The Hidden Value of Relationships - Maintain

Company Of One: Why Staying Small Is the Next Big Thing for Business - Paul Jarvis 2019

The Hidden Value of Relationships
Maintain

CHRIS BROGAN, THE New York Times best-selling author and CEO of Owner Media Group, doesn’t believe in hustling. Instead, he’d rather build long-term relationships with people based on mutually shared interests.

Chris believes that smaller business owners (and companies of one) are sometimes embarrassed about selling, and have an aversion to it, because they believe that selling means pushing your products on others. What he and many others have found, though, is that it’s much easier to sell to people with whom you’ve already built a relationship because they know that you actually care about them personally and their betterment. In this kind of relationship, selling doesn’t have to be pushy. It’s based entirely on a cultivated friendship.

On the flip side, if your business is constantly selling and constantly pushing its wares, people instinctively start to avoid your business or stop responding to your emails. But if you use your platform to teach, empower, and make customers’ lives or businesses better (as we saw in Chapter 9), you are seen as a trusted adviser, not a shady or slick salesperson. This is why Chris promotes friends and people he finds who are doing interesting work, without being asked to. He creates relationships by constantly thinking: Who do I know who could benefit from connecting with this person? Then he facilitates those connections, either one-on-one or by sharing with his entire audience. Over time this unique approach creates a lot of goodwill with others and with his audience, which helps when Chris himself has something to pitch or to sell.

Chris feels that these kinds of relationships can help companies of one because consumers innately trust smaller businesses over large corporations, deservedly or not. There’s a huge difference, Chris says, between “How are you, Cleveland, Ohio?” and “How are you, Paul Jarvis?” Companies of one can use this personalized approach to their advantage by calling out customers by name or speaking to them directly. For example, if you have a mailing list of 1,000 people and most of them reply to your newsletters, you’ll be able to read and personally reply to each one. Large corporations just aren’t set up to do that kind of personal outreach.

Smaller businesses tend to want to act like larger companies, which is curious, since many large businesses these days are trying to act like smaller ones. Chris has noticed a trend, especially in the realm of food and beverages: consumer demand for better-quality food (at a higher price) has driven large brands to either acquire or act like smaller artisanal companies. For example, Anheuser-Busch owns at least ten craft beer companies. The office supply store Staples, seeing that people have become less and less likely to visit its retail locations, launched a campaign called “Summon Your Inner Pro,” which focuses instead on cultivating business-to-business relationships. When customers say that they want more personal experiences from a brand, what they really want is a more personal connection or relationship with the company, so as to be understood better by them.

Chris believes that small businesses need to start embracing and acting like small businesses. Companies of one can be proud to be companies of one and can use their personality to stand out and their smaller focus to niche down to the specific groups of customers they want to serve. They can know customers by name, by need, and by motivation. Nurturing a relationship with customers ultimately reduces the likelihood of their going elsewhere and also strengthens their belief that smaller can be better.

Where some businesses (of any size) get relationships wrong, Chris says, is in laying claim to ownership of their audience, using phrases like “our audience.” While this might seem a trivial point, it’s an important one, because no audience or consumer group is solely one business’s property. You can’t own an audience, because they support, buy from, and enjoy many other products from companies besides your own. They rarely think 24/7 just about your business.

Implied in community ownership is a company’s assumption that it’s okay to use that relationship to sell them more. That kind of mentality can easily turn an audience or community against a company. This is why Chris uses his own mailing list mostly just to connect with his audience, through weekly articles; (very) occasionally, he pitches them products he’s created. For the most part, though, he uses his list to connect with the community he serves with news, information, and valuable content. Building relationships by being helpful first enables an audience to benefit from the relationship, and that experience will lead them to feel a sense of real reciprocity later when you try to sell them something.

THE TRUE NORTH OF AUDIENCE-BUILDING

You can’t buy your way into real relationships any more than you can force people to buy your products. To create an audience of people who are keen to support your business by purchasing from you, a real relationship is required first—one that includes trust, humanity, and empathy.

