Loyalty and the B2B Customer

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Marketing
Marketing
B2B loyalty initiatives are fast gaining credibility.

For a company that's all about connecting people, telecom provider XO Communications was having a tough time connecting with its own business customers. But that all changed in May 2009 when the telco launched a B2B loyalty campaign.

Today the company sends 100,000 emails a month to its business customers, with content ranging from contest promotions to free white papers. By reaching out to its business customers with "feel-good messages" rather than product pitches, the company's B2B loyalty program boasts an email open rate of nearly 20 percent and has contributed significantly to a reduction in customer churn, says Toni DeWitt, XO's loyalty and retention marketing senior manager.

Too few B2B companies currently employ loyalty programs like XO's. The B2C landscape, however, is awash in customer loyalty initiatives. And for good reason: The right programs can bring about impressive results, ranging from increased revenue and market share growth to upselling opportunities and enhanced customer spend. These benefits have caught the attention of an increasing number of B2B marketers, who recognize the potential value of B2B loyalty programs. "Employee loyalty, channel loyalty, and B2B-type loyalty programs are growing significantly," says Mark Johnson, CEO of Loyalty 360.

Another reason for that growth: Today's tough economy, off-patent products, and Web-based comparison shopping are forcing B2B organizations to rethink their retention and growth strategies. "If you want to retain and grow a customer, you're going to have to do more than just sell them the product," says Dan Carrothers, chief operating officer at Datacore Marketing, asubsidiary of KBM Group.

From trinkets to tactics

However, that's not to suggest that companies can simply repackage B2C strategies for the B2B playing field. "One of the principles of designing a B2B loyalty program is to avoid thinking of the classic, legacy consumer program where you earn points and receive gifts," warns Howard Schneider, a partner with Metzner Schneider Associates. "You have to avoid the possible appearance of bribery or of unfairness in a business setting."

That's why, unlike B2C's quid pro quo tactic of rewarding customer allegiance with "trinkets and trash," Loyalty 360's Johnson says, there's a more strategic element to B2B loyalty that involves delving into consumer buying patterns and preferences. "Now, we're seeing this big push towards understanding customer behavior," he explains.

"Data is king," says DeWitt of XO. By tracking customers' historical buying patterns, churn risk scores, and contract end dates, DeWitt says XO has been able to fine-tune its B2B loyalty initiatives. "Whether it's for our B2B upsell campaigns, our renewal-based campaigns, even for certain engagement campaigns, we use data to target our customers."

It's that attention to detail that's required in a B2B setting. According to Datacore's Carrothers, "B2B loyalty is much deeper than B2C. It can't be about simply rewarding customers for buying your product. There has to be more to it, because if customers don't believe that you have their best interests at heart, and that you are sincerely dedicated to helping them become successful, you shouldn't expect their loyalty long term."

In fact, the very nature of a B2B loyalty program entails moving beyond simple retention tactics and instead, incorporating strategies such as soliciting customer input, empathizing with customers' day-to-day challenges, and rewarding top customers with extra service. For example, shortly after launching its B2B email campaign, XO added a feedback mechanism that allows customers to offer comments on everything from billing and service concerns to repair issues and new product features. The option has been "a big hit," according to DeWitt, who adds that customer responses are closely monitored and routed to customer care representatives for redress.

Another example of a company using customer insight as part of B2B loyalty initiative is SAP. The B2B software provider's loyalty strategy is focused on the overall customer experience and has as much to do with analytics as with pragmatism. "First, we go through a thorough process of defining all the customer touchpoints that we provide as a company," says Marcus Starke, vice president of North America marketing for SAP. "Second, we define what the status quo is on the experience that we provide-and that can run from good to bad. Next, we work on a program to define what the experience should be and the gaps between what we have today and where we want to be."

Customer loyalty redux

That step-by-step approach to creating a B2B loyalty initiative has culminated in some sweeping changes for SAP. In addition to revamping its website user interface, Starke says the company is also in the midst of restyling the language that it uses with its customers both online and in marketing materials. "As we broaden our audience from CIOs to line-of-business leaders, the tech talk that we traditionally speak has become more of a problem and incomprehensive," says Starke. "So we really have changed the way we speak to customers and the language we use so that non-technical people can understand what we're talking about."

And nothing speaks louder than the data a company collects on factors such as website traffic, customer churn, and employee satisfaction. "Data is central to the efficacy of B2B loyalty programs," says Johnson of Loyalty 360. "Having good data insight so that you can make actionable decisions is important and something we're seeing more and more of in the B2B world."

One more tip for creating an effective B2B loyalty program: Focus on existing customers. While many B2C loyalty programs are as much about chasing the ever-elusive consumer as they are about retaining current customers, a recent study from Loyalty 360 reveals that retention efforts are essential given that at least 20 percent of new sales come from existing customers-with nearly half (44.6 percent) of respondents reporting that at least 60 percent of new sales come from existing customers. "It's much more cost-effective to keep a customer, keep him happy, increase that share of wallet, and increase that share of mind than to go out and acquire new customers," Johnson says.

Challenges ahead

Along with the benefits, however, come some common mistakes that can hinder the results of a B2B loyalty initiative. One is "rewarding behavior in a material way when you don't have to," says Schneider of Metzner Schneider Associates. "People in a B2B setting are just as likely to be motivated by service, recognition, and thanks than they are by an additional discount."

But according to Schneider, the greatest crime companies commit is regarding B2B loyalty programs as an after-thought. Instead, Schneider recommends that companies create a team of marketing executives dedicated to overseeing B2B loyalty initiatives, with an emphasis on enhancing customer experience and service.

Because, as more and more companies are discovering, when it comes to B2B loyalty programs, the emphasis should be on scoring points with customers-not doling them out as rewards.

EXPERT OPINION
EXPERT OPINION