06 Jun B2B Companies need customer loyalty
Despite the importance of customer relationships, it’s getting tougher to maintain them. In a recent survey by Bain & Company, 68% of executives said customers are less loyal.
But from the customers perspective, only 14% of business executives see a REAL difference between the B2B supplier offerings. This is despite the fact that 71% of buyers who see personal value will purchase a product and 68% of buyers who see personal value in a product will pay a higher price.
B2B companies need to go beyond mere satisfaction to earn customers’ enthusiasm and loyalty. Traditional sales practices, ineffective leaders, disengaged employees, cultural misalignment, lack of true customer connectedness and lack of customer governance, just isn’t going to cut it anymore. Customer loyalty has a big upside on several fronts that combine to accelerate organic growth. But too many B2B businesses are too slow to move as new entrants and more customer centric businesses move in to take market share.
B2B executives in industries ranging from industrial goods to financial services to healthcare find loyalty to be a powerful lever for them. But earning loyalty in B2B markets poses unique challenges to many B2B businesses:
complicated channel structures
concentrated buyer communities
organisational silos which don’t allow a customer focus
product driven organisations instead of customer driven
a disengaged workforce
senior management are too distant from employees and customers
large accounts with many people influencing the relationship
sales processes that don’t align with the customer journey
inability to truly calculate the value of a customer
technology that does not support customer service excellence and the new sales process.
Defining who the customers really are and how to best engage them requires a focus on the customer. A focus on the customer that is driven from the board, the C-suite and throughout the organisation.
In B2B markets, even those long regarded as commodities, deriving strategic advantage from loyal customer relationships requires true differentiation. Often that means not just great products at competitive prices, but also dependable delivery, tailored services and a high level of responsiveness and collaboration. The value in most B2B markets has shifted. Among manufacturers, for instance, profit pools have moved downstream to ancillary services, lifetime contracts or provision by the hour—all of which depend on addressing customer needs such as reliability or reduced risk.
B2B customers who are “promoters” have an average lifetime value typically three to eight times that of “detractors,” depending on segment and industry. Promoters stay longer with the company, buy more products, usually cost less to serve and are more likely to refer the supplier to colleagues and friends.
Increasing customer retention by 5% increases profits by 25 – 90%
A Net Promoter Score (NPS) score correlates closely with sales growth, expanded share of wallet, sales force productivity, greater market share, greater employee engagement and higher profitability
A 2% increase in customer retention is the same as a 10% decrease in costs
Price isn’t the main reason for customer churn (as many executives like to think), its actually bad customer experience
B2B loyalty leaders tend to grow four to eight percentage points above their market’s annual growth.
So what does it take to delight a B2B customer? Most B2B customers evaluate providers on a combination of several criteria:
Do they create economic and strategic value for our business?
Do they simplify our daily operations (and my own work life)?
Can I trust them?
Do I like working with them?
What is the resolution process if I have an issue or complaint.
An easy, trustworthy partnership in B2B markets can evoke personal feelings every bit as strong as with consumer products and brands.
Most importantly, our decision makers and influencers are still people, there is an emotional need that they have which needs to be identified and addressed.
Turning insights into action at B2B companies
(reference Bain & Company)
- Investment needs to be made on the Intangible Assets of the business (as much as the tangible ones) these include Brand, Customers, Employees and Innovation. Too much focus in the start up is put into the Tangiable assets and not enough spent on the Intangible. It’s the intangible assets that drive your relationship with the end user and create your differentiation.
- B2B companies who are starting down the road of customer strategy (or customer centric organisations) should aim to create a Customer Experience (CX) system that’s highly tailored to the dynamics of the particular industry. B2B settings often involve several customer constituencies including gatekeepers, business leaders and operational users. Each group has different needs and requires different types of interactions from providers. The design around when, how and with whom to engage will depend on the provider’s channel structure (intermediaries or not), the structure of decision making in the account (external influencers or not), and relevant episodes or moments of truth for the customer. Increasingly in IT purchases, the end users are becoming more involved in the procurement process as leaders recognise that the end user needs to be involved in the specifications to enhance the user experience.
- B2B companies that rely on intermediaries to interact directly with customers might consider evaluating ways to improve those relationships. And getting feedback from retailers and end users, not just the intermediaries, can be quite valuable as well.
- Its the age of the “prosumer” where customers and their feedback is an integral part of product design. The Food and Agriculture industry has many examples of customers assisting with the design of products to assist manufacturers deliver products from “healthy choice meals”, “food on the run” and packaging solutions to assist specific customer segments.
- Insights gleaned from customer feedback will help a firm align investments with its customers’ priorities, size the potential benefits and chart the best course to get there and reduce internal resource conflicts. Many customer centric companies find that bringing the voice of the customer (often via the use of customer journey maps) into decision-making forces across different departments—Manufacturing, R&D, Sales & Marketing,IT and so on—to intensify their collaborations and introduce products that meet customers’ needs.
Think like a customer— it can transform performance in even the most complex B2B markets to deliver a superior customer experience and outperform competitors. But becoming customer-centric requires substantial changes in ways of working, behaviours and mindsets: from leaders to frontline, from an exclusive focus on product to a wider view that includes customers; from a single department’s key performance indicators to an entire organisation looking at one reliable metric; from rigid protocols to teams empowered to help customers. As more companies have discovered, an obsession with customers, pays off with superior growth. Customers – your next big growth strategy.
6peas is a marketing and engagement consultancy specialising in customer strategy. We partner with organisations to identify their next big growth strategy – their customers. 6peas works with organisations to create “sharable experiences” with customers, employees and partners to deliver a superior customer service and outperform competitors. 6peas works with c-suite, middle management and boards to design a customer centric framework around 6 key pillars – leadership, customer, brand, employees, culture, and governance.
Carolyn Grant is the founder and managing director of 6peas marketing and engagement. With a passion for delighting customers and business improvement, Carolyn has found the way to facilitate change with Australian businesses. Carolyn has a broad range of industry experience in Health, Retail, E-commerce, Utilities, Banking and Finance, Professional Services and Education and Training.