B2B Customer loyalty development: where to start?

Collaboration – 13 August 2012

Your company is well-established in its sector. Sales are slowly progressing. Your market has reached maturity. Your clients are no longer loyal. The competition is constantly offering rebate or loyalty programs to their customers and it seems to be working. However, your clients return to you from time to time. Should you practice methods similar to those of your competitors? How do you develop customer loyalty?

You are contemplating setting up a customer loyalty program. Before diving in, an analysis of sales and your different clients, with your offer, can identify the best client segments and the reasons that motivate you to invest in the development of their loyalty.

Relevant figures

Below are some statistics supporting an analysis in order to decide whether or not to create a loyalty program:

  • 30% of a company’s clients are not profitable.1
  • A 5% increase in the client retention rate results in a rise in profits ranging from 25 % to 85 % depending on the sector.2
  • A 1% increase in the client retention rate signifies an average 8% increase in profits.3
  • Reactivating clients in B2B who have already been acquired costs 5 to 10 times less than acquiring them for the first time.
  • As it is quite costly for a company to go after new clients, it is very profitable to develop a loyalty program among existing clients and to work on increasing sales generated by this clientele.

With this in mind, you will understand the importance of analyses of company data.

A loyalty program or not?

Once the analysis phase is finished, several strategic recommendations will be developed and decisions will be made concerning those clients which are not very profitable to the company. There may also be adjustments made on the offer depending on the needs of different client segments. Other initiatives are also possible. If these initiatives are not sufficient or do not have enough leverage, then a loyalty program could be developed.

Loyalty programs establish solid relationships between your company and your clients and get a leverage effect on profitability. However, a loyalty program is not a “copy-paste” recipe. It should respond to the expectations and needs of clients targeted by the program.

Steps

To summarize, the elaboration, implementation and operation of a loyalty program go through three main steps:

  1. Research
  2. Strategy and implementation
  3. Measure and optimisation of performance for each segment

Turnkey loyalty program

If you do not feel able to develop a customer loyalty program on your own, ask experts for assistance. Exo is able to guide you in your efforts. We’ve developed a turnkey client loyalty and retention program to answer the needs of companies experiencing client erosion problems or who wish to work on loyalty development to increase sales and profits with their existing clients.

For more insight on the topic, I recommend Lynda St-Arneault’s blog post on B2B loyalty programs.

Before diving head-first in this adventure, consult us.

Sources:
1. Jonathan Byrnes, Massachusetts Institute of Technology.
2. Frederick F. Reichheld, en collaboration avec la Harvard Business School.
3. Gartner Group
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