Clients or Customers? The distinction makes a difference

We’re all engaged in commercial relationships; sometimes we buy, sometimes we sell. But what roles do the buyers and sellers play? At a host of conference and briefings over the last several weeks, I’ve been struck by the number of times that software and hardware providers (most often “vendors” in analyst-speak) have referred to their buyers as “customers” rather than “clients.” This thought, neither unique nor new (and perhaps pedantic), takes on particular relevance as 1) the bank technology space is being reshaped by a host of new forces, and 2) technology providers enter into new sorts of relationships with their bank buyers. In its purest form, the customer – vendor relationship is transactional, impersonal and zero-sum. It’s built on a series of one-off, individually negotiated exchanges of value. The seller doesn’t take account of the individual buyer’s needs, and could indeed be selling to anyone. And because there’s little give and take, except on price, one party’s loss is the other’s gain – the definition of zero-sum. Selling shrink-wrapped software in the past, or apps today, exemplifies a customer – vendor relationship. At the other end of the spectrum is the client – advisor association. It’s relationship-based, contextual and positive sum. The seller is not in this game to make a single high-margin sale, but instead wants to build a lasting rapport that will generate an on-going stream of revenue in return for a fair provision of value. The advisor develops an understanding of the client’s needs and provides tailored advice or products suited to the situation; there’s no such thing as one size fits all. And finally, when the client wins, the adviser wins; they both do well together. Strategy consulting and legal advice are classic examples of client-advisor relationships. Celent serves two main sorts of clients: financial institutions and technology providers. Depending on what they’re selling, they fall somewhere on the spectrum between the two pure-plays I’ve described. I’d suggest, though, that both types of firms can do a better job serving their “customers” if they start thinking of them as “clients” instead.