Customer Loyalty Techniques for Business to Business Marketing Programs

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1 Customer Loyalty Techniques for Business to Business Marketing Programs Overview Times have and continue to change for B2B marketers. Now, more than ever, drawing upon behavioral and statistical insight to deliver marketing value to the C-Suite of B2B organizations is a strategic business imperative. From multi-channel communications to loyalty and retention initiatives, gaining first-hand insight into how companies are effectively aligning marketing programs to their customer lifecycles and voice-of-the-customer programs is the information B2B marketers are clamoring for to secure a competitive advantage and forge deep, lasting customer relationships to drive the bottom line. Using data driven insight to develop more tailored 1to1 marketing communication, loyalty and engagement programs is paramount to creating sustainable behavioral change within their company and customers. Loyalty 360 The Loyalty Marketer s Association in partnership with set out to uncover the keys to building and delivering successful customer experiences in B2B marketing. In an online survey conducted from September through mid-october 2010, more than 250 customer loyalty and retention executives from a cross section of B2B industries shared their insights and experiences. Their candid responses allowed and Loyalty 360 to answer two critical questions: (1) How are B2B companies becoming successful in customer loyalty and retention campaigns? (2) How are they aligning their marketing programs to customer lifecycles and voice of the customer programs? Summary of Key Findings B2B organizations realize that the majority of their new sales come from existing customers. Yet, with only half of those polled having a department whose primary focus is on customer retention and loyalty, the need to embrace this realization and make it a focal point of a company s business/marketing strategy is apparent. B2B organizations are beginning to take a closer, more strategic look at customer loyalty initiatives and gaining a clearer understanding of the proven value a customer retention department could mean to their business and their bottom line.

2 What percentage of your new sales comes from existing customers? 12% 14% 11% 16% 30% 17% 60-79% 20-39% Don t Know % 0-19% 40-59% Loyalty is a journey, not a destination and the path is filled with constant changes and technological advances. Customer loyalty leaders are nimble and able to embrace and respond to this rapid pace of change effectively and efficiently. Mark Johnson, CEO of Loyalty 360 The Loyalty Marketer s Association B2B companies with customer loyalty departments use the myriad opportunities available to them to listen and respond to their customers. They align their voice-of-the-customer program with their customer lifecycle, and they have metrics in place to measure the success of their retention efforts. A significant amount of those without a program are planning to launch one in the future. And when these companies start this journey, they will do so with the strong support from the C-Suite which is the key to any successful customer loyalty initiative. Overall, customer retention and loyalty are seen to be important strategic issues as three-quarters of respondents revealed that at least 20% of new sales come from existing customers with nearly half (44.6%) reporting that at least 60% of new sales come from existing customers. As we all know and continue to hear, it is much more cost effective to listen, engage and retain a current customer than it is to prospect for a new one. Being able to draw upon years of data to make effective marketing decisions on a current customer s preferences and interests versus making assumptions or employing ineffective mass marketing techniques to acquire new ones is a key benefit of loyalty programs and effective voice-of-the-customer initiatives. This is a trend that Loyalty 360 continues to see as organizations in great numbers move from a mass acquisition marketing approach to more effective data driven loyalty/engagement marketing programs that, in turn, drive more focused customer recruitment and acquisition efforts. The data gleaned from current customers provides great insight into lifestyle/demographic groupings, revealing the tendencies of their most desired, engaged and therefore, profitable current customers. This deeper dive arms marketers with the analytics they need to most effectively target, engage and acquire new customers. 2

