A transactional relationship with a customer is only focused on one thing: a sale. This mentality reduces customer relationships to nothing more than a one way extraction of value.
Transactional brands are focused only on generating a sale.
When shoppers thought of brands simply as something they do business with, this traditional way of conducting business was very effective. However, that has all changed. Now, customers expect a different type of relationship from the brands they shop with and demand to feel an emotional connection.
Emotional brands are focused on creating a relationship with customers that goes far beyond a purchase.
These emotional connections are all about value-add marketing. The idea behind value add marketing is giving customers something in addition to the sale itself. This could be anything from a social cause to a shared brand value, educational content, or even rewards.
Only brands that build a community of customers are able to grow sustainably, while transactional brands will cease to exist.
The problem is that brands get so caught up in making that first sale (the transaction) that they lose focus of what creating a customer (building a relationship) does for their business. Even though transactional businesses can do well over a short period of time, only brands that build a community with emotional relationships can grow sustainably.
The negative impact of transactional relationships
Transactional relationships have been the backbone of commerce for as long as most people can remember. With an emphasis on price, these relationships rarely extend beyond the completed transaction and train customers to expect cost-based priorities from the brands they shop with.
Transactional relationships emphasize price and rarely extend beyond a completed transaction.
This type of customer relationship was universally accepted as the way to do business. The birth of ecommerce led to a flood in marketplace competition which skyrocketed the costs of digital advertising. These costs pushed businesses to start fighting tooth and nail for every acquired customer, but with very poor results. The more they invested in acquisition marketing, the less they got back.
From there it was only a matter of time before discounts and undercutting became the primary focus for the majority of business growth strategies. This approach was not only an unsustainable strategy but also made offering the lowest price the most important part of every customer relationship.
Transactional relationships are expensive and unsustainable.
This unwavering focus on customer acquisition has led more brands to experience short-term growth and long-term failure -- all at the expense of a cheapened customer experience.
Transactional brands are already fading away
Even if your transactional business is currently experiencing positive growth, it won’t last.
If you can identify with even one characteristic of the following three examples, your brand is already at risk.
Daily deal sites
Daily deal sites are notorious for focusing on the “quick wins” of radical discounting by offering specific products at ridiculously low prices for only 24 to 36 hours. As a result, they’re constantly undercutting themselves in order to acquire customers who are ultimately only good for one purchase.
Daily deal sites rely on extreme discounting to acquire customers who rarely, if ever, make a second purchase.
When a customer’s experience with a brand is built solely on how little they need to spend in order to get what they want, it’s no surprise that they can’t develop any true connection with the brand. With no sense of loyalty influencing their decisions they won’t hesitate to shop somewhere else, making the money spent to acquire them a waste.
By resetting the acquisition process on a daily basis, daily deal sites are cheap for the customers using them, but expensive for the business itself.
Consumer packaged goods
CPGs are broadly defined as any products used on a daily purchase and, as a result, have a higher than average purchase frequency. This makes the industry extremely competitive. With higher market saturation brands tend to have low switching costs, giving customers the luxury of shopping around with knowledge that they can almost always find a lower price somewhere else.
Consumer packaged goods are highly competitive and make it easy for customers to shop with a competitor.
Placing an emphasis on cost-based features like availability and shipping leads to extremely weak customer relationships that are driven first and foremost by the brand’s ability to meet and exceed transactional demands. When these demands aren’t met customers have no issues jumping ship and shopping with someone else, putting the money spent to acquire them to waste.
Blue Apron is a meal delivery service known by many as one of the biggest failed IPOs. In spite of their early popularity, stock prices began to drop almost immediately after the company went public. Huge competitors like Amazon were extremely well positioned to outmatch them on price and service after announcing their deal to acquire Whole Foods. With one press release, Blue Apron was up against a competitor they never knew they had.
Blue Apron is currently reported to be losing money on 70% of their customers, pushing the break-even point further away with every newly acquired group of customers. With steadily declining revenue and growing customer acquisition costs, Blue Apron is only one of many brands whose transactional business decisions have led to more struggle than success.
Clearly something needs to change if you want your business to succeed, and the catalyst for that change is emotional relationships.