Building a genuine audience around your business, product, or brand is not the same as growth-hacking. In fact, the overall concept of this entire book is antithetical to that practice.

Companies of one don’t growth-hack, because the true north of growth-hacking is, of course, growth. Growth to growth-hacking companies is the single metric used to gauge validity or success, and thinking of it as always beneficial (which, as we’ve learned from the countless stories and research studies reported in previous chapters, is untrue), they consider it not only useful but entirely necessary. Relationships for growth-hackers mostly revolve around offsetting churn, in that their goal is to build an audience as quickly as possible, then sell as much as possible to them until they relent, buy, or give up and leave. This “churn and burn” mentality can lead to faster short-term profits (or at least short-term audience growth), but it has nothing to do with relationship building—and it mostly involves paid acquisition. “Churn and burn” doesn’t create or foster personal connections, and it isn’t based on trust or shared interests. It’s simply a way to work toward a scale at which profit can happen for a growth-focused business.

Glide, a video chat app, launched at number one in the social networking section of Apple’s app store, mostly owing to the viral nature of its invitation system. By default, the app scrapes a user’s address book and spamvites via text message everyone in your contacts. (A spamvite is like an invitation, but one you didn’t knowingly send.) This happens by default when you start using Glide’s app; to keep the app from texting your entire contact list, you have to find the right setting to turn it off. After a lot of negative press and pushback, Glide said that it had changed its “growth strategy” away from spamviting customers’ entire address books, but in reality, it was still happening years later. Glide has since dropped hundreds of spots in the social networking section of Apple’s app store.

The Circle, another app that focused on growth-hacking, spam-blasted its customers’ contact lists in hopes of gaining faster growth. CEO Evan Reas later changed his view on growth-hacking after it repeatedly backfired for his company; he came to believe that a business should grow as the result of great customer experience, not just grow for the sake of growing while taking away from great customer experience. Andy Johns, head of Product at Wealthfront (formerly at Facebook, Twitter, and Quora), found that startups that focus aggressively on exponential growth above all else will expedite their path to failure, exponentially.

Des Traynor, founder of Intercom, a messaging platform for websites, says that the Faustian bargain of the internet is that you can swap credibility with an audience for attention at any time. And while this “bargain” can lead to a meteoric rise in popularity for your business, your brand, or your product, it can also lead to measuring the wrong metrics (those that don’t lead to profit) and, even worse, tricking customers—like accessing their address book to spamvite their friends and colleagues. This kind of growth, however exponential, at best doesn’t last and at worst backfires. Metrics produced only by growth aren’t always good indicators of a healthy, sustainable, profitable business, and they certainly can’t compete over the long haul with customer satisfaction from an empathetic company and a well-developed product.

On the flip side of vapid and ephemeral growth-hack relationship-building is a company like Kiva, a microlending service whose entire business plan is about fostering relationships, not to grow their audience overnight but to build connections between microlenders and microloan receivers. Kiva is in the business of inserting human relationships into our financial system by helping people in impoverished countries who require a bit of money to start or run a business. People like Lindiwe, a store owner in rural Zimbabwe, tell their story on the Kiva website, providing some information about themselves, where they are from, and what they’re trying to accomplish with the loan. Individuals who want to fund projects like Lindiwe’s can lend a portion of the money needed, or all of it, after reading their stories.

Over time, as Lindiwe makes a profit, she repays the loan. The current rate of repayment on Kiva is 97 percent. Their network of 1.6 million lenders and 2.5 million borrowers brings together hundreds of thousands of people who would probably never meet in real life. Connecting them on the Kiva platform has generated more than $1 billion in loans so far. The magic of Kiva is that it helps build relationships and connections that lead to these microloans by showcasing the stories and lives of people who need tiny loans to build something for themselves in a place that wouldn’t typically offer them loans to do so. Kiva is a relationship business whose outcome is microloans. Instead of churning and burning customer acquisition, they focus on the relationships between lenders and lendees.

