Want to Create a Successful B2B Loyalty Program? Avoid These 5 Common Pitfalls

Perhaps because the ROI of most sales and marketing tactics is virtually impossible to measure, most decision-makers focus on how much loyalty programs cost – instead of what they can deliver.

Many times, over the years, I’ve had a potential client interrupt my presentation and ask to skip ahead to the cost section, rather than hear about the typical ROI they should expect from a successful B2B loyalty program and how we achieve the results. They want to see whether they can afford the program – or if it costs less than other programs they may already be using. They approach the program with an attitude of how little they need to invest in it – instead of how much they should invest in it.

It’s important to understand a customer loyalty program is a highly efficient strategic sales tool that an organization and its sales team can use to leverage historical sales data to drive incremental sales and profits with existing customers (LIFT) and attract new customers (SHIFT).

A great loyalty program will be structured so that the reward costs optimize the financial benefits to your company. They are not designed to minimize reward costs. So long as the reward program is developed with a performance-based reward structure, with reward offers tied directly to targeted purchases from both existing and new customers, then the program will generate a positive ROI for your company. So often, after the program’s first ROI review, we’ll have clients ask us, “How do we get more customers using the program and earning rewards in order to get more of these results?” – A sure sign that they have stopped worrying about the reward costs and have become focused on the reward program’s positive impact on their bottom line. After that change of attitude, the program ROI really takes off as the company is prepared to make more investments in something they can measure. Perhaps because the ROI of most sales and marketing tactics is virtually impossible to measure, most sales and marketing decision-makers focus on what loyalty programs cost – instead of what they can deliver. 

Setting up and running a solid B2B customer loyalty program is a lot of work!

Even with an investment in loyalty software or custom development costs to automate certain program functions, it’s a full-time job for at least 2-3 people.

Many businesses are simply not prepared to make that sort of investment in human resources for something they have never attempted. Too often, an already busy member of the team will be required to add “the loyalty program” to their growing list of responsibilities. As a result, the business creates a simplistic incentive program, something the team member can “fit in” to their hectic schedule – and is often lacking even the basic automations needed for success.

The net result is quite predictable: an overly simplified “one size fits all” reward structure, not rooted in today’s account-based marketing realities; instead, every customer is presented with the same reward rules and offers. This is because the program manager lacks the time or ability to effectively analyze all customers’ historical purchasing data and develop personalized reward rules and offers, which are tied to growth objectives, purchasing gaps, order slow downs, or any other strategic sales issues or objectives the company has for each customer or account.

Another common failing is a lack of investment in program “builds” – the automated program tools that make the customer experience as positive as it should be. Too often, programs lack a detailed reward website with an account summary, a personalized monthly reward statement, and a customer service contact – all of which are crucial to making it easy for customers to participate in the reward program so it can have the desired impact on their purchase behavior.

Lastly, there are common reward program features that may seem like a good idea to the program operator – but not to the customers, such as:

• Premature point expiry - where points expire after only 6 or 12 months. This often aggravates loyalty program customers, many of whom have every intention of continued purchasing to accumulate enough points for a ‘big ticket” reward – until they realize they will never get there with the short-term points expiry rules and stop participating in the program
• A fee to join the program - This will ensure most of the customers with the greatest opportunity to be influenced by the reward program (and increase purchases), won’t bother to join in the first place.

B2B customers are much busier than consumers who take time to participate in B2C programs. B2B loyalty programs must deliver a good value proposition to the prospective B2B loyalty program participants. The program needs to be easy to join and use while remaining highly engaging and relevant or the program will not create customer loyalty; it might even have the opposite effect – especially if a key competitor’s B2B customer loyalty program is engaging.

Most customers will employ multiple vendors in a category for a variety of reasons. The opportunity with a B2B loyalty program is to tap into the existing customer’s spending data to see what they are buying now – and what products or services they are not buying, which may provide an opportunity to upsell and/or cross-sell – using rewards to reinforce the current spending (customer retention) and acquire more of the spending currently going to competitors (customer growth and new customer acquisition).

The most crucial error in loyalty marketing is not making use of your customer data to present the customers with relevant and realistic purchasing opportunities they can take advantage of to earn desirable rewards, while directing more of their total business to you, and not your competition, making them a more loyal customer.

If a customer doesn’t have a clear and accessible reward path to direct more spending to you, they likely won’t be able to reach their reward value. This lack of reward attainability results in customers losing interest in the program and abandoning it. Once this happens, there is very little chance of reengaging them with the program, and the value and potential program ROI decreases with each disengaged customer.

Another program feature that is imperative for customer engagement is a wide-ranging reward array to reflect the fact a company will have hundreds or thousands of customers each with different tastes, preferences or situations. 

Many program operators limit the reward selection to their own products or an account credit. 

This is a mistake! 

