Customer Loyalty is Key
In today’s fast moving global marketplace customer retention and loyalty is key; particularly in the B2B market where companies will often talk about 85%+ of their business coming from existing customers — but this is under pressure and changing.
By: Melanie Parker, CLMP, Stream Loyalty
Customers have access to more information about the world in which they operate than ever before. They expect to be able to access information online about existing and potential supplier organisations. They feel, rightly or wrongly, that they can make independent buying decisions and don’t need the input of a salesperson. The days of salespeople putting catalogues in front of customers is long gone; sales teams are now far too expensive to operate as ‘talking brochures. Customers are happy independently making purchasing decisions, which previously would have involved dealing with a salesperson; even multi-million pound purchases — such as buying a jet engine for an aircraft — are now confidently conducted online through sophisticated procurement portals.
Increasing competition with decreasing customer loyalty
The global marketplace, deregulation, and supply chain sophistication have fundamentally changed the ability of suppliers to operate in markets and areas of the globe which were not previously accessible or economically viable. This, coupled with huge variations in manufacturing costs around the world, has led to global competition on a level which few had accurately predicted.
Fast-moving nimble competitors are incredibly quick to provide alternative spares, consumables, and service to compete with those of the original equipment manufacturers (OEMs); ‘me-too’ products are everywhere. OEMs who could previously expect a level of repeat business and on-going sales from hard-won customers are seeing that after-market eroded, both in terms of product and service sales.
B2B customer loyalty has become increasingly fragile as customers see alternatives to paying a premium to buy from the OEM. The importance of relationships and continuity has been eroded in the customer’s mind, which in turn has led to much greater price sensitivity and commoditisation of products and services.
Dependency on channel partners
Many suppliers have a multitude of routes to market. As well as their own employed internal and external sales people, suppliers may work through a multitude of channel partners and agents. These channel partners may have exclusivity deals tying them to that particular supplier’s products or be acting as channel partner for a number of potentially competing products. Channel partners may have little or no emotional loyalty to a particular supplier.
For the channel partner, the key questions are:
Which supplier products are easiest to sell?
Which products give me the best margin?
Suppliers selling through the one channel may have little or no contact with the end customer; their relationship, and potential loyalty, is with the channel.
How well do we really know our customers?
All this leads us to a stark reality — many suppliers have lost contact with their end customers.
What their end customers are actually saying and/or require is being lost or distorted, however innocently in many cases, by the involvement of the channel partner.
The voice of the customer (VOC) may no longer be aligned with the voice of the supplier’s business (VOB). Suppliers are investing in costly marketing initiatives and promotions where sales potential is increasingly difficult to validate and the impact of the promotions hard to monitor, all because of the disconnection from the end customer. Costly marketing campaigns may well be encouraging end customers to approach the channel partners to buy a supplier’s product BUT, understandably, the channel partner may seek to substitute that supplier’s product with a comparable product if this offers better margin for the channel partner.
So where does all the above leave the supplier?
There are a number of key issues for suppliers to address:
Get your cost of sale right
Employing salespeople is only viable (or necessary) if the cost of employing them is covered in the margins which you are making from their sales. Salespeople need to be integral to the process of helping the end customer to make a purchasing decision. Customers need to see value in not just what you are selling but, critically, how you are selling. If the customer feels that they can make the purchasing decision without requiring a salesperson to facilitate the process, then that salesperson may be unnecessary; and not only unnecessary, but an expensive operating cost affecting margin and the competitiveness of the selling organisation. So, is the salesperson redundant? Not entirely, there is still a role for salespeople, but it has changed. Salespeople need to help the customer facilitate change; selling with — rather than to — customers. If the salesperson is not integral to facilitating the purchasing decision, then, for many suppliers, educating the customer through digital marketing — enabling and motivating them to buy online — is the key to maximising margins.
Communicate directly with your end customer & target market
Suppliers need to be able to communicate directly with their end customers to ensure that loyalty is to the supplier’s brand and not that of the channel partner. Channel partners will rightly remain an integral part of fulfilling those orders but only by hearing the voice of the customer for themselves can suppliers be confident that their marketing initiatives and promotions are correctly targeted and communicated to the end customer and that those customers are hearing the voice of the business. Marketing functions need to have direct reliable data about customer needs and buying behaviours in order to make sound marketing spend decisions; many marketing functions that operate through channel partners simply don’t have sufficient data to enable them to make those decisions and track the impact. One marketing manager described marketing spend in the absence of reliable data as “like tipping money into a black hole!”.
What are smart suppliers doing to address these issues?
What is the key to attracting, retaining, and growing sales in an increasingly competitive marketplace, where channel partners are a supplier’s key route to market?
Communicate directly with your customers
The supplier needs to have a complete picture of which product and/or service is being bought by which end customer and, importantly, why. When any customer places an order — even if it is fulfilled by a channel partner and they get credited for the sale — the supplier must have access to this information in real time.
B2B Customer and Channel Loyalty Programmes
Incentivise your customers & channel partners
End customers and channel partners must be incentivised and motivated to be loyal to the supplier’s brand/products and/or services. In the case of premium priced products particularly, those incentives may often be non-financial but of high perceived value to the end customer.
B2B Employee Loyalty Programmes
Incentivise your salespeople & give them real time customer data
Salespeople must also be incentivised and motivated to focus on the sales activities that add the most contribution to the business. Often the key to this is access to customer feedback and sales data to enable them to use their time more productively, measure their success in real time, and gain the recognition and reward they seek.
So, how can loyalty and retention be maintained in this digital age where customers have more choice than ever, and suppliers are further and further removed from direct contact with end users?
The simple answer is to ensure you have the data you need and the means with which to evaluate, segment, and target your audience. Data is the Holy Grail to maintaining close and valuable relationships with your customers. Companies who invest in the technology to gather, manage, and utilise their customer data — and who use real-time personalisation in their marketing — are reaping the benefits of increased response rates and click throughs on marketing campaigns, and resulting increases in conversions.
B2B Loyalty is at risk. The B2B Customer is savvy, and competition is intense. It is cheaper to retain your existing customers than acquire new ones and so it is vital to use all the available resources at your disposal to ensure the VOC is aligned to your VOB. Learn to appreciate and understand buying behaviours and preferences and learn to work with your channel partners to provide the best customer experience and ensure your customers don’t stray.
Have a listen to this testimonial from one of our clients, Dentsply Sirona, who managed to gain end customer loyalty in a highly competitive channel market.
Melanie Parker is a Certified Loyalty Marketing Professional and Director at Stream Loyalty, a UK-based Loyalty Service Provider with clients in England, New Zealand, Australia, France, Spain, Italy, Germany, Switzerland, Canada and the US. Melanie is frequent contributor to The Wise Marketer.