A company of one finds its true north by working toward being better, not bigger, and the way to do that is to build long-term relationships with its audience and customers. Part of being better is better serving an audience who, if served well, will become customers and, if served well as customers, will become advocates. The difference between relationship companies and companies that focus solely on growth is that the former recognize that real relationships are built more slowly, in more meaningful ways, and without massive turnover. Sales aren’t asked for immediately; they’re brought up after relationships have developed a bit of trust. The idea is that in rewarding an audience who’s giving you their attention by giving your attention back to them, through listening and empathy, you’ll be rewarded with a sale (and most of the time several sales over the long term). Measuring profit or customer retention can lead to more sustainability because, as the adage goes, “What gets measured gets done.” So if you’re focusing on growth, growth is what will happen. But if you focus instead on relationships that turn into long-term customers and sales, that’s what will happen instead.

How does a company of one build genuine connections in order to navigate its true north? Unfortunately, a simple desire to be authentic won’t magically make us authentic, and consumers are smart enough to see our true intentions whether we want them to or not.

Chris Brogan believes that real connections are built when companies share a simple message, repeatedly, through their actions. Long before they ask for a sale, these companies articulate their message by sharing who they serve, and why. In our interview, Chris created a story on the spot that illustrates how this concept works for a business:

Imagine that your business sells fortune cookies with messages praising employees for their achievements. Your ideal customers would be HR people who are looking to reward employees for their hard work. A simple message that could be used on your website would be something along the lines of: “We’re here to catch you doing something good at work.” This shows the importance of praise at work and validates the product you sell (which is a good vehicle for that praise). It would make sense, as a marketing effort, to start a newsletter that showcases one great employee from your customer pool each week. This would show why praise is important and how it benefits companies that take it seriously, as well as provide an excellent example of what can be rewarded.

The newsletter isn’t directly pitching your fortune cookies each week, as no one would want to subscribe to a weekly product pitch. What it does is show the potential benefits of rewarding good work, featuring your product as one specific way that can be accomplished. This message shows that, as a business first and foremost, you want your customers to succeed and thrive, and that secondarily you’ve got a product that can help them do that. By collecting and talking to customers constantly, you’re building real personal connections with them and learning more about what they need in their business as it directly relates to what you’re selling. As a company of one, your true north here is showcasing how companies can benefit from rewarding good employees—which leads to sales of fortune cookies.

BANKING SOCIAL CAPITAL

Even a company of one whose true north isn’t growth requires three types of capital. The first is financial capital, which we learned in Chapter 11 should be as small as possible to start so that profit—achieving your MVPr—happens quickly. The second is human capital, which is the value that you (or your small team) bring to the business or group: this value takes the form of the skills you’ll need—or your willingness to learn them—to build something and be autonomous in running it. The third type of capital required is social capital. While financial and human capital are important, social capital tends to be what makes or breaks a business, as it’s the piece that relates to how a market or audience sees the value in what you’re offering.

The term “social capital” was used intermittently as early as the beginning of the 1900s, but it gained popularity in the 1990s. Lyda Judson Hanifan is credited with coining the term in 1916; later it made a resurgence as a way to describe relationships—especially online relationships—as a form of currency. When cashed in, social capital is what you can ask people to do that benefits you (like buying your product or having someone share what you wrote with others).

The premise of social capital as the term is used today is that our social networks indeed have value. The people in those networks do things for each other, such as buying products, sharing articles, and helping each other. Relationships are currency. So companies of one need to think of social capital like a bank account. You can only take out what you put in. If you’re always asking people to buy your products or doing nothing but promoting your business and its products on social media, your balance will hit zero or you may even be quickly overdrawn. People don’t want to buy something from someone who is constantly bothering them on social media with “Buy my stuff!” tweets and posts or newsletters extolling the virtues of their products every week. No matter how often you ask, you won’t make any sales, and no conversion tactics or growth-hacking will help.

Instead, you have to make deposits into your social capital account often and build up your balance well before you ask your audience to buy what you’re selling. Do this by being helpful and creating value for as many people in your audience as possible. At the core, your social capital depends on what you can provide for your audience that educates and builds trust, value, and reputation. Social capital is built on mutually beneficial relationships, not one-sided sales-pitch-fests.