3 What type of staff do you have on your customer loyalty team? An Inside Look At Companies With A Formal Customer Loyalty/ Marketing Retention Program 14% 4% 26% As validated by feedback from Loyalty 360 members, B2B organizations are looking for answers on how to increase customer commitment and advocacy. Taking a strategic approach is imperative to ensure these programs not only have the senior level backing, funding, and commitment needed to grow and succeed, but also create more engaged customers/brand participants. 15% 18% 23% Customer Service Representatives Marketing Support Technical Resources Sales Market Research Other What position in the company does the customer retention/loyalty department report to? 11% 8% 13% 3%3% 5% CEO Sr. VP/VP of Sales CMO Sr. VP/VP of Operations 19% 38% Sr. VP/VP of Marketing Other COO Don t Know In years past, customer loyalty was clearly a sales and account management function guided by a belief that any program implemented would drive incremental sales growth and retention. Recently, we ve seen a surge of dedicated marketing support for customer retention efforts within B2B organizations. We also see that because the insights derived from loyalty/engagement marketing and voice-of-the-customer programs impact the C-Suite (CMO, CIO, COO, FCO), it is important to be accountable to and cognizant of the respective needs of these stakeholders. Data, integrity, insight, and constant monitoring of these programs are necessary for continued success. To better understand this shift and what it means, Loyalty 360 and set out to gain a deeper understanding of the customer loyalty landscape within these B2B organizations. Existence of a Dedicated Customer Loyalty Department More than half (55.4%) of the surveyed companies currently have a department whose primary focus is on customer retention and loyalty. A full 93.9% of these companies report there was senior level executive support for creating such a department the high-level support that is imperative for the launch, commitment and long-term success of these programs. It takes time for loyalty programs to create a baseline behavioral database and to generate the subsequent models/insight gleaned from them. What s more, launching the loyalty program is only the beginning. The need for continuous upkeep, support and tweaking are required to make sure all phases of the program are working optimally. Loyalty is a journey, not a destination. With technologies, processes and ideas in the loyalty space changing at an extremely rapid pace, the ability to assimilate them effectively into the current initiatives (as they should) is critical. To further this goal, a direct link from the customer loyalty team to the C-Suite is beneficial. In fact, more than one-third (36.4%) of respondents indicated that their department reports directly to the CEO; 21.2% report to the Sr. VP/VP of Marketing; and 15.2% report to the Sr. VP/VP of Sales. Across the board, the loyalty team is comprised of personnel from a variety of departments across the company. 3

4 What is your organization s annual marketing budget for retention marketing programs? 7% 11% 5% 3% 2% 6% 28% 38% <$100 thousand Don t Know >$2 million $250-$500 thousand $100-$250 thousand $750 thousand-$1 million $1 million-$2 million $750 thousand-$1 million A good rule of thumb for companies is to invest 1-2% of top line revenue into their reward/loyalty initiatives to drive short-term engagement and long-term profitability. Stacy Hobson - Director of Customer Loyalty - Compensation of Customer Loyalty Staff Members The responses were mixed regarding compensation of customer loyalty staff within the B2B organization, with slightly fewer (41.4% vs. 46.6%) incorporating retention and attrition components into the compensation plans of the employees running these initiatives. In breaking down this topic further, half of respondents use a percentage of base salary to determine customer loyalty staff compensation and 16.7% calculate it based on a percentage of retained customers. The remaining third use other factors such as growth of the program, decrease in attrition and others tied to communities/social media metrics. When developing loyalty programs, Loyalty 360 believes it s important for marketers to consider a number of metrics: engagement, profitability, word of mouth, and attrition rates. Other temporal factors affected by where the program may be in its lifestyle should also be addressed. Due to the natural changes in the business cycle, reward compensation should consider both hard (profitability, spend, ROI) and soft measures (referrals, posting on feedback forums, participation in user groups, suggestions, website visits, etc.) of success when developing effective compensation schemes. The longer the programs are in place, the greater the amount of data available to help create these different models. This in turn will help companies tailor compensation plans that will create greater incentives for those running the programs. Budget for Retention Marketing Programs While nearly one-third (28.6%) did not know what their company s budget was for retention marketing programs, most (37.5%) reported a budget of less than $100,000. At the other end of the spectrum, 12.5% have budgets that exceed $2 million. While we did not tie the size of the company to the size of the reward budget, a good rule of thumb is that an effective program should invest 1-2% of top line revenue into their reward/loyalty initiatives to drive engagement in the short-term and profitability in the long-term. These programs will typically drive incremental results (sales lift) of 2-10%. The overall responses break down according to the figure seen to the left. 4

