Although you wouldn't know it after a particularly poor customer service interaction (we've all been there), most organizations really are invested in keeping customers happy. It costs about 5 times more to acquire a new customer than it does to generate new business from an existing customer. Additionally, happy customers are the ones who will refer you new business -- a less costly method of lead generation, not to mention an easier close for your sales organization. In fact, in a Loyalty360 survey, three quarters of respondents reported that 20% of their new sales come from current customers. Your customers are your best growth opportunity.
But when you think about customer loyalty, it seems hard to apply many of the tried and true programs to B2B organizations. Punch cards, points, rewards programs -- customer loyalty seems like a game only B2C marketers can play in. But really, customer loyalty is alive and well with B2B marketers; they simply must move away from the mindset that they should design specific customer loyalty programs, to a broader customer retention mindset.
Challenges to B2B Customer Loyalty
Customer loyalty is no simple feat -- consider these common challenges that B2B marketers often face when trying to reduce churn.
- Higher Price Point - Many B2B organizations are selling a product or service at a high price point, which means in a tight economy where budgets are always under close scrutiny, your business' product/service could be the next expense to get cut.
- Longer Buying Cycle - If you get cut from a customer's budget, you can't quickly recover with the longer sales cycles typical of many B2B organizations.
- Employee Turnover - The employee(s) at your customer's organization that manage your product or relationship could leave. If they are the only one(s) who know(s) how to use your product, or they were acting as an evangelist of your product or service within their organization, the value you provide could be quickly lost.
It seems the role of the B2B marketer looking to improve customer loyalty is to consider pleasing not the individuals at a company, but the business as a whole. How do you create a company, website, product, or service that makes an organization stick with you forever?
Customer Retention Metrics to Watch
We would be remiss to send you off on a mission to improve customer retention without telling you how you can measure your effectiveness. Here are some metrics you can watch to determine if your attempts at improving customer loyalty are actually working.
Customer Retention Rate - This metric tells you how long your customers stay with you. Start by establishing this as a baseline metric so you know whether your efforts are improving your retention rate over time. How you calculate this number will depend on your business model -- CRM Trends provides a great breakdown of how to go about determining this number for your business if you haven't done so already; click here and scroll to the section titled 'Retention Rate' for its formula and explanation.
There is such a thing as negative churn, too, which is actually a good thing, despite the name's implications. Negative churn is when a current customer upgrades or buys additional services from you, and it can offset any other churn you see from customers leaving.
Net Promoter Score (NPS) - This is a customer loyalty metric that can be used to gauge the loyalty of a company's customer relationships. On a scale of 0-10, customers respond to the question "How likely is it that you would recommend [Company X] to a friend or colleague?" Their answers get them placed into one of three categories: Promoters (those who give a response of 9-10), Passives (those who give a response of 7-8), or Detractors (those who give a response of 0-6).
'Promoters' can be interpreted as customers who are your loyal enthusiasts, will keep buying from you, and will refer others. 'Passives' are satisfied but unenthusiastic customers who are vulnerable to competitive offerings. 'Detractors' are unhappy customers who could cause damage to your brand.
You can calculate your NPS score by taking the percentage of customers who are 'Promoters' and subtracting the percentage who are 'Detractors.'
These are just two recommendations for basic metrics you can watch to establish a benchmark for how loyal your customers are, and how your efforts to improve customer loyalty affect your retention rates. There are certainly more sophisticated metrics to consider depending on the structure of your business -- lifetime customer value, for example. Loyalty360.org has also provided some other metrics by which B2B companies are measuring the effectiveness of their customer retention efforts, some of which you may find helpful for your business, too.
What B2B Marketers Can Do to Promote Customer Loyalty
Now that you have some metrics in place to determine success, let's examine how you can turn organizations into loyal customers of yours. There are 5 components to consider when fostering and improving B2B customer loyalty: orientation, ongoing education, communication, community building, and pricing.
