For some consumer marketers, the customer well might seem bottomless. But for their B-to-B brethren — particularly those that are specialized — the waters are a little more shallow. Business customers tend to be fewer in number, meaning each is extremely valuable. You don't want to lose even one.
But how do you prevent defection, and keep your customers active and buying from you? Let's look at seven strategic approaches to retention marketing that can help you retain your customer base, and, in turn, drive additional revenue and profit.
MEETING AND EXCEEDING CUSTOMER EXPECTATIONS
First and foremost, you need to deliver on the promise made to the customer at the point of acquisition. Meeting customer expectations is, quite simply, a minimum requirement for doing ongoing business. Any dissatisfaction with the product, service or experience will be an insurmountable barrier to retention. The best customer relationship management in the world can't overcome product problems.
Ensure that you have a viable, competitive product, and that all the other elements of product marketing are in place. Features should meet the market's need; quality has to be acceptable; and the item should be priced correctly and distributed well. In short, a maniacal focus on the core business is essential. Without this, any investment in retention programs is doomed — and a waste.
CUSTOMER SERVICE
The same logic applies to problem resolution. If a customer's product or service problem is not resolved quickly and satisfactorily, retention strategies are fruitless.
However, this isn't simple. As buyer expectations rise, so too can the necessary investment in customer service. But this function has traditionally been viewed as a cost center and a drain on profits. Less enlightened companies may feel pressured to squeeze expense out of customer service.
Studies have shown that strong service can have an important payoff in retention, and thus in long-term profits. For one thing, a customer whose problem was identified and resolved often indicates a stronger intention to repurchase than even a customer who's never had a problem before.
One strategy to consider is migrating the customer service function from a cost center to a profit center by training and motivating service reps to take advantage of opportunities to sell more into the account.
PENETRATION MARKETING
If you agree that customer acquisition represents an expense — or more accurately, an investment — and that the customer relationship only becomes profitable upon retention, then penetration is where the firm's profits lie. Penetration marketing is about maximizing the value of the customer asset by optimizing the sales to current customers, namely by cross-selling and upselling.
The concept is typically called account penetration, and often is the province of the salesperson assigned to the account. Skilled salespeople are natural upsellers and cross-sellers, and marketing can boost sales productivity with predictive modeling to identify opportunities and create campaigns to generate leads.
PREVENTING DEFECTION
This is the best way to ensure retention. An alert marketer can easily put in place effective defection-prevention strategies. Defecting customers almost always give off signals of their impending departure — if you pay attention. Identify the key variables and set up tripwires to capture the signals and put programs in place to remedy them.
CONTINUOUS-RELATIONSHIP SELLING
Most marketers are slaves to one-off selling. To any given customer we sell and then sell again, whether it's an upsell or a cross-sell. We're always hounding our customers to buy, and in the process we not only may make pests of ourselves but incur considerable selling expense.
What if you could convert a customer to a continuous buying relationship? Persuade the customer to accept an ongoing stream of product deliveries, on terms agreed upon in advance and delivered automatically. Essentially, this moves a customer to a replenishment scenario, characterized in recent decades by just-in-time delivery of component parts and raw materials in manufacturing.
In this way, the expense and time of reselling is eliminated, and revenue streams are more predictable. Certain businesses — like telecommunications, financial services and pharmaceuticals — are set up for continuous selling methods from the get-go. But there's no reason why you can't create such a model for your firm.
B-to-B marketers have enjoyed success creating continuous sales scenarios with:
- Post-sales support services.
- Replacement parts.
- Just-in-time components.
- Consumable products, like office supplies.
- Professional services.
LOYALTY PROGRAMS
Taking a page from the consumer world, some business marketers have found success with frequency marketing programs that reward customers for certain behaviors, such as repeat purchasing. These programs are not universally applicable in business, but they have their place, particularly in situations characterized by:
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A market where a competitive advantage is critically important.
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Management that's not inclined to compete on price, so an alternate source of value is needed.
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High fixed costs but low variable costs, which supports reasonable redemption expense.
