Measures To Consider When Developing Business Relationships

It's true; you get more of what you measure; but what if you are measuring the wrong thing for developing business relationships. Knowing how to develop business relationships is important, only when you understand how to measure relationship performance the right way.

So-called "experts" mislead business organizations by asking them to measure useless factors like brand awareness, share of market, and time of exposure. These factors have little or no value to a growing business, but work wonders to justify expensive advertising programs.

If you want strong business relationships, which contribute to a profitable organization, then these critical measures help create results:

• Cost Per Contact (CPC) -- What are your base marketing costs? This could be item mailed, number of advertisement displays, or prospect contacted.
• Cost Per Response (CPR) -- What did it cost to get a single response? This could include number of unique visitors, number of in-bound calls, or general inquiries.
• Cost Per Lead (CPL) -- What does one qualified lead cost? This is the cost of a single qualified lead, completed web form, or returned reply card.
• Cost Per Sale (CPS) -- How much is spent for one sale? You base this measure on the number of sales per leads generated, considering all marketing costs.
• Profit per Sale (PPS) -- How much was a sale worth? This is the critical most important value, but you need to know your costs to determine this.

Measures CPC, CPR, and CPL are tuning factors, CPS and PPS are resultant figures. CPC, CPR, and CPL each influence CPS. CPS and margin each influence PPS. By far, PPS is the most important factor to consider when looking at relationship value.

For more on this topic read "Quantifying Customer Relationship Value" (Inside Strategic Relations; May 1, 2004), which provides two valuable tools that identify other measures of business relationships, plus a number of retention factors every successful business must consider.

Yes, other non-monetary factors should be considered when building business relationships, but never forget, you're a business and the purpose of business is to generate a profit for stakeholders. The touchy-feely side of business relationships is useless if your numbers aren't right.

Don't waste resources developing business relationships that don't have a measurable value to your organization. Business relationships isn't about making friends, it's about serving customers interests in an efficient and profitable manner. And, that's the bottom-line!