Emotional relationships are the future of commerce
More than ever, shoppers are looking to develop genuine relationships with the brands they love. They want to shop with brands who understand who they are and make an effort to connect with them. These desires play into your brand’s overall web experience and how customers feel as they interact with you at every stage in their customer journey.
When you address each of these desires with an exceptional customer experience, you begin to build real emotional connections with your customers. However, it doesn’t stop there. The true strength of emotional relationships lies in building a brand community. Nothing is stronger than a group of people united by a common vision, and your brand has the power to become the idea that draws people together.
Communities extend relationships beyond simply making a purchase and let customers know that they belong as part of your brand experience.
With a brand community, you create a place for customers to buy into what you’re doing as opposed to simply what you’re selling. Now, your brand isn’t just a store but rather an idea that they can identify and connect with beyond the process of completing a purchase.
Why brand communities work:
- They create strong emotional connections between your brand your customers
- Customers see themselves as part of your brand experience and want to actively remain a part of it
- They transform your brand into something customers want to incorporate into their everyday lives
Gymshark fosters a powerful brand community
Gymshark is one of the best examples of a brand who’s already succeeding with emotional relationships. Based in the UK, they’re one of the fastest-growing athletic apparel brands in the world, and the reason for their success is simple: they built a community shoppers want to be a part of.
A shared passion for fitness and fashion led the brand to focus on building their marketing strategy around a core group of fitness influencers and brand advocates who became champions for the brand. Through platforms like YouTube and Instagram, customers were introduced to each of the Gymshark influencers and quickly began to feel like they knew and understood them.
By sharing their lives with customers all over the world, Gymshark’s brand ambassadors were able to build emotional relationships between the customers they engaged with and the brand they represent.
These relationships continue to deepen through brand meetups and special events that bridge the gap between a customer’s online experience and their day-to-day lives.
"It's a customer experience second to none [that] bridges the gap between the digital and physical worlds and creates emotional customer experiences that can't be had online."
Daniel Knight (Gymshark Brand Manager) for ShopifyPlus
With this type of success, Gymshark has set themselves up for long-term success, but what about the brands who aren’t targeting niche markets? How do established businesses move away from transactional relationships and start building emotional experiences?
The answer lies in customer rewards.
Rewards are the key to unlocking emotional relationships
Brand communities used to be something that businesses hoped would happen on their own, but this way of thinking isn’t proactive and makes it easy for you to slide into transactional business habits.
You can intentionally start building emotional relationships with customer rewards. Whether you’re building a community from scratch or strengthening an existing one like Gymshark’s, rewards are the perfect basis for rallying customers around a common idea.
How Evy's Tree strengthened their community with rewards
Evy’s Tree is one of the best examples of this strategy at work. Founder Amy Miraflor was able to turn her passion for functional, fashionable clothing into a brand that people were excited get involved with. That’s because they recognized themselves in the products she made and the vision she represented.
This inspired the Evy’s Tree team to design a customer experience that not only put an emphasis on how customers experience their brand but also how they can find new ways to connect. Through special events, social media campaigns, and customer rewards, they created a desire to engage and stay engaged that strengthened their existing community in ways they couldn’t have imagined otherwise.
Why rewards work
Evy’s Tree is only one example of brands who are intentionally building community with rewards, and that’s because it works! Rewards allow you to put your brand’s focus on your best customer, building an experience around providing more ways to engage and get involved with your brand.
Rewards turn the focus towards your customers and allow you to build an experience that caters to their interests.
With a strong brand community, your customers’ association with your brand becomes part of their identity. When your brand is embedded in how they define themselves, it strengthens their decision to continue shopping with you and be associated with your brand. As a result, they’re encouraged to promote your brand to their friends, reducing acquisition costs and strengthening their relationship with your brand in the process.
Rewards become the bridge between your brand and your customers' identity by encouraging ongoing engagement that fits into their lifestyle.
By using rewards as a reason to choose you over your competitors, you start to establish a connection that transcends the first purchase and gives them a reason to come back time and again. This cycle of engagement is what truly breeds emotional relationships and will carry your brand above the raging war of acquisition into the future of lasting relationships.