Relationships from social networks—which can be anything where people connect, not just Twitter or LinkedIn—have immense value. That’s why many companies of one have mailing lists (a social network they’re in control of) that drive sales. Or why many companies of one engage in conversations on social media. Relationships are the basis for building the trust required for commerce.

Buffer, our friend from previous chapters, is a company that helps people manage their social media accounts. They write daily on their blog, sharing well-written and well-researched articles about social media, which is the type of content that their audience is intensely interested in. Buffer committed to providing value, for free, right from the start and has grown to more than 1.2 million users in two years, with more than 700,000 people reading their blog each month.

Chris Guillebeau, best-selling author and creator of the World Domination Summit, personally emailed the first 10,000 people on his mailing list to thank them for signing up. Sometimes doing something that doesn’t scale but is truly genuine is a great way to form strong connections with your audience. Through his authenticity and personal touch, Chris has sold more than 300,000 books and continues to sell out the WDS event each year.

There are several schools of thought about building social capital, but a popular theory put forth by Sam Milbrath of HootSuite is that you can begin by dividing your mass interactions with an audience into thirds. Sam suggests that one-third of your updates should be about your business or your content, one-third should be sharing content from others, and one-third should be personal interactions that build relationships with your audience.

Dr. Willy Bolander, assistant professor of marketing at Florida State University, and his colleague Dr. Cinthia Satornino, assistant professor of marketing at Northeastern University, found that as much as 26.6 percent of variance in sales performance comes from the social capital of a business. So building relationships by banking social capital leads directly to higher sales—sometimes as much as one-third higher. By sharing and teaching, as we’ve seen in previous chapters, you can establish yourself as a credible expert. And in helping people with your expertise, you can build social capital with an audience.

Social capital works because it fosters reciprocity. The more you share, provide real value and help, and connect with others, the more they’ll want to help you. Danielle LaPorte, from earlier in the book, doesn’t separate business relationships from her personal relationships. To her, they are the same, and she feels that all good business relationships have a strong spine of personal friendship, where both parties genuinely care about and want to help each other. These are relationships that last.

Having the empathy to learn what a consumer really wants from your company of one besides your product or service—whether it’s knowledge, education, or just help—can go a long way. Empathy takes a relationship from “What can I sell you?” to “How can I truly help you?” This is the way to bank social capital: by starting a long-term and mutually beneficial relationship.

DON’T FORGET THE PEOPLE WHO BUY FROM YOU

HighRise, a CRM (customer relationship management) company (and an offshoot business of our friends at Basecamp), does something most unusual when a person becomes a customer of their software—their support team films a personalized video for that new customer: addressing them by name, asking what help they specifically need, and giving them direct access to a human being at HighRise.

While providing these videos is definitely not a scalable system, it’s an absolutely amazing relationship-builder between the business and its customers. The videos aren’t professionally shot—most are taken from a shaky camera phone, with poor lighting—but they are always well received. So well received, in fact, that they tend to get shared on social media quite a bit, generating a lot of press for HighRise. Something as simple as a thirty-second video welcoming a customer to a product has real capacity to build goodwill, social capital, and genuine connection between a customer and a company.

McGill University feels so strongly that deep relationships are required with customers that they actually teach several courses and workshops on the subject. Matthew Lieberman, a professor of social cognitive neuroscience at UCLA, even goes so far as to suggest that Abraham Maslow had it quite wrong in his pyramidal hierarchy of needs when he specified physiological needs and the need for safety as humans’ most basic needs. Instead, in Lieberman’s estimation, belonging and connection, which Maslow defines as psychological needs, are our most basic need and should be at the bottom of the pyramid, because humans are wired to connect with each other.

Large businesses, however, in focusing on making everything quicker, often offer little real human interaction. Obviously, scalable systems are important, but only if human interaction is still at play. Too often, companies put all of their focus on turning their audience into paying customers and don’t spend enough time connecting with people once they become paying customers. For Chris Brogan, and for many other companies of one, the focus stays directly on customers—by properly onboarding them, communicating with them regularly, and making sure they’re getting value and use out of what he’s selling. He doesn’t want to make $100 off someone once; he wants to make thousands of dollars off each customer over the span of many years. This is why he focuses on customer relationships after each sale—to make sure customers are happy enough to come back again and again to buy more from him.

