Thanks to the incredible speed with which our economy has migrated to e-commerce, even satisfied customers now have access to more vendor brand choices than ever before. Add to that a drop in customer face-time due to Covid concerns and pandemic-related supply chain disruptions and all of a sudden, simply assuming customers will stay loyal to any vendor or brand is completely naïve. Customer expectations have changed, and many existing customers aren’t waiting for their rep to call on them; they are taking matters into their own hands, using the internet to locate products and services at the best possible price, in the least amount of time. Market dynamics have helped to erode the old norms surrounding customer loyalty and lost, inactive or declining accounts are a huge concern for any B2B marketer or business owner with an eye on customer retention and customer engagement levels.
How to Create a Wildly Successful Loyalty Program for Your B2B Business
Loyalty reward programs. They are everywhere. Most consumers participate in six or more programs for various brands on a regular basis – at the grocery store or pharmacy, when flying or staying at a hotel, or when shopping for a myriad of other retail products and services ranging from coffee to burgers to clothing.
However, when it comes to B2B relationships, reward programs aren’t as commonly used. But they should be. B2B loyalty programs use historical sales data to gain incredibly valuable insights into customer purchase behavior and identify purchasing trends, gaps, and opportunities.
Customer loyalty in business is more important than you think
There are many stats available to underscore the importance of customer loyalty – for example, a commonly quoted statistic from a famous Harvard Business School study states “increasing customer retention rates by 5% increases profits by 25% to 95%.” While many people might have assumed this was a B2C stat, the reality is this simple truth applies equally to B2B – and maybe even more so.
B2B customer relationships have always been built upon the interaction between the sales rep and the customer base. The sales rep presumably understood their customers’ businesses and were able to efficiently sell in the appropriate products and/or services to meet the customers’ needs. A good sales rep would build up their customer relationships by anticipating and meeting their needs and grow their sales accordingly. But things have changed…Big Time.
How to keep customers loyal
To begin, let’s be clear: a B2B customer loyalty program, no matter how good it is, can’t build brand loyalty if the vendor is consistently lacking the basic elements important to any loyal customer base:
- product selection and availability
- product pricing
- fill rates
- customer support and service
These brand loyalty building blocks are the table stakes for any customer retention hopes and can help to ensure the customer maintains a relationship with the vendor. But a customer loyalty program is a sales tool that can give you a distinct competitive advantage and dramatically enhance customer satisfaction and drive incremental sales.
It's all about the sales data
Even the world’s best sales reps have limitations regarding how well they know and service each customer. A sales rep may well represent hundreds or even thousands of unique products, calling on dozens or perhaps hundreds of different customers. There simply isn’t enough time in the day to learn everything there is to learn about each customer – and then call on them on a regular basis. Let’s be honest, many reps will focus on their biggest “bread & butter” accounts, as the bulk of their sales (and commissions) are generated by them. There often isn’t even enough time to sell in all possible product categories to these big customers let alone the time required to call on secondary and tertiary accounts. This is both unfortunate and ironic because the biggest accounts are quite often the least profitable – and the best opportunities for higher margin and incremental sales growth opportunities lie with the secondary customers. Building customer loyalty with these accounts will enhance the chances they become repeat customers and possibly even brand ambassadors, helping with your customer acquisition objectives.
This is where the B2B reward program comes in.
What is a B2B customer loyalty program?
A customer loyalty program is simply a very effective and efficient sales tool.
- It’s effective because it relies on historical sales data to create incredibly valuable insights into the current purchase behavior of a customer, enabling the sales organization to address problems (e.g. sales drop off, no recent order activity, etc.) and/or opportunities (the customer is not buying the same things that similar customers are buying, but probably should be, etc.).
- It’s efficient because reward programs are performance-based sales tools where rewards are only earned by the customer IF they buy things the vendor wants them to (or engages in other desirable purchase behaviors). No purchase? Then no reward and no reward cost. What other sales or marketing program offers that sort of ROI equation? 
Sales process automation
A good B2B program also helps to automate your sales process. It employs data analytics to analyze an unlimited number of customers’ historical purchasing, comparing the purchasing of similar customers and instantly identifying purchasing trends, gaps and opportunities for each and every account, regardless of size.
The reward program is an extreme form of account-based marketing (ABM). Using a monthly or bi-weekly reward statement, it helps to keep your brand top of mind, elevating brand awareness with current customers. Each customer is targeted with personalized communications and reward offers tied to the relevant purchase opportunities (and targeted up-sell and cross-sell offers, etc.) that are appropriate for that account.
In this manner, the reward program helps the sales rep by ensuring each participating account feels understood, boosting customer satisfaction and repeat purchases – and increasing their receptiveness to new purchase opportunities through the use of strategic bonus reward offers.
