The 4 C’s of B2B Customer Loyalty
Enterprise software companies have been particularly susceptible to the customer acquisition over retention bias because they get a substantial amount of their revenues up-front in license fees. In addition, their customers face high switching costs from the investments that they have made in installation, configuration/ customization, integration with existing systems and end user training. Once they sign on, they usually do not find it cost effective to move to a competitor’s system.
However, the return on investing in existing customer relationships is much higher than simplistic financial models might suggest. Value comes from:
- Opportunities to up-sell new products and services, creating ongoing revenue streams
- Opportunities to fulfill ancillary needs over time; for example, services for system optimization or operational improvements
- The ability to support new customer acquisition goals by providing references during the lead generation and sales processes
- Serving as valuable sources of insight on the business problems your company solves, improving both short-term marketing and sales efforts and long-term strategy
As enterprise software markets continue to shift from on-premise deployments to Software as a Service (SaaS), the revenue lifecycles for new customers and existing customers change significantly. Revenues that were paid up-front are now payable over time; and SaaS usually has lower switching costs. (Although depending on the nature of the application, end user training and integration still serve as significant barriers to switching.) Even for vendors that will move slowly into SaaS or maintain a hybrid business model, customer retention and loyalty metrics need to become much more important to enterprise software executives.
So, is your marketing organization doing everything that it should to maximize customer loyalty?
Step 1: Measure and Benchmark
Ongoing dialogue with select customers gives you a good idea of what is going on of your customer base. However, you need more systematic measurement benchmarking, including anonymous feedback conducted over time, to acquire a truly accurate picture of your customer base. Questions to consider:
- Are your customers truly satisfied with your offerings and your company? Are they getting the strategic and quantifiable benefits that they expected?
- What are their metrics of success (not just your metrics of satisfaction)?
- What do they really value in your offerings? In their relationship with your company?
- What is their intent to repurchase? How is this changing over time?
- What would they tell your prospective customers about working with your company?
- What solution gaps did they have to fill when implementing or using your product? When expanding their implementations or serving new end user populations?
- How could you serve them better?
Step 2: Invest in the 4 C’s of Customer Loyalty
Customer communication should go beyond one-way communications providing product updates and product roadmaps, although these are important. Proactive, outbound communications should include:
- Responses to any actionable issues that come to light during benchmarking
- Best practices for deploying your products
- Issues that surround customers’ use of your product; for example, how to best “market” the system to end users
- Topics of specific relevance to existing customers, e.g. upgrades
- Information about your company; not just financial results but communications that put a “human” face on your business
Some marketing organizations view customer communication as an afterthought, simply an additional audience for prospect communications. However, with their strategic importance, customers deserve dedicated marketing resources and a slice of the marketing budget.
Goals for customer collaboration should be part of your account plans, especially with key customers. How you best work together depends on both the customer’s organizational goals as well as the motivations and goals of key individuals that touch your company.
The product roadmap is an important area for two-way collaboration. Existing customers can add valuable input to the product development process, and mining this input through a collaborative partnership builds trust and loyalty. For more insight into how to make this collaboration work effectively, read Saeed Khan’s 2005 Pragmatic Marketing article “A Model for Metrics-Driven Feature Prioritization.” I have seen the model that Saeed presents work well in multiple companies.
Formal customer communities give your customers a stronger identity as a group within your company’s extended enterprise. Giving customers the opportunity to interact and share ideas and best practices with other customers is a critical part of the identity building processes. Salesforce.com has been particularly successful with its community strategies.
Community-building vehicles include:
- Customer portals with interactive features such as blogging, document sharing, perhaps via wikis, discussion boards, etc. Depending on the nature of your business, you may include partners as part of the same portals. While they shouldn’t necessarily lead the effort, internal company stakeholders such as product managers and services leaders are critical to getting the portal of the ground and keeping the dialogue going.
- Formal user groups. While Web conferencing technologies make it easier to form user groups, they should be organized and encouraged to include opportunities for face-to-face interaction. The more personal the interactions, the stronger the bond.
Customer communities with self-determination generally forge a stronger identity because key members are more personally invested in their success. However, self-determined communities require committed customers. It may be difficult to find customer representatives who are willing and able to take on that extra work. Splitting up community roles carefully and organizing them so that customers get a maximum of decision making and a minimum of administrative responsibilities works best.
Customer loyalty does not just stem from interactions with just Sales or Marketing; a customer’s interactions with Service, Support and even Legal or Finance staff can have a significant impact. Getting everyone in your organization aligned to customer loyalty goals and proactively training them on how your company expects customers to be treated can be as important as implementing the right incentives for your sales staff.
Step 3: Evaluate and Improve
Customer loyalty is more important than ever, enabling companies to achieve both customer acquisition and customer retention goals. As it becomes a part of the way everyone does business every day, you will identify new opportunities for improvement and profit.
Posted on Sun, November 3, 2013
by Linda Sonne