A magnum of Moët and a box at Lord’s Cricket Ground might have been the gifts laid on for loyal customers of yesteryear, but times have changed. Before the age of instantly accessible reviews, candid case studies and increased competition, this approach to currying favour made sense: customers weren’t as fickle, so one-off loyalty incentives seemed to cut the mustard. Indeed the constant strive for ROI and tightening laws on bribery means marketers must now work harder.
Out with the old
Of course there are now many reasons why the aforementioned style of schmoozing is deemed slightly crass by many modern-day marketers. Perhaps the most pressing is that it just doesn’t really work. Ever-shifting customer expectations and increasing competition – both phenomena over which a marketer has little say – means retaining customers is a complex business, and one that requires regular contact time and nurturing. Another very real threat to the old corporate gifting approach are the legalities surrounding the Bribery Act, introduced by parliament in 2010 and described by lawyer Brigid Breslin as “the toughest anti-corruption legislation in the world”.
It’s unusual for B2B marketers to look towards the consumer market for inspiration in this area; coupons and points-based schemes lack the assurance needed to seal – or reseal – large-scale deals. In order to keep their best customers coming back from more, B2B marketers need to think of new ways of making them feel special.
Why is loyalty so important?
The oft-cited approximation that 80% of a company’s revenue is stored in 20% of its existing customer base highlights the value marketers should place on those they’re currently doing business with. Brands are awakening to the fact that the cost of winning over new customers outweighs the benefits of keeping existing ones happy. One recent Forrester study, for example, found it costs five times more to acquire a new customer than it does to convert an existing one, while a research piece by Marketing Metrics revealed that the likelihood of selling to an existing customer is 60-70%, compared with just 5-20% for a new prospect.
"Understand who your top 20 customers are and identify what their share of spend is in your product or service area"
Customers have access to many channels capable of sharing messages to uncapped numbers of people, which means word of mouth is critical for recommendations and referrals. Shane Redding, owner of Think Direct, explains how powerful these networks are for niche industries.”Now our customers’ voices are amplified through the digital channels, loyal customers are not only our most powerful advocates but they also provide the solid foundation for growth. If our customers aren’t loyal, and we use tactics or behaviours that encourage churn, all we do is make it harder to succeed.”
Reducing churn – the rate of customer attrition – isn’t just a simple and effective way to boost profit, but also enables hefty acquisition budgets to be relocated elsewhere.
Who’s most worthy of reward?
With so few customers contributing the biggest chunks to a brand’s total revenue, it’s clear that lavishing rewards on every client isn’t financially viable. So how do marketers identify those worthy of investment? Katryna Turner, marketing director and B2B Marketing editorial board member, says: “The criteria for different levels of key account status will depend on a blend of past revenue, strength of relationship and potential future revenue […] personal relationships are absolutely critical to any client or key customer.”
Offering further explanation, Graham Morgan, small business consultant at Business Doctors, says: “Understand who your top 20 customers are and identify what their share of spend is in your product or service area. This allows you to prepare a strategy to increase share of wallet or defend it (if there’s a chance they could move to a competitor). Building multi relationships within your top 20 customers and nurturing them is also important given some of the junior management may be at the helm at some time in the future.”
To reinforce this process and get a clearer picture of who’s most deserving, marketers should look at both a micro and macro level at their customer base. As Katryna touched upon, the most obvious indicator that a client is worthy of reward is previous revenue – after all, it’s perfectly logical to invest in those who have invested in you. But as well as previous gain, a marketer should study a customer’s future propensity to buy. What are they spending on similar products and where are they spending it? What issues are occurring in the wider marketplace that they’ll need help with in the coming months and years? And what sort of objectives does their business need to meet?
Prelini Udayan-Chiechi, VP marketing EMEA at Bazaarvoice, on the other hand, argues that loyalty rewards shouldn’t be a call for exclusivity: “A customer is a customer whether they’re spending one pound or £1000. So ultimately if you want to make them feel special, set up programmes you can deliver to on an SMB or enterprise level.”
