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Business is about generating economic events that result in financial

transactions. However, other than for occasional incidental events, a
relationship must exist between an enterprise and its customers for
financial transactions to occur because there are always competitors.
Relationships are based upon the effectiveness of specific individuals
within enterprises, whether in management, on the front line, or in
between. Relationships are built on the expectation that stated and
enacted values, and offered and perceived value will be the same.

To build a relationship, first it is necessary to give in order to receive so as

to build trust and credibility, and to demonstrate what can be expected on
an ongoing basis. Enterprises offer promotions as incentives to encourage
prospects to try out products and/or services on a trial basis before making
a full commitment as customers.

To form a relationship, a customer has to become a new user of a product

and/or service, or has to switch from another supplier. The new supplier
has to be persuasive. Decisions to adopt a new supplier are often made on
emotion, and then justified rationally. The new supplier may only receive
part of the new customer's business at first, and has to earn the rest over
time. It is not uncommon for customers to do business with several
suppliers to stimulate competition, especially on price, but also as a hedge
if quality degrades, or if outages occur.

Relationships between parties migrate through up to four stages of


● Emerging - getting know each other with a few test transactions (both
financial and non-financial)

● Growth - increases in size and/or volume of transactions

● Maturity - steady state: stable size and/or volume of transactions

● Declining - decreases in size and/or volume of transactions

Non-financial transactions include updating account information, and
determining service delivery options. However, they can also be related to
non-economic events such as invitations to parties, receptions, and
seminars, and referrals.

The migration path is not linear. Due to changing circumstances or lack of

commitment, some emerging and growth relationships do not reach their
full potential, whereas some mature and declining relationships migrate
back to the growth stage again. It can take time to build a relationship, but
it may be damaged beyond repair in an instant if credibility is lost.

The strength of a relationship is based upon the degree to which the parties
wish to connect with each other, and applies to both financial and non-
financial transactions. The strength of the relationship migrates through
four phases of connection, primarily during the emerging stage of

● Formation - getting to know each other

● Divergence - differing opinions, disagreement, and doubt

● Convergence - reconcilement, acceptance, and agreement

● Association - performing collaboratively or cooperatively

However the relationship can migrate to back to the divergence phase at

any time.

Parties can be:

● External suppliers and customers

● Individuals within the enterprise with an internal supplier and

customer relationship

● In some other relationship where they have to work together, either

external or internal to the enterprise

If either of the parties or both are enterprises, the connection is always

between individuals. Two individuals within the same enterprise can
connect differently. Differentiators include willingness to help, or going
beyond the call of duty.

Relationships between non-competitors are either collaborative or
cooperative. In both cases, there is a common purpose or value. In
collaborative relationships, the parties are dependent upon each other; in
cooperative relationships, the parties are independent.

Team members should have collaborative relationships because they are

dependent upon each other. Organizational units within enterprises should
have collaborative relationships because the individuals within them
should be working towards a common purpose - the mission and vision.
However, in highly political environments where stated and enacted
values differ, relationships tend to be competitive as individuals fight for
position and status.

A general contractor/subcontractor relationship is collaborative because

both parties have a common purpose - project completion on budget and
schedule. The relationship between a retail enterprise and its customers is
cooperative. The retailer wants or needs to sell products and/or services
and the customer wants or needs to purchase them. Hence, there is a
common purpose. However, unless any other form of relationship exists,
the retailer and the customer are independent.

In financial transactions, a supplier offers a product and/or service that a

customer wants or needs with a certain level of expectation. A financial
transaction is an offer of an item in exchange for cash or credit (or barter).
The price is the exchange value offered by the seller; quality is the value
perceived by the customer. When offered and perceived value equal
approximately, the relationship is likely to be sustainable over time. When
perceived value is higher than offered, the customer has an advantage, but
the relationship may not be sustainable over time because value is being
given away. When perceived value is lower than offered, the supplier has a
price advantage. However, unless the supplier can further differentiate, the
customer may believe that they are being taken advantage of. The
customer may be able to get better quality or lower price elsewhere, and
thus the relationship may not be sustainable.

Relationships often exist within certain tolerance levels for quality and
price, and service levels can be differentiators. In general, lifestyle
enterprises differentiate on the basis of service because owners are willing
to make the extra effort to exceed customer expectations personally with
no additional labor cost.

Customers will often test suppliers with "teaser" transactions before a
major financial outlay occurs, and before a supplier is recommended to
others. However, "word of mouth" referral is the best way to start a

Building relationships is an enterpriship (entrepreneurship, leadership, and

management) competency.

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About Nigel A.L Brooks...

Nigel A.L Brooks is a management consultant to entrepreneurs, business

enterprise owners, executives, and managers, and the enterprises they
serve. He specializes in developing the entrepreneurial, leadership, and
managerial competencies that build sustainable advantage from vision to
value. He is an author and a frequent speaker.

He obtained his professional experience as a partner at Andersen

Consulting (now Accenture, Ltd.), as a vice president at Booz Allen
Hamilton, Inc. (now Booz and Company), as a senior vice president at the
American Express Company, as president of Javazona Cafes, Inc., and as
president of The Business Leadership Development Corporation. He has
been a contributing editor for the Bank Administration Institute magazine,
and has served on boards of entrepreneurial networks. He was educated at
the University of Exeter, Devon, United Kingdom.

His clients are in the financial services, food services, high-tech,

manufacturing and distribution, pharmaceuticals, oil and gas, professional
services, retail and wholesale, transportation, and government industries.

He has experience in North and Latin America, Europe and Asia-Pacific.

About The Business Leadership Development Corporation (BLD)...

The Business Leadership Development Corporation is a professional

services firm that works with entrepreneurs, lifestyle business enterprise
owners, executives, and managers, and the enterprises they serve.

BLD develops entrepreneurial, leadership, and managerial competencies

that achieve performance excellence by building sustainable advantage
from vision to value through:

 Strategic Management Consulting

 Executive Coaching and Mentoring
 Professional Training via The Center For Business Leadership
Development (CBLD)
 Motivational Speaking

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