Given that 80% of a company’s revenue comes from 20% of their customers, relationship capital is a topic that demands constant reappraisal. But, what is relationship capital and why do relationships matter? Why do we care about our personal and professional relationships? What is the actual value of relationships and how can it be measured?
- What is relationship capital?
- Why does relationship capital matter?
- How do you measure the value of a relationship?
- What does measuring relationships allow?
What is Relationship Capital?
Relationship Capital is an asset that is difficult to measure, but its importance is also easy to underestimate. It is made up of a company’s extended network of contacts and associations, including customers, partners, groups, suppliers…everyone that anyone in your team has a relationship with contributes to the value of relationship capital.
As you nurture these relationships the value grows. Similarly, allowing these relationships to fade makes the value go down.
Why does relationship capital matter?
Ultimately, relationship capital matters because progress is significantly affected by human-to-human interaction. We owe our personal and professional growth to those who we cross paths with.
Since the pandemic, businesses are having to reinvent how relationships are built and maintained. With the shift to a virtual world creating a new hybrid way of doing business, navigating these murky waters can be challenging. With webinar fatigue, remote work, and shifting priorities between home and work life, it’s difficult to maintain and grow relationships. But understanding the true value of relationships could shed some light and create clear waters ahead in navigating these changes.
This was the theme that brought us together with Consalia for an in-person event. We discussed how to navigate through the interconnection between account planning, account-based marketing, and sales strategy – and how these can be lead indicators for your relationship capital.
Why is relationship capital so important for key accounts?
Relationship capital is important for key accounts for two main reasons:
- Relational constraints caused by the COVID-19 pandemic
- Emerging science on how relationships are measured
Relational constraints caused by the COVID-19 pandemic
Measuring the value of relationships with key accounts has always been difficult, not to mention trying to put a value on the extent of their loyalty too. Add a pandemic into the mix, and teams lost one of their most valuable tools for building relationships: in-person interactions. This not only affected sales performance over time, but also required teams to be more agile and develop new ways to preserve their relationships. This impacted performance, but over time sales teams were required to be more agile and come up with new ideas to preserve their relationships.
A study by Garner identified that:
- 41% of Key Accounts have been affected by Covid, which has negatively impacted the bottom line.
- 53% of Key Customers have purchased less than a half of their suppliers’ total offerings in 2020
- 7% of Key Accounts consider their suppliers’ key account management as a business-growth focused advisor
Like any challenge there’s an opportunity, the effect on the relationship capital during the pandemic provided Consalia with the opportunity to develop a framework (S.P.A.C.E.) that looks at the customer stage over key events, like Covid-19.
Developed by Dr Philip Squire at Consalia, the S.P.A.C.E. framework can be used to help gauge where your customers are as they respond to a pandemic. From a C-level perspective, this framework can help review key account plans and re-work your account selling strategies to become more effective.
Once the S.P.A.C.E. framework is adopted as a business, it allows a business with a unique and compelling opportunity to show customers how they can also overcome this curve.
Emerging science on how relationships are measured
Dr Phillip Squire at Consalia defined the science of relationship capital as:
“…the process to capitalise the value of the client contracts & the network of people and organisations that represent employees’ clients, partners, suppliers. It is explained as the value created and maintained by nurturing and managing good relationships. It is therefore a predictor of current and future value of (key) accounts and as such can be measured.”
Phillip Squire, Consalia
How do you measure the value of a relationship?
Using a score to measure relationships is a detractor from the long-term relationship. It is arbitrary when done. We need qualitative and quantitative touchpoints, which happens to be the sweet spot that Consalia and Introhive found in partnering together.
Where Introhive looks at the relationship mapping and interactions (quantitative), Consalia looks at the values of salespeople using their Mindset survey (qualitative), which determines whether or not the individual possesses the 4 key sales mindsets that customers want to see when being sold to: Authenticity, Client-centricity, Proactive Creativity and Tactful Audacity.
Insightful Key Account Plans that ensure customers and prospects are front of mind with key contact influencers and decision-makers.
In this whitepaper, Dr. Ryan O’Sullivan, Introhive and Dr. Philip Squire, Consalia give you a deep down on How to measure Relationship Capitalisation.
At last, relationship capital requires considering variables that make the relationship work – the interactions, the agreements, the pipeline growth and…the people! All can be translated into data, but we don’t score our personal relationships, why would we do it professionally? Instead, businesses need to identify their qualitative and quantitative touchpoints to support and justify investment in their relationship-building activities; what’s the result? A clear understanding of the true value of relationships and the impact on revenue growth.
What does measuring relationships allow?
Insightful Key Account Plans that ensure customers and prospects are front of mind with key contact influencers and decision-makers.
Relationship capital requires a considerable amount of variables as the value of the client contracts and the network of people and organisations is a hard thing to measure. However, Introhive and Consalia have provided great insights and tools in how to identify qualitative and quantitative touch points to support and justify investment in relationship-building activities. Relationship mapping and the Mindset survey allow your business to ensure customers and prospects are front of mind with key contact influencers and decision-makes.
*Reminder* Relationship capital starts with self-perception and customer perspective.
Reach out to us if you are interested in hearing about specific case studies or running your own case study.