5 Where does your customer lifestyle or voice-of-the-customer program begin? 18% 14% 4% 43% Initial contact/lead Immediately after the sale 3-6 months after sale Pre-sales activities 6-9 months after sale Without strategic vision and commitment from company leaders, many loyalty programs will falter 18 months after launch. Stacy Hobson - Director of Customer Loyalty - Defined Customer Lifestyle/Voice of Customer Program Slightly more than half (51.8%) of responding companies have a formally defined customer lifecycle or voice-of-the-customer program upon which they base their marketing programs. The majority (53.6%) of respondents align their retention marketing programs to a customer lifecycle; 21.4% are created ad hoc and 10.7% use a voice-of-the-customer model. This is an area where the insight gleaned from effective loyalty programs and CRM databases can help foster more successful retention efforts. The challenge lies in the ability of B2B organizations to look across the industry and assimilate data from disparate databases (warranty cards, loyalty programs, call center, social media initiatives, purchase, returns, purchase feedback, etc.), rate them effectively, and use or develop score cards/dashboards that are tuned into the specifics of the organization. However, where companies begin their customer lifecycle/voice-of-the-customer program varies. The challenge is not where in the sales process the voice-of-the-customer program starts, but rather the effective use of social media to glean the optimal kind and depth of data. For instance, a warranty card will give you insight into the person and their behavior (someone who takes the time to fill out a warranty card has a level of engagement that others may not). The true value comes when it is properly identified, tagged with other data sources and put into effective models. These steps give you data that is more impactful and more actionable. Obviously, the earlier you can start to gather data, ascribe it to an individual and build on it with transactional, attitudinal and lifestyle informational overlays, the more predictive it will be. Also, the more modeling that can be done on the back side will generate more detailed predictors of early behavior that should be looked for and encouraged and therefore, more profitable. 5

6 What metrics are you using to measure success of your retention campaigns? 10% 12% 2% 4% 8% 17% Which channels do you use to listen to/respond to your customers? Listen to 26% Customer satisfaction/loyalty metrics Retention/Attrition rates Revenue targets Upsell or cross-sell leads Net Promoter Score Number of customer saves Number of programs completed Don t Know 12% 7% 8% 15% 18% 19% Measuring Retention Campaign Success Survey respondents reported using a variety of metrics to gauge the effectiveness of their marketing retention programs. For years, measuring B2B customer loyalty was done by one or two metrics: Do we still have the customer? Are they satisfied with our services? Obviously being able to retain the right customer is imperative and satisfaction is still important, but some would say satisfaction has waned in importance as engagement has become the new buzzword. Engagement, advocacy and loyalty using an active voice-of-the-customer approach are keys to short and long-term success of these corporate marketing initiatives. However, this requires strategic vision and commitment from leaders to integrate what can be separate entities within the corporation. Without this commitment, many programs will falter 18 months after launch. With the trend to dedicate more resources to customer retention, it appears that B2B marketers are utilizing more sophisticated tools to listen and evaluate the customer relationship. Again the challenge here is the ability to look across (potentially siloed) departments and have open access to disparate databases, making sure the data is clean and tied to a respective customer and that models are built to glean this insight. In addition to ensuring that the data is detailed and comprehensive, B2B marketers need to use the right weighting and analytic tools in order to generate the most actionable insight. Channels to Listen/Respond to Customers Companies use a variety of communication channels to interact with customers. Listening to customers is most often done via surveys; responding to them is most often done through call centers. Social media, word of mouth marketing, interactive company and industry forums, and corporate and industry blogs are great sources of rich behavior, customer centric data. This data combined with the right process and model can provide invaluable insight to the B2B marketer. Listening and responding to customers is the area where companies have the most uncertainty. They are wondering how to listen more effectively to their customers, which customers (connectors, mavens, influencers or all) they should listen to, and how should they effectively weigh/measure these individuals. Respond to 11% 13% 8% 12% 14% Loyalty 360 is continually asked, should we listen to and respond to all customers or only a select few. If it is a select few, how do we effectively identity and weigh them? The key is to start the voice-of-the-customer program as early as possible and to evaluate the depth, breadth and frequency of interactions and purchase behavior to identity the true stakeholders and influencers. Effective models will allow brands to make actionable insights from this disparate and deep data. Channels most often employed to listen to customers are shown on the figure seen left. Surveys Company websites Advisory boards Blogs Call center Social media communities Discussion forums 6

