The business environment is facing some of its greatest challenges ever: competitive pressure from home and abroad, sales force erosion, increasingly dynamic technologies, additional trading regulation, to name but a few. In the B2B arena, where supplier and customer face similar challenges, such issues have a spiralling effect. These are just some of the reasons behind the growing need for an intensive re-examination of profit drivers.
Financial success derives from supplying profitable customers – and the rewards of better retention of those customers are extremely seductive. A five per cent increase in customer retention yields a 35 per cent increase in lifetime profits for a typical software house; for office building management this is 40 per cent; for a commercial brokerage the figure is nearer to 50 per cent; and for insurers the average increase is 84 per cent. Such were the findings of Bain & Co. Consultants, in their comprehensive study on the effects of customer longevity.
Why is it, then, that arguably one of the most effective and dramatic ways of improving profitability is usually only afforded an inbound customer care line? How do you turn this around to increase retention? The answer, or at least a very robust start, lies in the contact centre or similar: that hub of customer communications for most modern businesses. This can be in-house or outsourced.
More processes than ‘the norm’ – lead management, customer service, complaints resolution – are now necessary to be ‘best in class’ at maintaining customer relationships. Such processes should also include the often neglected satisfaction management (not measurement), and key to this approach is dialogue. Only through talking will you be able to probe the issues, clarify opinions and swiftly address any issues raised.
Strong relationships
The relationship between customer satisfaction and customer retention is strong. There are many forces influencing satisfaction: competition feeds expectation; styles and preferences change; corporate buyers change. Another major hurdle for some B2B organisations is the management of end-user satisfaction when the product is sold via an intermediary.
It is vital to distinguish between measuring customer satisfaction and its management. Instead of taking snapshots of customer temperament and disposition, organisations should continually track satisfaction, using carefully-honed parameters which probe for the underlying attitudes driving satisfaction and purchase behaviour. While tracking, specific measures need to be in place to address dissatisfaction triggers, including small changes for individual customers as well as larger-scale policy or process changes.
Steps to success
1. Pilot.
Begin with a pilot study to prove the concept. Retain discrete control groups for each segment, so that effectiveness can be compared and measured.
2. Segment and refine.
Identify which customer groups to examine and refine these segments further, perhaps based upon value, recency and frequency of purchase.
3. Questionnaire development.
This is crucial. Seek to understand what triggers both satisfaction and dissatisfaction and to evaluate the extent to which this causes a change in buying behaviour.
4. Problem resolution.
Develop an effective system to deal swiftly with any issue raised: delays only aggravate.
5. Staff.
The quality of dialogue and interviewer are paramount. Select with care.
6. Analysis.
There are many forms of analysis appropriate to such programmes ie. understanding results, interpreting the hierarchy of importance of actions taken and evaluating ROI.
7. Development and evolution.
You will not achieve perfection first time and will need to test the impact of subtle changes.
Output
It is crucial to understand which elements of your products or services represent key drivers to satisfaction, and to build models that demonstrate the relationship between stated intent and actual action.
A well-conceived programme will achieve a happier customer base with a propensity to spend more and stay longer. It will also achieve a bottom-line improvement for the supplier. Success should be based on the validated identification of:
key drivers of satisfaction and customer retention
- product and/or procedural standards that require additional focus and their relative importance
- measurable returns on investment.
- It must leave the buyer with no outstanding irritations and a strong feeling that their opinions matter.
What direction does all this give the B2B marketer? It leads the way to a re-examination of profit drivers and a critical evaluation of current programmes. Customer retention through satisfaction management is not easy but it is rewarding – quickly and unquestionably.
