amazon Prime, enabling customer reviews and ratings, providing easy returns and refunds, and offering 24/7 customer support.

Netflix

The streaming service is known for its innovative and disruptive business model that revolutionized the entertainment industry. Some of its customer relationship strategies include: offering a subscription-based model that allows unlimited access to content, using data and analytics to create original and tailored content, providing a user-friendly and intuitive interface, allowing multiple devices and profiles, enabling offline viewing, and providing flexible cancellation options.

Starbucks

The coffee chain is known for its premium and consistent quality of products and services. Some of its customer relationship strategies include: creating a welcoming and comfortable atmosphere in its stores, offering personalized and customized drinks, providing free Wi-Fi and mobile ordering, rewarding loyal customers with Starbucks Rewards, engaging customers with social media and community initiatives, and providing social and environmental responsibility.

Apple

The technology giant is known for its innovative and design-driven products and services. Some of its customer relationship strategies include: creating a loyal fan base with its brand identity and values, offering a seamless and integrated ecosystem of devices and software, providing high-quality and reliable products, enabling easy access to information and support with Apple Store and Genius Bar, engaging customers with events and launches, and fostering a culture of innovation and creativity.

Customer relationship is a vital component of the business model canvas that determines how a company interacts with its customers and how it creates value for them. Customer relationship can be classified into different types, depending on the nature and degree of interaction between the company and the customer. Customer relationship can be motivated by three main goals: customer acquisition, customer retention and customer expansion. Customer relationship has a significant impact on key business metrics such as customer satisfaction, customer loyalty, customer lifetime value, customer acquisition cost, customer churn rate, revenue growth and profitability. Customer relationship can be implemented in different ways in different industries and contexts, depending on the customer segment, the value proposition, the cost structure and the revenue streams of the business model.

Frequently Asked Questions:

Q1: What are customer relationships in the Business Model Canvas?

A: Customer relationships are the type and quality of interactions that you have with your customers throughout their journey with your product or service.

Q2: Why are customer relationships important for your business model?

A: Customer relationships are important because they directly affect the customer experience, satisfaction, loyalty and advocacy of your brand.

Q3: How can you design customer relationships using the Business Model Canvas?

A: You can design customer relationships by considering what type of relationships your customers expect from you, what type of relationships you want to establish with them, how these relationships fit with the rest of your business model and how costly they are to maintain.

References:

https://en.wikipedia.org/wiki/Special:BookSources/978-1-62825-664-2

https://hbr.org/2014/10/the-value-of-keeping-the-right-customers
https://hbr.org/2014/10/the-value-of-keeping-the-right-customers
https://www.gartner.com/en/sales/insights/b2b-buying-journey
https://experiencematters.blog/2018/06/19/report-customer-experience-drives-loyalty-for-companies-and-industries/
https://www.zendesk.com/blog/customer-service-and-lifetime-customer-value/
https://www.salesforce.com/research/customer-expectations/
https://blog.hubspot.com/service/customer-service-stats
https://about.americanexpress.com/all-news/news-details/2017/Global-Study-Shows-Online-Customers-Want-it-All-and-They-Want-it-Now/default.aspx
https://www.accenture.com/us-en/insights/strategy/cost-of-poor-customer-service