In their efforts to increase reach, audience, and customers, companies cannot forget about their existing customer base. Daiya Foods, a Canadian plant-based company that makes a dairy-free cheese alternative, has been popular with vegans—their core customer base—for many years. When the company was sold to the pharmaceutical giant Otsuka in the summer of 2017, its customers were outraged. By routinely testing products in animals, Otsuka, to Daiya’s customers, acts in direct opposition to what vegans stand for: cruelty-free living and not harming animals. The outrage wasn’t just at the consumer level either: also quickly boycotting the brand were businesses that use Daiya cheese in their commercial products—like the Toronto-based vegan pizzeria Apiecalypse Now. Going through twenty cases of Daiya per week, Apiecalypse Now placed the largest single orders for the “cheese” outside of grocery chains.

Daiya had felt that it could reach a larger customer base by selling itself to a multinational company, but the resulting sudden misalignment of values caused loyal and long-term customers to revolt. In chasing growth, Daiya ignored the main reason it had enjoyed success in the first place—by catering specifically to people who wanted to eat a plant-based diet. Petitions and boycotts quickly went up online, with thousands of ex-customers, feeling betrayed by the change in the core values on which Daiya had been founded, signing on within days of the announcement. Several retailers, like Portland’s Food Fight and Brooklyn’s Orchard Grocer, stopped selling Daiya immediately. Within hours, over 6,000 people signed a petition to boycott the brand.

Bear in mind that Daiya is not just an isolated incident. When Apple released its bug-filled maps software, CEO Tim Cook had to issue a public apology. When United Airlines yanked a customer from his paid-for seat, the internet exploded, and United stock plummeted by a market value of about $1 billion. When Nivea staged an ill-conceived “White Is Purity” campaign that was quickly embraced by white supremacy groups (not their target audience), the company saw a huge backlash from consumers who felt that the ad was overtly racist.

By not first considering the core group and relationship that your business serves, you can run a risk of making them feel like they don’t matter—or worse, making them feel like your company doesn’t care about them. At that point, they can gather their digital pitchforks and take to the streets of the internet with their outrage toward your business. And consumer outrage rarely stops at angry tweets—it causes serious business repercussions too.

Jim Dougherty, a lecturer at MIT’s Sloan School of Management, has identified several key points to building relationships with customers so that they’ll have an emotional and loyal stake in your business.

The first, Dougherty noted, is ensuring that customers like your business. That’s a fairly obvious point, but you can’t move forward in a relationship without this basic prerequisite. Going out of your way to be personal, friendly, and helpful encourages a potential customer or client to like your business more.

Second, respect must be present. Customers have to admire your work, what you offer, and how your company behaves. You build respect by doing things like following up, competently segmenting customers on your list (i.e., not pitching them products they’ve already purchased), and working to be the best at what you offer.

Next, customers need to admire your “whole person”—not just how you act when you’re trying to sell them something. What charities do you support? How do you act outside of work? With everyone sharing everything on social media, your entire life is available to anyone with access to Google. CEOs are sharing the news when their own babies are born (like Mark Zuckerberg or Marissa Mayer). Tim Cook, an incredibly private man, shared an essay about being gay and campaigns against anti-transgender laws. Customers admire businesses that feel and act similarly to them. Admiration develops when you do this well, and once you have their admiration, customers develop an interest in your success and accomplishments instead of a sense of resentment or jealousy.

Finally, it’s important that you maintain the relationship over time, even with customers who haven’t financially supported your business in a while with a purchase. Consistency and longevity are key. Dougherty has found that this is where most businesses fail with relationships—that is, they drop off because they can’t “find the time” when the business benefit seems to disappear. This is the exact time, however, when the relationship becomes most valuable, when a customer could be considering another purchase or heavily recommending a business to their peers or their own customers. Good relationships are the foundation to a successful business, especially for companies of one.