While your business products should be included in any good B2B loyalty program, they should not be the only reward options for the participating loyalty program customers.

Some customers may like gift cards. 

Others want to go on a trip.

Some may not be able to accept a personal reward, so workplace-oriented rewards work best for them.

It’s crucial to have something for every type of customer and business.

The key question to answer when selecting your reward options is:

What will best motivate a certain type of customer to buy more from us?

If it’s a gift card or a trip instead of an account credit or free product, so be it.

The goal of the loyalty program is to increase each customer’s lifetime value to your company, not simply to push your own product upon them; that is simply too limiting.

Any B2B company that expends resources introducing a B2B loyalty program should be doing everything in its power to ensure high levels of customer participation (existing and new) to re-coup all the program costs, fully leverage the program’s ability to be a profit center, and build brand loyalty.

This is far less likely to happen if the program is not well promoted to their customer base using the organization’s marketing mix and sales team.

A healthy participation rate among eligible customers is typically about 30-35% by end of year 1 and 75-80% by end of year 3. No program ever realizes 100% customer participation.

Some organizations will downplay a program because it may not be available to all customers – and they don’t want to upset ineligible accounts. This isn’t necessary.

Any B2B customer loyalty program can be easily structured to reflect different customer types. A growth-based reward structure rewards all customers IF they grow their business – so VIP accounts and smaller accounts can all still benefit in one way or another. Other accounts may simply never be a good fit, such as government agencies or large organizations where a B2B buyer is unable to accept a personal reward – but these types of customers usually receive other benefits due to their size.

It’s simply a matter of ensuring the sales team understands who can participate and who is ineligible, and why, and manages the message effectively with all customers.

The program should be strongly promoted at all times in order to drive maximum ROI and any customer touchpoints (website, advertising, sales materials, invoices, vehicles, etc.) should incorporate some mention of the reward program and a call-to-action to encourage the customer to sign up and participate.

The sales team should also be assigned enrollment targets for their customer accounts each year. 

One of the three marketer groups mentioned at the beginning of the article were companies who had tried and cancelled a program because they perceived it didn’t work. Trying and giving up is one approach but certainly not recommended – or necessary. A successful B2B loyalty program is not an inflexible tool, carved in stone; it should be regularly updated and aligned with your current sales opportunities and challenges, based on ongoing measurement and evaluation.

Ideally, any loyalty program will be properly structured from the get-go, with program rules and parameters that will incentivize customers to direct more business to you and become more valuable (in a cost-effective manner) for your company, thus delivering optimal ROI.

BUT if the initial program structure does not appear to be working – STOP and evaluate why – and use this insight to refine the program, change the rules and reengineer the program accordingly. The beginning of a new fiscal year is an ideal time to introduce changes to a B2B loyalty program and the changes can usually be positioned as positive for the customer group.

Program evaluation should ideally be done quarterly, especially if the program employs short-term tactical bonus offers (each of which should be measured for ROI). The most important metric to be evaluated will be customer growth – have the reward-earning customers changed their purchase behavior in a meaningful or desired way? Different companies face different challenges or opportunities, so the definition of “meaningful” will vary but business goals can include:

• Total sales in a month/quarter/year

• Purchasing more frequently

• Larger transaction sizes

• Purchasing in more product or service categories

• Migrating more purchasing online

• Picking up a new product line

• Acquiring new customers

• Building brand awareness

Too often we will hear a marketer state that the “customer probably would have made those purchases anyway,” implying the incentive program had little or no impact and questioning its value.

One way to ensure this is not the case is to compare reward-earning customers to similar customers who are NOT participating in the program. So long as each group comprises at least 100 accounts, you can be very certain the results are accurate. You should normally see quite a difference in purchase metrics between the two groups – and these variances (total sales, margin, reward costs) can be used to calculate the ROI of your program. For more detail on how to calculate loyalty program ROI, read our blog post. 

It's also highly useful to solicit input from two important program stakeholder groups: your existing customers and your sales team or your channel partner/ISO. A B2B customer loyalty program is first and foremost, a sales tool – so get candid input from both groups.

What do customers like/dislike about your program?

What (if anything) needs to change for them to further change their purchasing behavior?

Similarly, ask your sales team: What do they perceive to be the strengths and weaknesses or opportunities for the program to help them drive greater sales with their customers?

Some ideas or suggestions may not be feasible for implementation, but many will be, so be sure to ask these two groups for their opinion on a regular basis and try to incorporate viable suggestions into the program to help evolve it into the corporate profit center it should be.

If you’re looking to introduce a program for the first time – or want to improve your B2B customer loyalty program or have found your team doesn’t have the time or expertise to run a best-in-class loyalty program in-house, contact our team at Lift & Shift. We can help you create a winning loyalty program – not just for your customers, but your bottom line too.