If your customers are actively using your product or service in the most advantageous ways from the very beginning, it's more likely they will stay with you for the long haul. Consider the moment after purchase the honeymoon phase of your relationship -- they are excited about your company and how it will help their organization. Use that momentum to ensure they actually use your product or service, and use it in the way that will make them the most successful. Active use that drives results is the first step to making your company a fixture in their organization.
These principles should extend beyond the honeymoon phase, too. If you have current customers who are inactive, wake them up! Don't abandon customers, whether new or old, after the point of sale and leave them to figure out how to use your products or services. They're new to this stuff...you're a pro! Share your knowledge so they can become pros, too.
2. Ongoing Education
Which brings us to the importance of education. Be the company that continually provides value and shows you're invested in their success. When you're first orienting customers, there's probably plenty of functionality about your product or features of your service from which they would benefit -- but it's too early to overwhelm them with everything. Education should come in stages. It not only makes adoption more likely when information comes in bite size chunks, but it also makes you look like the gift (or company) that keeps on giving.
Create content that highlights new and underused features of your product or service, or educates them about their industry. Videos, webinars, workshops, customer-centric blog content, and use-cases are particularly effective content formats for this type of information.
Effective education goes hand in hand with great, open communication. In fact, communication is one of the most important components to customer loyalty, and also one of the hardest to successfully execute. Remember, you're not communicating with one customer -- it's an entire organization of people that you must continually impress. That means you need to communicate with not just your point of contact, but also the influencers, decision makers, and other employees involved in executing your solution -- with not all of whom you'll necessarily have a personal relationship.
Keep communication channels open, and provide multiple places for people to talk with one another and provide feedback to you. The more opportunities for dialogue, the more likely you'll hear from employees of all levels -- especially those C-suite decision makers you likely aren't actively engaging with on a consistent basis. In fact, MarketingProfs reported that after Oracle began actively engaging with decision makers of a particular client, its customer retention rate was more than 20% greater.
Provide forums and customer-focused social media accounts, and send out email surveys to solicit feedback, and make sure employees are actively moderating and following up on these discussions so your brand's presence is felt.
Open communication of this sort not only helps strengthen the ongoing education process as customers learn from one another, but it also gives you the critical feedback you need to improve your product and service offerings, and your sales and marketing processes. Marketers need to understand customer preferences and buying habits so they can continue to deliver value in their pre- and post-sale marketing content. You'll also begin to identify patterns around the types of customers who stick around the longest so you can better target them in your lead generation efforts and prioritize them in the sales process.
4. Community Building
The dialogue that comes with this open communication between your organization and your customers will build a community that's crucial to illicit feelings of loyalty from your customers. Active members of your community will be more active users of your product or service. Encourage activity on forums and social media sites, host local, in-person events, and hold workshops that let customers discuss how they're leveraging your product or service in their company. When customers have ownership over others' success with your product, they become far more invested in your company, and are less likely to churn.
It's important to build a strong community with your employees, too. They are on the front lines with your customers every day, and as such, customer culture will inevitably overlap with employee culture. If your employees show enthusiasm for your products and services, those feelings will extend to your customers.
To say pricing is a complicated beast is an understatement. But if your organization is facing a pricing change, it's crucial to execute it with tact to ensure you don't turn loyal customers into angry exes. All pricing changes should be approached with clear, frequent, and gracious communication. If you have the authority to do so, offer to grandfather in customers for a period of time on your old pricing structure. There will sometimes be penny pinchers, sure, but if you've effectively built the value of your product or service to their organization, you should find you've built enough value that those customers can't justify switching to a competitor that isn't tried-and-true like you.
Ultimately, none of this will help you retain customers if you don't already have an amazing product or service backed by amazing service. Continue to invest in acquiring top talent to manage the development of your product and service offerings, and hire amazing front-line employees that serve as the helpful and intelligent face of your business to customers.
As a B2B marketer or business owner, what are you doing to promote customer loyalty? Share your successes and recommendations in the comments!
Image credit: Tobyotter