7 An Inside Look at Companies Without a Formal Customer Loyalty/Marketing Retention Program Companies that forsake a loyalty program now will be further behind in their respective journey to customer understanding, engagement, advocacy and increased share of wallet. Mark Johnson, CEO of Loyalty 360 The Loyalty Marketer s Association As previously indicated, just under half (41.5%) of companies surveyed do not currently have a customer retention/loyalty department. While roughly two-thirds (63%) of these companies do not plan to create one in the future, nearly one in five (18.5%) do. Companies such as ebay, Allergan, P&G and other organizations have seen great success in their B2B loyalty programs. The list of companies who are actively looking for engaging programs continues to grow. Best-practice examples show that the most successful programs are dynamic and take advantage of the technologies, data and media at their disposal. Leading companies realize that using this information helps them create a competitive advantage (both short- and long-term) and drive sustainable behavioral change that will further enhance the engagement, loyalty and advocacy of their consumers. Empirical evidence supports the belief that the existence of and commitment to loyalty initiatives (as long as best practices and applicable technologies are used) are very effective at creating significant data driven insight insight that has been shown to significantly impact all areas of the organization including marketing, operations and customer service. Companies that do not have programs and are not willing to invest in them are going to be at a greater risk than ever to lose customers and share of wallet to those companies that do. Once a customer is engaged in a true voice-of-the-customer loyalty initiative, the chances of winning them back may be challenging for the organization who lost the customer in the first place. Remember loyalty is a journey, not a destination and those companies who forsake a program now will be further behind in their respective journey to customer understanding, engagement, advocacy and increased share of wallet (profitability). Let s look closer at how these companies will go about creating such a department: 80% indicated there will be executive support for creating the department. While 20% do not know to whom the department will report, others indicated the department will report to the Sr. VP/VP of Sales (40%), the Sr. VP/ VP of Marketing (20%) or the Sr. VP/VP of Operations (20%). The departments will be comprised of a mix of staff from customer service (25%), marketing support (50%) and sales (50%). 7

8 Putting it all Together B2B marketing seems to be a bit behind. But, they are now following B2C s lead and moving in the right direction looking not only to retain customers but working to build advocacy as well. Stacy Hobson - Director of Customer Loyalty - About Loyalty 360 Connecting. Educating. Guiding. This is what Loyalty 360 The Loyalty Marketer s Association is all about. Loyalty 360 is an unbiased, market driven, voice-of-the-customer focused clearinghouse and think-tank that is committed to bringing loyalty to the forefront as a critical marketing strategy. A trusted source for cuttingedge research, best practices, and networking opportunities, Loyalty 360 gives marketers the expert insights and guidance they need to better understand loyalty and develop programs that effectively engage their customers and employees and build stronger relationships with them. About is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions delivered within an integrated framework, helps customers at more than 45,000 sites improve performance and deliver value by making better decisions faster. Since 1976 has been giving customers around the world The Power to Know. Overall, B2B organizations realize that the majority of their new sales come from existing customers. Yet, with only half of those polled having a department whose primary focus is on customer retention and loyalty, the need to embrace this realization and make it a focal point of a company s business/marketing strategy is apparent. Loyalty 360 continues to see organizations that are struggling with the rapid and seismic changes in the marketing field. The willingness to embrace new technologies is tempered by the fact that they need to make sure these new technologies are creating effective and measureable behavior change and ROI. Loyalty and engagement programs can be the focal point for these initiatives. We speak continuously with CMOs from these organizations, and the consternation they report with this rapid rate of change and the impact these programs have across the C-Suite has led to trepidation and unwillingness to adopt new technologies (mobile, social, and other emerging.) This is precisely why B2B organizations are beginning to take a closer, more strategic look at customer loyalty initiatives and strive to gain a clearer understanding of the proven value a customer retention department could mean to their business and their bottom line. As with B2C marketing, when the recession hit, this survey indicates that B2B marketing seems to be a bit behind. They are now following B2C s lead and moving in the right direction looking not only to retain customers but working to build advocacy as well. Those with customer loyalty departments use the myriad opportunities available to them to listen and respond to their customers. They align their voice-of-the-customer program with their customer lifecycle, and they have metrics in place to measure the success of their retention efforts. A significant amount of those without a program are planning to launch one in the future. When these companies start this journey, they will do so with the strong support from the C-Suite which is the key to any successful customer loyalty initiative. 8