Maintaining customer loyalty is an increasingly important part of most B2B marketers’ jobs, yet many practitioners are ignoring the opportunities presented by B2C-style dedicated loyalty programmes. This is according to new research by B2B Marketing in association with Nectar for Business, which found that whilst 80 per cent of practitioners describe customer loyalty as ‘critical’ or ‘very important’ only 20 per cent have actually utilised formal loyalty programmes (see figure 1.)
The results suggest that cost or pricing of such dedicated programmes is not a major factor in many B2B marketers’ decision not to utilise them, as it was cited by only 14 per cent of respondents. Indeed, the sums being invested in loyalty are significant: the majority (70 per cent) spend at least 10 per cent of their budget on loyalty initiatives.
By contrast, ‘rewards not appropriate to my customers’ was identified as the largest single reason for not using formal loyalty programmes, selected by 40 per cent of respondents. This suggests that programme providers have more work to do to tailor activity and rewards to specific audiences, and perhaps senior business audiences in particular. Nectar for Business, for example, which is the largest programme focused on the B2B space, is mostly targeted around the needs of SME members, rather than those in large corporates, and its proposition is designed accordingly.
Although uptake of loyalty programmes in B2B is not yet widespread, marketers remain broadly open-minded about them. When asked if they believe there is a place for loyalty/incentives programmes in B2B (see Figure 4.) the largest group just under half replied with an unqualified ‘yes’, whilst the second largest segment suggested they were relevant ‘but not in my market’. Of the remainder, a further quarter said they were ‘not sure’ whilst only three per cent said ‘no’ outright.
Of those companies not currently using loyalty programmes, 14 per cent said they were ‘currently investigating opportunities’ whilst four per cent were ‘not aware of opportunities’.
Again, the onus would seem to be on the loyalty providers to understand and cater for specific needs of these marketers, and this would seem to be borne out by further results, which demonstrate ‘ability to customise’ and ‘reward/redemption opportunities’, which are the two most significant factors in companies’ selection of a loyalty programme (with 26 and 24 per cent of respondents). Ease of operation was next in line, with 21 per cent, whilst ‘strength of brand’ only attracted 13 per cent.
This is reflected in the question regarding choice of loyalty programme, with ‘inhouse programme’ proving the most popular provider (45 per cent) and ‘gift vouchers’ coming second (27 per cent).
The survey also examined the penetration of B2C loyalty programmes amongst the B2B marketing audience, and revealed a high level of uptake. Nectar proved to be the most popular programme with 63 per cent of respondents amongst its membership base, followed by Boots Advantage and Tesco Clubcard, whilst a quarter of respondents were members of an airline frequent flier programme. Programmes offered by Air Miles, John Lewis, Homebase and M&S all boasted at least 10 per cent of respondents as signed-up members.
However, despite the high levels of adoption of consumer loyalty programmes, only two per cent of respondents have considered cross-referencing customers’ consumer loyalty membership with their business activities. This would provide participating companies with better understanding of their customers’ tastes and preferences, and enable them to strengthen relationships and build loyalty. At present, however, such techniques are some way off.
Despite this, interest in B2B customer loyalty remains strong with 42 per cent of respondents reporting an increase in budget during the previous year (against six per cent for whom investment declined), whilst 41 per cent anticipate it will increase in the coming period.
With interest in this issue remaining high, it would seem inevitable that sooner or later companies will seek to leverage the power of formalised programmes.
It is pleasing to see that loyalty marketing is high up on the agenda of B2B companies, with 80 per cent of respondents to the B2B Marketing customer loyalty survey rating customer loyalty and retention as ‘critical’ or ‘very important’ to them. It appears that this is also starting to flow through to their marketing budget. In our survey last year 45 per cent of respondents were investing less than 10 per cent of their spend in customer loyalty initiatives. Twelve months on and only a quarter is investing less than this level. What’s more, four in 10 B2B marketers expect further increases in the next 12 months, with less than one in 10 forecasting a decrease. This reflects what B2B firms are telling us. Customer loyalty and retention is as important for small and medium-sized enterprise suppliers as it is for consumer retailers, which investment levels are now starting to reflect. The key for B2B marketers is finding the right mechanism for delivering this. According to the research, only 15 per cent of B2B companies have used a customer or trade partner-focused points or incentive programme. It is interesting to examine the reasons why the remaining 85 per cent are not using these tools. Forty per cent of respondents state inappropriate rewards as the primary reason, and 38 per cent say better reward options would make loyalty programmes more appealing for them. Sourcing an appealing range of rewards for an inhouse reward programme can be labour-intensive and the rewards difficult to fulfil. However an outsourced loyalty provider can significantly reduce this burden. It is also revealing to see how many customers are targeted by B2B companies that do run loyalty or incentive programmes. Two-thirds say they reward less than 100 customers, with an additional 22 per cent only targeting up to 500. This indicates that companies are using these programmes to incentivise their larger customers who probably also benefit from active account management and potentially bespoke pricing. It is often difficult for organisations to recognise and reward their smaller customers in a cost-effective way. This is where coalition loyalty programmes, such as Nectar for Business, can benefit B2B firms. These programmes offer a low ‘cost-to-serve’ for each customer, whilst recognising and rewarding loyal customers who don’t necessarily have high enough spends to warrant the attention of account managers, whilst at the same time retaining the flexibility to appeal to larger customers. A very positive result is 73 per cent of respondents believe there is a role for loyalty programmes in a B2B environment and I am confident the number of organisations recognising the need to reward all customers will grow.
