Customer loyalty is arguably more important in business-to-business (B2B) industries than it is in consumer industries. That’s because, in B2B firms, the 80-20 rule is sometimes the 90-10 rule: the top 10 percent of your customers can account for 90 percent of your profits. The good news: by identifying the key purchasers and influencers in your client organizations and then building relationships with them that mimic relationships in the consumer world, you can increase the retention, yield, and lifetime value of your best customers. That’s the message from David Harwood, co-author of the Essential Guide to B2B Loyalty, published by the Wise Marketer. You can subscribe to the Guide here.
By: David Harwood, CLMP
Loyalty marketing was born in the consumer world. When American Airlines launched the AAdvantage programme in 1981, the frequent-flyer program was so revolutionary that it literally changed marketing overnight. For the first time, a company used a customer database (the airline reservation system) to segment, reward, and recognize best customers for their loyalty. The AAdvantage program also introduced the concept of rewarding the airline’s most valuable customers through both hard benefits – frequent-flyer miles that could be redeemed for a free flight – and soft benefits – upgrades to first class for high-value members. The idea that consumers respond to both reward and recognition with increased loyalty, born in the airline industry, soon spread to every consumer sector. Today, these principles form the foundation of the loyalty marketing discipline.
At first glance, reward and recognition would appear to be an ill fit for the world of B2B marketing. B2B business-client relationships are often more complex than those in the consumer world. Instead of marketing to a single customer, B2B marketers are often dealing with a connected web of relationships: in some cases selling directly to small business owners; in other cases, selling to purchasing managers within large companies, who must in turn answer to department heads with their own preferences; and in others selling to end-users indirectly through distributors or channel partners. In such a complex environment, how can loyalty marketing help?
For the most part, business-to-consumer relationships are simple and direct: the business advertises its products and services, the consumer makes a purchase, and the business can then begin a direct relationship with that consumer. In the B2B world, actual buyers are often hard to identify, and relationships can be both direct and indirect. B2B marketers must therefore engage in detective work to uncover the buyers and influencers within their client accounts. Here’s a primer to the five basic types of B2B customers and the keys to building relationships with them:
- End Users: If you sell direct to small business owners, then identifying your best customers and rewarding them is relatively straightforward. If you sell primarily through partners and distributors, or primarily to larger companies, then identifying your actual buyers can be difficult. A B2B loyalty program can encourage your buyers to raise their hands and ask to be identified.
- Purchasers: If you sell into larger organizations with procurement departments and purchasing managers, then you’ll need to know who they are. These purchasing managers may have leeway to choose you, or they may be bound by contractual purchase agreements. Identify these purchasers and then reward and recognize those who demonstrate loyalty to you.
- Influencers: Influencers are your "hidden" customers – they're IT directors, senior corporate managers, and other mid-level corporate executives who exert a profound influence on the purchasing decisions of your clients. A value proposition based on content marketing can help you reach this group – just make sure you encourage identification, so you can market to them on a one-to-one basis.
- Distributors: Many B2B companies sell their products indirectly through wholesalers and distributors. These distributors often have a choice between stocking your products and your competitor’s products. A loyalty program designed to reward and recognize your key distribution clients can provide an effective way of building relationships with them – and shifting their spend to you.
- Partners: Larger B2B companies often align with strategic channel partners that help them enter new markets or geographies. While many channel partnerships are negotiated at the C-level, you can often work with your channel partners to extend your loyalty program into their markets. Make them an explicit partner in your customer loyalty efforts, and your partners too will reward you with their loyalty.
The answer our earlier question: loyalty marketing can help you build stronger and more profitable B2B relationships. The key to success is to find those purchasers, managers, and influencers within your client accounts and then leverage the tools of loyalty marketing to reward and recognize them for their loyalty. First, put a value proposition on the table to encourage them to raise their hands and identify themselves. Next, start a conversation with them, and then leverage the resulting insight to segment them according to value and potential to your business. Finally, leverage the tools of loyalty marketing to foster profitable behavior change. By uncovering the consumer inside your B2B accounts, you can build customer loyalty that lasts a lifetime.
David Harwood is founder and Chief Strategy Officer for Reward Paths in the US and Incentive Solutions in New Zealand and Australia. He is a noted expert in the B2B loyalty field and a Certified Loyalty Marketing Professional™(CLMP). This article is excerpted from “The Essential Guide to B2B Loyalty - Volume 1,” written by David Harwood and Rick Ferguson and published by the Wise Marketer. You can subscribe to the Guide here.