Client relationships Featured

7:49am EDT June 28, 2006
The difference between a customer and a client may not be readily apparent to some business people. Failing to recognize the difference can result in lost sales and goodwill and have an otherwise adverse impact on a business — particularly for service providers such as banks, law firms and wealth management advisers.

Contemporary financial service providers have become specialists who operate within narrowly defined parameters. For example, commercial bankers often deal specifically with real estate companies whose expertise lies primarily in building suburban shopping malls. Or wealth management advisers may work strictly on succession planning with small business owners. These are the types of specialists who benefit the most from developing client — rather than customer — relationships.

Smart Business discussed customer versus client with Vince Laughlin of MB Financial Bank to find out how such distinctions foster improvement in a business’s bottom line and client relationships.

What is the difference between a client and a customer?
In its simplest terms, a customer relationship really implies a vendor relationship. Vendors, by definition, sell products mostly by competing to be a low-cost provider. On the other hand, a client relationship implies service, which means much more than being a low-cost provider. It involves the creation of some lasting intrinsic value within the context of the ‘seller/buyer’ relationship.

Businesses such as law firms would never think of the ‘seller/buyer’ relationship in any terms other than ‘client.’ Yet they too must deliver their services in a cost-competitive fashion.

While banks offer tangible products, the delivery of these products has become more specialized. Arguably, then, the greater value to the buyer is not merely product price; it is the ability of the banking specialist to recognize the buyer’s specific needs and match those needs to the most appropriate product. That is truly service and more representative of a client relationship than it is of a customer relationship. Nevertheless, the banking industry remains steadfast in its reference to the ‘seller/buyer’ relationship as a ‘customer’ relationship.

Can a business be on both sides of the relationship?
Yes. Banking is a great example. Banks offer products such as checking accounts and consumer loans. Therefore, they are clearly competing on a cost-competitive basis. But — especially on the commercial side of banking — bankers are providing their ‘buyers’ with more than just products.

Whether it is credit, capital markets products, treasury management products or anything else, commercial bankers and service providers in general have to be competitive. But the cost equation is rarely the primary driver of that relationship. We have to offer more than products. There must be an element of service as well, in the form of recognizing how to identify and tailor products that will most appropriately meet the needs of the ‘buyer.’

How does a business benefit from treating people as clients rather than customers?
The most significant benefits are profitable long-term relationships with people, increased revenues and expanded goodwill, which often lead to additional business through word-of-mouth in the form of referrals.

In commercial banking, as in other client-driven service businesses, it is important to recognize the value of goodwill. For instance, while commercial banking to a degree relies on traditional cold-calling to develop leads, a far more efficient and productive source of new business is referrals from clients with whom the banker has built relationships by anticipating their clients’ needs, maintaining dialogues with them, understanding their business plans and providing the specific services tailored to their operations.

Why is it important to learn a client’s business?
It helps to recognize the entire spectrum of a client’s businesses, not just a few parts. Learning the unique needs of a specific business’ss individual divisions contributes to a strong client relationship and leads to another important aspect: earning the client’s confidence.

Building a strong client relationship is more than placing a couple phone calls or occasionally meeting with a client to discuss a product. It entails recognizing that the business environment world and service providers like banks and law firms have become highly specialized, and they will benefit most from dealing with businesses that understand one another’s operations. That is a confidence-building process, which requires teamwork.

How does teamwork apply in the client-building process?
Service providers in today’s complex business world must rely on a coordinated team of specialists to build a client relationship. That includes professional and support staff personnel. The members of the support staff play an important role in the process. They have to be visible and articulate, and understand the process and the products we offer, just like the specialists they support.

VINCE LAUGHLIN is the manager of the Commercial Real Estate Division for MB Financial Bank. Reach him at (312) 456-8510 or