Do B2B Loyalty Programs Work?

The case for B2B customer loyalty

Successful businesses are always looking to increase profits. Driving new sales and cutting costs are a couple of ways to accomplish this goal, but both approaches have substantial downsides. Acquiring new customers is expensive. Businesses need to invest in order to acquire new revenue growth, whether through advertising and marketing or employing more salespeople.

On the flip side, cutting costs may sound straight-forward but can often lead to diminished product quality or customer service, contributing to customer attrition. Today, it's easy for customers to seek out new vendors at the click of a button.

Another way to drive profits is to employ enhanced customer loyalty techniques to increase customer engagement, retention and loyalty. Doing so has many economic benefits that will help an organization increase profits – with minimal investment and low risk. Consider some of the customer engagement and loyalty statistics included in the often-quoted study, The Economics of E-Loyalty, from the Harvard Business School:

• Acquir­ing new cus­tomers can cost as much as five times more than sat­is­fy­ing and retain­ing cur­rent customers
• A 2% increase in cus­tomer reten­tion has the same effect as decreas­ing costs by 10%
• Increasing customer retention rates by 5% increases profits by 25 to 95%
• Cus­tomer prof­itabil­ity tends to increase over the life of a retained customer

B2B loyalty programs – one size does NOT fit all

The rule of thumb for all loyalty programs is that when the purchaser can benefit from the program, its impact is the greatest.

However, many large companies and government agencies frown upon loyalty programs. They may even have an employee code of conduct, preventing participation in such a program. These companies tend to look for the lowest price, guaranteed supply or highest fill rate as key drivers for repeat purchasing and loyalty.

Similarly, buyers and/or category managers for large chains or organizations are less able to be influenced by participating in a loyalty program as they usually cannot personally benefit. But a program can be structured to offer appropriate enticements to these stakeholders that benefit the company employing them, such as account credits, free shipping, free training courses, travel credits for trade show attendance, and charitable donations, etc.

The B2B target audience most influenced by a B2B loyalty program is the owner-operator. They tend to make many of the business purchasing decisions and are also the program's direct beneficiaries. The more they buy, the more they benefit, which will impact purchasing behavior.

Many companies will find a mix of these types of customers, but they still need to enhance the customer experience to minimize churn, increase retention and grow sales. A well-structured loyalty program will include appropriate rewards for all customer types and contingencies. Small and medium-size accounts will have a wide range of reward options to suit all tastes. While at the same time, larger customers who demand the lowest price or do not allow staff to participate will be excluded from a reward program as they receive other benefits to enhance the customer relationship.

Most of the programs offered by Lift & Shift reflect this reality and include organization-focused rewards such as account credits, free shipping, charitable donations and free training for larger customers, while also including individual-focused rewards such as gift cards, merchandise, experiences and trips, for the owners of small-medium sized accounts.

The role of customer data

Reward options, program language and program purchase goals will all be driven by customer data. What has the customer been buying? How much, how often, and what things were bundled together? Have they bought your newest product category? The more you know about the customer, the better. Most companies can learn a great deal about their customers if they analyze the customers' historical sales data and program profile data. Doing so allows you to tailor each customer's messaging, increasing program relevance and ensuring you are more likely to achieve program sales and profit objectives such as:

• Filling purchasing gaps
• Encouraging repeat purchases
• Introducing new products
• Reactivating lapsed customers
• Encouraging new customer referrals

Customer data is an incredibly valuable tool. Used correctly, it does many important jobs; used incorrectly, it doesn't.

Our article, Successful B2B Loyalty Programs are driven by Customer Data Analytics, provides more detail on how this is done.

B2B loyalty programs do work!

Any reward program will work so long as it is effectively managed by the B2B marketer. For this to be the case, several things have to happen:

1. Recognize and appreciate the value of customer retention. It's not all about getting new customers – that's expensive. Retaining and growing customers is less expensive and has vastly better odds of success.
2. Embrace the fact that B2B customers are really not that different from B2C customers. They come in all different types and sizes, each with different terms of engagement and growth opportunities. A good program will reflect these nuances in order to succeed.
3. Use customer data to drive the program set-up, structure, communication, content, offers and rewards. This will increase program relevance for all stakeholders and increase program impact.
4. Build a sound performance-based economic model. Ensure reward offer costs are only triggered by specific purchasing outcomes and are in line with each reward offer's profit opportunity. In this manner, program ROI is always excellent.
5. Learn from the program. A reward program is a long-term sales tool for your organization, and the program structure is not carved in stone. You are entitled to alter the program structure with reasonable notice to participants. Measure the program impact every three months at a minimum. Repeat what works and discontinue or tweak things that don't. When you ask participants for feedback and evolve your program to suit them better, they will respond.

The Ultimate Guide to B2B Loyalty Programs

This article is part of a series covering how growth-based loyalty programs can elevate sales and company profits by incentivizing current customers to spend more, attracting new customers with appealing rewards, and motivating your sales team.

If you'd like to learn more about B2B Loyalty Programs, then please read the next article in the series:
"The Difference between B2B and B2C Loyalty Programs"

For an overview of all articles in the series, please visit our resource page "The Ultimate Guide to B2B Loyalty Programs".

Lift & Shift offers a powerful B2B reward platform that can help your company leverage its sales data to drive incremental purchases with customers and channel partners or motivate sales staff. We work with manufacturers, distributors and service providers to analyze sales data, identifying purchasing gaps and other valuable targeting opportunities. 

We create and deliver highly relevant offers to customers, in-house sales staff or sales associates, motivating your target audience to respond, using a wide array of appealing reward options as influencers. Our performance-based reward structures deliver an unparalleled return on investment, with absolutely no wasted budget. 

Our customizable reward platform enables clients to easily benefit from a robust loyalty reward program. It's affordable and includes Lift & Shift’s turnkey professional program administration. We take care of everything so you can focus on your key initiatives.