How to create a customer loyalty program
There are all sorts of customer loyalty programs; some are better than others due to a variety of factors, but two key failings tend to be:
- The reward program does not make proper use of sales data
- The reward program is not customer-friendly
The basics
For the purposes of this article, we’ll focus on the basics of creating a best-in-class customer loyalty program.
1. Define the program parameters
Who do you wish to target with your program?
- Direct customers?
- Downstream customers buying through distribution?
- Your internal/channel sales organization?
- All of these groups?
A reward program can be used quite effectively with all these audiences – but the program will necessarily be quite different for each.
2. Ensure access to sales data for each group you target
Loyalty programs are data-driven sales tools. If you lack sales data you can’t define the goals of the program or measure its results. If you currently lack the required data, figure out how to get it. Your own sales data, your distributors’ data or data submitted by program participants are all potential data sources.
3. Analyze the sales data and put it to work
Data really is a gold mine – but like a gold mine, it involves a great deal of work to extract value. Don’t under-estimate how much work is involved in this important area of a good program. Attempting to use an Excel table to sift through millions of lines of data is not practical. You need an experienced data analyst – and the tools and technology to enable them to do their job, identifying purchasing trends and associated sales insights for your program to leverage and act upon.
4. Customize the program for each participant
One size DOES NOT fit all. Each customer’s purchasing is different from the next and the sales opportunities associated with each account can be equally different. It’s fine to include generic or universal content and reward offers in a program, but the more relevant the program content and offers are for each customer, the greater the likelihood that they will be influenced by the program and respond to the sales overtures it makes to them. Be sure to use your data to segment customers into groups that are similar and then employ segmented offers tailored to what they have been buying and/or what you want them to buy. The same applies to channel incentive programs – all reps do not sell the same way, so be sure to segment them as well by sales volume or categories sold – but be sure to make the program relevant to each.
5. Make the program user-friendly
The goal of the program is building brand loyalty, not customer complaints, so ensure whoever you target with a program has a great experience, enhancing customer satisfaction. Make it easy to enroll in the program and then interact with it. Provide program participants with an easy-to-use reward website that includes all the reward info they want (current point balance, earning history, available bonus offers, etc.) and be sure to offer personalized reward statements that push this information to them on a regular (semi-monthly or monthly) basis, negating their need to even log in to the website until they want to redeem points for something. Happy customers become brand loyalists and even brand advocates.
6. Measure and adjust the program
A reward program should never be static. Programs should evolve based on your business model and also by learning from program measurement and business or market conditions. Because a reward program is a data-driven tool, it is relatively easy to measure its impact and ROI. A program should also be a profit-center, so if program ROI is not where it should be, changes must be made to the program structure, rules and offer values to ensure it is generating excellent ROI. Similarly, market challenges and opportunities facing a business change on a regular basis, impacting sales objectives. As a result, any program rules or offers must change to reflect the new sales objectives.
How to measure the effectiveness of your customer loyalty program
Because a program is driven by customer data, this same data is what we use to measure the program’s impact. Again, the amount of data used for this purpose can be vast , so you need to have the experience and tools to properly undertake this exercise.
Each program objective should be defined and measurable:
- Are you trying to increase the quarterly/annual sales to each customer?
- Are you trying to boost the average customer lifetime value?
- Are you attempting to encourage up-sell or cross-sell?
- Are you launching a new product line?
- Are you attempting to convert more customers to online orders?
No matter what you wish to measure, you will typically want and need six basic sets of customer data:
- Pre-program historical sales data
- Post-launch sales data
- Existing customers (pre-program) who have joined the reward program
- Existing customers who have NOT joined the program
- New customers since program launch, who have joined the reward program
- New customers since program launch, who have NOT joined the program
It’s not enough to simply compare a reward-earning customer’s pre-program sales data with their purchases since the program launched as external market conditions (bad weather, shipping disruptions, price increases, tariffs, employee shortages, competitive offerings) could all influence the customer’s purchasing.
How can you be certain the customer changed behavior due to the reward program?
To understand what impact your reward program has had on your business, you need to compare pre-program and post-launch sales data for reward customers against the same data for customers who have not joined the reward program. Assuming both groups are subject to the same market conditions, then the reward program is the only real variable that will explain any deviations in purchasing.
You can also undertake a similar analysis for new customers who began buying only after your reward program was in place, again comparing new reward earning customers with new non-reward earning customers.
Regardless of which groups you are looking at, you will take the incremental sales volume, calculate your associated gross margin on these sales and divide the incremental Gross Profit by your associated reward costs (for each program objective or goal) to arrive at your program and/or reward offer ROI. Our blog, The Complete Guide on How to Calculate ROI of Loyalty Programs goes into detail on the steps involved and where to find the information. You can also check the loyalty program potential ROI for your company using our ROI calculator.
Are you looking to add a loyalty program to your marketing mix? Contact us now for a free strategy session.
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