Welcome to the relationship economy
The relationship with the fan or client was already the main focus in my previous two books. In the past 25 years, the economy has been strongly affected by the advent of new technologies, such as the internet and social media. This means that fans and clients can enjoy direct contact with artists, brands and organizations. Business models are drastically changing. Matthijs van de Peppel and Xavier van Leeuwe explained in ‘The relationship economy’ what this technology exactly means for companies, artists and brands: the development of a relationship with fans or clients is more important than ever before. Welcome to the relationship economy.
“How To Succeed in the Relationship Economy: Make Data Work for You, Empathise with Customers, Grow Valuable Relationships” is the full title of the Dutch book written by Van de Peppel and Van Leeuwe. The authors were working at the Dutch newspaper NRC as data intelligence analysts when they wrote the book. NRC was facing a reduction in their readership, just like many other traditional media. As one of the few daily newspapers, it knew how to grow its number of subscribers. This succeeded by making smart use of data — but also because a new philosophy was being used.
From flowers to music
This new philosophy does not only concern technological possibilities. They write: “We are increasingly busy and spend less time in traditional organisations, such as associations, churches, social organisations and even family. We are becoming more individualistic, speak less with the people close to us. A growing number of companies respond to this social change by offering subscriptions (Van Leeuwe/Van de Peppel, 2017).
Moreover: increasingly more products (from flowers via Bloomon to music via Spotify) are offered as subscriptions. Companies that offer subscriptions, generally grow quicker than other companies. “Why is the subscription model growing?”, ask the authors. “Because we want to feel like we are part of something.”
You can be part of something not only by taking out a subscription — as is the case with a newspaper — but also by following a brand, artist or organisation on social media or by signing up for newsletters. Consider your favourite festival, trousers or artist. You are happy to let the world know that you are associated with this brand or artist. This is expressed these days by embarking on a relationship in the digital domain.
Relationships more important
The central theme of the book is the shift from the transaction economy to the relationship economy. This shift stems from both data analysts becoming tired of focusing on the wrong objectives. The focus should no longer be on the number of subscribers, but on the relationships that NRC maintained with subscribers, suppliers and partners, among others. These relationships must be optimised, state Van de Peppel and Van Leeuwe.
What is an optimal relationship for a newspaper? It did not concern the optimal profit per relationship, but no relationship can be making a loss anymore — and earn at least one euro in two years’ time. This ensures that digital subscriptions are just as valuable for the newspaper as subscribers that receive the newspaper every day, for example.
In addition, the focus on an optimal relationship raises a totally new question: what is the optimal relationship for the client? After all, relationships work both ways. Even an Active listening course was used to find out what clients genuinely believed was important, by conducting interviews with them at their homes. These insights were then used to optimise the relationship with the client. The point of departure was still: it is the relationship with the client that matters — and not the circulation of the newspaper.
Choices can be painful
It sounds rather non-committal: put the client central. It has been said so many times that it has become a cliché. Companies that would not recognise a client if they were standing in front of them, claim to put the client first. Principles only have value if they cost something. As stand-up Dutch comedian Daniël Arends once joked: it ‘does not count’ if you say that you are attracted to someone’s personality if you are in love with someone ugly — that is obligatory!
NRC used a so-called holiday tenner: money that was collected to pause the newspaper during a holiday. This made the newspaper tens of thousands of euros, but was cancelled again when it appeared to be the biggest frustration of their clients. That is an ‘expensive’ principle. Pausing the paper was also made more pleasant: subscribers now get e-mails when the subscription has been paused or recommenced, checking whether the subscription is really received again, and is also valued by the clients. This means that they stay a subscriber for longer.
Proven approach
This allowed NRC to cease unnecessary expenditure, for example for test subscriptions. The number of cancellations dropped by 50 percent (!). The reviews about the book are full of praise: many wanted a sequel to the book, where it is explained in a practical way how insights can be used. Spoiler alert: you have the sequel in your hands.
Van de Peppel shared the approach with me during a presentation that he did for the Media Workgroup, where I also gave a presentation that afternoon. He illustrated the effect of the relationship economy perfectly.
The authors of the book give a number of clues for an optimal attitude in the relationship economy:
- It is important to know what clients value: talk to them;
- Use data to base decisions on facts;
- Build an analytic team for this that is efficient and effective;
- Ensure that data is always studied to achieve a certain objective (this is now mandatory due to the new General Data Protection Act);
- It is not about as much data as possible, but the right data. It often appears that you do not even need ‘big data’, but rather need to work in a smart way with the data that has already been collected;
- Delve into service design methods; these reveal the deeper feelings of clients;
- Dare to experiment; only by offering new options will client preferences become clear. This also allows less obvious conclusions to be made, which can help a business grow.
Conclusion
Previously, the emphasis used to be on supplying services or goods, organising events or publishing music. Those days are over. These days it concerns actively maintaining fan and client relationships.
The fan relationship has become the most important business economic capital of companies. The entire organisation needs to be set up for this. By investing in new technologies, people can improve this relationship and increase value. By delving into blockchain, bots and content, you can get started with this as an organisation, brand or artist.
In the book by Van de Peppel and Van Leeuwe we learn how you can maintain your position in this new economic reality. In fact, everything you will subsequently read is a substantial manual for developing, running and expanding a business in the digital ecosystem that exists thanks to the relationship economy. Now it is time to push through, and head towards your own, digital business model.
- This post is a pre-read of Part 1 — Chapter 3 of my new book ‘Digital Assets’ the translation of the Dutch publication ‘Digitaal Vermogen’.
- Also read the publication ‘EDM and the Digital Domain’
