As the recession takes its toll, marketers are increasingly expected to do more with less. So what can you do? One answer is to segment your customers by the experience they have with you so that you can focus on the most loyal, lucrative and influential segments.
Why segment by loyalty?
According to research Satmetrix conducted with Fred Reichheld and Bain & Company, loyal customers exhibit four key behaviours that drive growth and profitability:
1. Repurchase Vitally important in a downturn.
2. Increased purchase B2B companies are more likely to up-sell and cross-sell additional products and services to loyal customers.
3. Refer you This word-of-mouth recommendation both drives new business growth and reduces the cost-of-sale.
4. Provide feedback Insight on product and service innovation can be extremely valuable when every decision needs to pay off.
Consequently, being able to identify which customers will behave in this way, and why, is critical to success and to making your marketing budget work harder.
Use Net Promoter
Obviously, there is no one-size-fits-all approach to segmentation. Net Promoter helps you identify the strategic value of a customer because it segments by the level of loyalty and attributes financial value to the resulting behaviour. The answers to the Net Promoter question (‘How likely are you to recommend product/company/service x to a colleague or a friend?’) segments customers into three groups based on whether you have missed (detractors), met (passives) or exceeded (promoters) their expectations. As a result you can take immediate actions as follows:
Activate your promoters to positively refer your business more often.
Passives are often prone to accepting more compelling offers from competitors. Consequently, these accounts may require more urgent attention to first retain, then convert to promoters perhaps by targeting with tailored offers that exceed their expectations.
Detractors can cost your business, either by defecting (despite making investments to recover the relationship) or by feeding the marketplace with negative comments about your business. We suggest you take the most profitable detractor accounts first and identify if you can turn around the relationship. If you can, great! But if not, exit the relationship in a positive manner and minimise the negative word-of-mouth. (Clearly the level of revenue and margin impacted by this process will drive the extent of this action).
Obtain Net Promoter scores at multiple levels of the account. Ensure you capture feedback from decision-makers, influencers, and end-users of your product or service.
Use the feedback as a catalyst to drive a strategic account review with the most senior contacts you can reach.
Overlay account-level NPS feedback on sales pipeline data. We expect you’ll qualify what’s real, plus understand where there are quick wins for the business to close.
In a benchmark study of 10 enterprise software companies, Satmetrix calculated that each promoter customer generated an additional £400,000 of revenue through positive recommendations while each detractor customer created a loss of £500,000 through negative recommendations. While these economics may not apply precisely in your business, we anticipate they will be directionally similar in many B2B markets.
By adding key questions to your Net Promoter programme you can calculate the impact of word-of-mouth recommendations on your business and provide further proof of the value of driving referrals and loyal behaviour.
Using Net Promoter as an integral part of your segmentation and strategic account management will help you to prioritise and focus marketing action on delighting the most loyal, influential and lucrative customer segments.