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Perishable inventory, so the value declines as the deadline approaches.
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A short purchase cycle where purchase behavior can be tracked.
One of the most obvious opportunities for rewards programs is in businesses that mimic consumer purchasing behavior, like office supplies. Staples, for example, runs a thriving rewards program targeted to its small and medium-size business customers.
Outside of classic frequency marketing programs, however, there are abundant ways that business marketers can reward desired customer behavior. A long-standing practice has been special service levels. Best customers are assigned the top account reps and given dedicated customer service personnel to support them. Or the firm may build a special intranet behind the top customer's corporate firewall, allowing 24/7 purchasing at pre-negotiated terms.
WIN-BACKS
Despite the brilliance of your retention marketing, at some point a tragedy may occur — you'll lose a customer. But this is not a time for despair. In fact, customer defection presents an opportunity. Here's why.
The first step in reversing a defection is to consider very carefully whether you want the customer back. It could be that this customer is simply not right for you. That the cost to serve is too high. That the margins have been beaten down to the point of unprofitability. It may be better to let the customer move to a competitor that's able to make the relationship work.
But if the customer is of value to you, then you need to establish a win-back process. The first step is to find out what went wrong and try to fix it. This is usually the province of customer service or account management. They must assess the situation and quickly apply the kind of solution that'll bring the customer back. It's critical that these reps be knowledgeable and empowered to take fast action.
In many cases, even these quick moves will not solve the longer term problem. It will take more time and effort to persuade the customer to return. So companies put dedicated win-back sales teams in place. The win-back team needs special training (and special compensation) to work on bringing customers back.
Loyalty represents the source of all profits. By focusing on providing ongoing value to customers, identifying opportunities to improve that value, preventing at-risk customers from defecting, and reactivating good customers when they do defect, business-to-business marketers will be able to ensure maximum profitability.
RUTH P. STEVENS (ruth@ruthstevens.com) consults on customer acquisition and retention, and teaches marketing to graduate students at Columbia Business School. She is the author of “The DMA Lead Generation Handbook” and “Trade Show and Event Marketing.”
MEASURING UP
B-to-B Retention Metrics
If retention is difficult to define, it can be even harder to measure, especially for business marketers. The fundamental problem lies, ironically, in your customers' value. You want to retain them because they're so valuable. Yet setting up metrics is difficult for the simple reason that they are so valuable.
The ideal marketing metric is based on the test-and-control method. You want to isolate a certain set of customers from the rest of the customer base, apply a retention tactic to the remainder, and see what kind of lift you experienced in such obvious metrics as repeat purchasing, average order size, purchase of multiple products or services, or referral to buyers in other departments and outside companies.
But in most business marketing situations, it's virtually impossible to set up control groups because:
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Salespeople worry about inconsistent messages and offers going into their territories.
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Management worries about leaving money on the table when eliminating promotions to control accounts.
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Testing incurs extra expense and time investment.
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Customer universes are small, and products change rapidly, so this year's test may not apply to next year's business environment.
So B-to-B marketers are limited to proxy methods, such as:
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Measuring against themselves over time by looking at churn rate, repeat buying rate by segment (or any other metric) and hoping for an improvement.
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Measuring against their industry. Some industry groups invest in the kind of research that assesses benchmarks which any individual player can use as a yardstick.
Whatever measurement plan you adopt, the important thing is to set standards and expectations in advance so you can declare success or failure after your retention programs have been in operation for a reasonable time.
— RPS
WHAT WORKS?
Retention tactics you might want to try
- Survey customers (ask what they value — and how you're doing).
- Poll employees (they're the front line to your customers).
- Newsletters (print or digital).
- Proprietary magazines.
- Special events.
- Affinity merchandise.
- Lights-out marketing (i.e., automated communications triggered by predetermined decision rules).
- Outbound communications.
- Contests and awards.
- Special service levels.
- Welcome programs.
- Advisory boards.
- Occasional thank-you notes.
- Sales force incentives.
- Rewards programs.