The return on investment from building connections with customers can manifest in several ways, like loyalty to your brand, vocal advocacy for your products, or even a reduction in churn. IBM did a study of more than 1,500 business leaders across sixty countries and thirty-three industries and found that the majority of these leaders (88 percent) viewed deeper customer relationships as the most important dimension of their business.

Building connections with customers comes down to happiness: if they’re happy, they’ll keep using your product or service. If they’re happy, they’ll tell others about your business. If they’re happy, they’ll stay loyal to your brand. There’s no need to overthink customer relationships when the main point should always be: what can you do as a company of one to make your customers happy?

ON NOT BEING A LONE WOLF

Remember, just because you might work for yourself doesn’t mean you have to work by yourself. Just as connections to an audience or paying customers are important, so too are relationships with your peers.

Angela Devlen, CEO of Wakefield Brunswick, understands the value of not being a lone wolf in business. Her company is able to do its job—consulting with large hospitals and health care facilities to help them plan for and recover from major disasters—by partnering with the top people in related fields in order to offer fuller services to its clients. These partners are not employees of Wakefield Brunswick, but they do represent her company when she brings them on for projects. It’s a tight-knit and trusted network of independent business owners who work together under a single brand for a client. And conversely, if they bring her into a project, she represents their brand in the project. Each person serves on a team that is brought together for a specific project, then disbanded until they’re required again. This requires no micromanaging, as these business owners are skilled at the service that’s required of them, so full autonomy, with the direction of a project lead, can and does happen.

Operating this way allows Angela to run her business out of a shared coworking office (which she recommends to anyone running a small company) and to have only a single, full-time employee. This leaves the administration of her business quite light, with minimal HR obligations, and allows her greater profits from much less overhead.

Wakefield Brunswick has trusted partners only because Angela has worked hard at developing relationships with the leaders in services related to her own business. It wouldn’t work for her if she hired just anyone off the street, as they wouldn’t have the requisite trust to represent her brand well without first being trained extensively, which takes a lot of time.

As a company of one, Wakefield Brunswick could be limited in the size and scope of the projects it takes on, but by building connections to other independent contractors, the company can pool its expertise and skills with these other businesses and take on much bigger contracts. Remember, Wakefield Brunswick only partners with other businesses when a project requires it; otherwise, they are free to work on whatever they want. Business at every level is built on who we know and who knows us.

Similarly, Ghostly Ferns, a “family of designers,” works on agency-sized projects while remaining a loose group of independent workers who all offer different design services, from illustration to branding to web application design. The team grows and shrinks as projects demand, and individual members also take on their own projects as needed. This flexibility has allowed them to work with big clients like Lincoln Motor Company, compete with and win bids from larger clients, and earn prestigious awards as well. Meg Lewis, the founder of Ghostly Ferns, believes that mixing their skills together, serving as a sounding board for each other, and generally supporting each other has led to a greater outcome than the sum of their individual skills could have achieved.

James Niehues has hand-painted more than 240 ski maps. If you’ve ever hit the slopes, you’ve probably seen his work. When Niehues was forty, he was unemployed but keenly interested in painting landscapes. So he reached out to Bill Brown, who had a monopoly on ski maps at the time, to see if he needed help. Turned out he did, and was actually about to retire. So after they did a few projects together and developed a deep connection, Brown passed all his commissions to Niehues—who has now made a living painting ski maps for thirty years.

Especially if you’re working for yourself, the tendency can be to believe and then act like your company of one is in this struggle all alone and that your business needs to be just you, with no outside interaction or involvement. But in connecting with peers and fostering relationships with them, as well as with other people in our industry and even similar industries, we gain access to new ideas and a way to build valuable connections that can lead to new customers—or to simply vent. We want to retain our autonomy and independence, sure, but we also need to run with a pack from time to time, as there’s strength in numbers.

BEGIN TO THINK ABOUT:

· How you could get to know your customers as real people with specific problems

· Where the true north of your business lies and what actions you could take to stay aligned with it

· How you could build relationship wealth by increasing your value and thus your social capital

· The ways in which you could empathize with your current customer base