As the grip of recession tightens, companies are becoming increasingly nervous about ploughing money into the costly, and in this climate often shaky business of acquiring new customers. Add to that the threat from aggressive competitors in this dog-eat-dog environment, and it’s understandable why retention strategies have replaced acquisition strategies at the top of many marketers’ agendas. Keeping your current customers on-side has never been so important for many B2B brands.
Loyalty campaigns may once have been the preserve of consumer marketplaces we can all name supermarket chains and petrol companies that put the concept to good use, and more recently you can’t grab your morning coffee in any of the big chains without being offered a stamp on your ‘buy-six-get-one-free’ loyalty card. But increasingly B2B businesses are turning to loyalty campaigns to incentivise their business customers to stay.
According to Jon Maddison, client services director at Epsilon International, the nature of these campaigns can vary greatly, but the basic principle is always the same. You either want to make yourself more attractive to these customers, or make it ‘sticky’ for them so that they’ll find it awkward to leave you, he says. Schemes can be based around incentives, like access to improved service provision, loyalty bonuses or improved tariffs, adds Maddison, or win-back strategies.
The favourite of many suppliers, particularly in the utilities marketplace, is the direct debit mandate, says Maddison. It’s a real win-win. Small businesses like the ease and simplicity of it whilst their providers enjoy a greatly reduced churn rate. Utility customers will often use email to try to migrate their customers onto direct debit as it has the strongest return on investment thanks to its low marginal cost and relatively high response rates.
Come back to what you know
As far as the win-back campaign is concerned, Maddison says, it is critical here to communicate with your ex-customer quickly, before they become bedded in with their new supplier or their cooling-off period has expired. Email is the perfect channel for this, he says. Unlike direct mail campaigns, which often have long lead-times, you can set up your email trigger campaign to target ex-customers as soon as you suspect (or know) they’ve left you. And because it’s measurable in close to real-time you can tweak your campaign on the fly, optimising it incrementally.
Indeed many agree that email and other digital channels are now the most powerful tools at the disposal of a marketer looking to set up a loyalty campaign. Traditionally, B2B brands might have used corporate hospitality as a loyalty driver taking key clients out on jollies to keep them onside but during a recession this type of relationship building is on the decline, plus in a downturn, branding and other forms of push marketing tend naturally to make way for more measurable channels, where spend can be accounted for. Online marketing has come a long way since the last recession and downward collapse of the Internet circa 2001.
But even before choosing a channel, marketers should ask themselves some basic questions: ‘Who am I looking to target and how much do I want to spend on targeting them?’
Without proper analysis, retention strategies are almost always doomed to failure, however creative or brilliant they may be. The first step is to identify who should be targeted for attention, says Andy Wood, managing director of GI Insight.
B2B brands shouldn’t necessarily want to achieve loyalty from all customers since the cost of heavy loyalty activity with certain segments outweighs the value of those customers to the firm. Initially it is vital to identify those from whom the brand is earning most or making the most profit. In one extreme case, with one of our clients, four per cent of customers were generating 60 per cent of the profit, so these are the customers the brand would want to try and encourage to continue spending, he says.
Richard Perry, chief operating officer at Gyro International, adds that budget wise, B2B brands should now be looking at spending up to 50 per cent of their overall marketing budget on strategies dedicated to the retention and growth of existing customers. Before, they might only have allocated 20 per cent to this audience. But the way to look at it now is, whatever your advertising budget is, put the same into your CRM, he says. And remember that CRM isn’t just about maintaining the status quo you should expect to see a two to ten-fold increase on your return it’s all about getting dramatic uplift from your database.
The way to do this is to look at the data available to you. Understanding your customer database and having a complete customer single view is imperative. This may sound obvious, but Richard Lee, managing director at Blue Sheep, says many marketers merely pay lip service to this concept when they are in fact miles from achieving it. I often hear marketers claim they have a single customer view for every customer; however I’m always doubtful if this is the case. I know how long it takes to build an accurate single customer view which gives truly intelligent B2B marketing strategy, and the process isn’t easy. One thing is for sure, this recession will highlight those companies that understand their data complexities from those that don’t, he says.
Only once you have your single customer view can you begin to develop customer loyalty activity based on the intelligence you have gathered, argues Lee. This is achieved through predicative modelling which can highlight up-sell and cross-sell opportunities. I would recommend also that you apply credit and risk assessment to ensure customers you have highlighted are financially viable, he advises.
Sell, sell, sell
Data doesn’t just play a role in helping you to identify initial targets either. Once you have identified them, your main aims are to sell them more and retain their loyalty. The fact that an increasing number of customers now conduct both their purchasing research and their sales on the web lends itself a big hand here. Analysing website visits, information downloads, keyword searches and email responses all help paint a picture of their buying habits and help a company to identify opportunities to up-sell and cross-sell.
As Andrew Freeman, director at CRM Technologies explains, this is also where the marketing and sales force must work closely together to drive repeat business.
The idea is to develop a closed loop between your marketing and sales efforts, he says. This allows you to keep track of the different stages of a customer and adapt your marketing messages appropriately. By aligning your marketing and sales teams around information and intelligence, you will possess the most important tools to drive successful sales. Freeman suggests a holistic approach that includes a series of practical steps (see ‘keep them keen’ boxout).
If can’t beat them, join them
Of course if you don’t want to go to the hassle or expense of setting up your own customer loyalty programme, you can join an existing programme run by an established name. Argos Business Solutions (ABS) allows its clients, who include B2B names such as Experian and Brother, to use ABS incentive schemes to motivate their employees, agents and resellers to reward performance and loyalty (see ‘case study’ boxout). Becoming a partner of a scheme like this does involve passing a certain number of criteria. For example to become a partner, or sponsor of other major B2B loyalty company Nectar for Business, you must have nationwide representation and be able to demonstrate that you are a market leader in your sector. Current Nectar for Business sponsors include EDF Energy, Viking Direct and Dulux.
Joining a scheme like Nectar gives ready-made access to sophisticated data mining tools. Sponsors are assigned dedicated teams of analysts with expertise in fields such as geographical analysis and predictive modelling. Nectar uses transactional data to develop propensity models; for example it can identify ‘at risk’ customers for a sponsor those who might be spending less or looking to switch suppliers.
For example we can look at customers of Dulux typically painters and decorators who make frequent transactions, and use that data to say ‘look, here are a group whose spending is tailing off, we think they might switch,’ says Nectar for Business’s head, Charlie Humphreys. We can then get Dulux to trigger an email or piece of direct mail to that group, offering them a deal such as spend X amount in the next week and we’ll give you extra points.
Humphreys adds that in the current economic climate, the concept of collecting points is appealing more to the 500,000 small businesses in the Nectar programme. Some companies trade points for staff days out they perhaps couldn’t otherwise afford, whilst one-man-band types tend to use them to cut overheads where they can. What this drives is a virtuous circle of people earning and redeeming their points which is obviously beneficial to the sponsors, says Humphreys.
If customer loyalty isn’t already high up on your agenda, chances are it will be creeping its way up. Customer retention programmes are becoming more than marketing initiatives now they are business initiatives, says Ed Weatherall, managing director of Concep. Over the past couple of years CRM has been making a big comeback and as businesses start to fear losing money, they’re going to want to stay as close to the clients they already have as they can.
