- Loyalty programs for customers have long been a mainstay of strategies to build customer stickiness.
- For brands wanting to create those special relationships with other companies, B2B loyalty programs represent opportunity.
- A focus on mutual success and targeting the right people in the business will be key to forming loyal partnerships.
Retailers, hotels, airlines, and restaurants have long relied on loyalty programs—including discounts, early access to new products, and exclusive perks that enhance the customer experience and inspire a following—to strengthen customer loyalty.
But only recently has the idea taken root in the B2B world. And it’s about time. In a recent PwC customer survey, almost 60 percent of B2B customers reported they had never had an experience with a brand that made them feel special. That’s an alarmingly high percentage of customers who’ve been given no particular reason to stick around. But the implications of consumer loyalty for B2B companies are enormous, and, if anything, as crucial as they are for consumer-facing companies. After all, it can cost five times more to acquire a customer than to retain one,1 and on average the most loyal customers account for up to 80 percent of a company’s revenues.2
For companies willing to reimagine the traditional transactional nature of their B2B relationships, a loyalty program represents an important growth opportunity. But in this regard, B2B customers can be a tough nut to crack. Many times, the B2B ‘buyer’ is actually more than one person—including those in procurement and finance, along with heads of business, for instance—and these individuals have different needs. Companies must figure out who to pursue: the whole entity or the different purchasers? And getting targeting right is just one piece of the puzzle. To be successful, a B2B loyalty program must also align with the customer’s strategic goals and transform transactional relationships into dynamic partnerships designed to promote mutual success.
The benefits of B2B loyalty programs
By developing a relationship with your customers, you can reap major benefits.
Growing top-line revenue and improving profit margins. Loyalty programs can feature tools that encourage customers to try out more products and services, thus increasing their purchase frequency and spend. Programs can also offer differentiated benefits, based on factors such as seasonality or customer purchase behaviour, to promote the sale of higher-margin products. Pairing these offerings with creative premiums that offer strategic benefit to customers—a TV spot highlighting the customer, a store makeover, energy-efficient equipment—help shift the relationship from transaction to partnership. The more the customer interacts with your brand and captures new rewards, the more your revenue and profitability can climb.
Reducing costs and raising customer satisfaction. Done right, loyalty programs can replace the blunt instruments of discounting and heavy promotions with a precision instrument—one that reduces monetary discounts while expanding customer benefits in other ways, both tangible and intangible. You can offer gestures or perks, such as helping the customer optimise its product mix—by selling more of one popular product than another less popular product, for instance—to drive maximum revenue. These measures don’t directly hit the bottom line, but still build on the relationship. An improved relationship also will make the customer contracting process smoother and simpler. Collectively, these benefits add up to greater customer satisfaction, retention, and advocacy, and increased revenue and profitability.
Promoting digital engagement and generating valuable customer data. The B2C sector has made the value of digital engagement clear. Beyond attracting and retaining customers, digital engagement generates what we call the ‘engagement flywheel’: continuous customer insights that spark ideas for new products and services, deepen the customer relationship, and, in turn, help companies grow. The B2B sector has been lagging in this respect, but loyalty programs can help jump-start digital engagement efforts. You can tailor digital channels and techniques to each unique customer type, including the oft-neglected small and medium-sized enterprises. And as you advance your digital transformation efforts, you can put big data and analytics to work, accelerating the engagement flywheel.
Five actions for making B2B loyalty work
Although you can’t build a winning B2B program by cloning your B2C program, you can capitalise on decades’ worth of B2C lessons learned. To achieve the benefits we’ve outlined, you’ll need to adapt B2C principles to your business.
1. Dig deeper to understand your business buyers. The foundation of any well-designed loyalty program is a carefully thought-through segmentation strategy. This starts with identifying and understanding your customer segments. But as we’ve already mentioned, understanding your B2B customers is more difficult than understanding B2C customers. For one thing, B2B buyers are under-analysed. Buyer segmentation is also more complicated because gaining access to them is harder—in part because transacting is done under the customer-company auspices, making the right individuals hard to find—and the buyer population is more fragmented. You also have to pinpoint the value drivers and economic opportunity within each customer segment (and even subsegments).
2. Identify and encourage optimal customer behaviours. Focus not only on current, desirable behaviours but also on new ones you want to elicit—behaviours that will support your overarching business goals. These behaviours might include your customers buying a broader range of products from you, creating more shelf space for those products, referring new business to you, or getting consumers to write product reviews.
Think about which behaviours are priorities, and structure incentives accordingly. And realise that the behaviours you’re targeting might vary based on location, store size and type, and buyer role. What works for the business-unit vice president might not motivate the procurement head. It’s important to be consistent with program incentives so different people in the same organisation reap the same rewards for the same behaviour, but you’ll also want to be able to tailor some benefits through promotions and other means.
3. Design your program to be simple. The best loyalty programs are intuitive, both for the sales team (so they can promote enrollment) and for the customer (so they actually use it). Start with a simple loyalty program concept. It’s hard to know which features will deliver results until you test them, and the more variables you start out with, the harder it is to isolate their impact. Make sure the instructions on how the program works and the app you design for your program are user-friendly. The base structure of the program (e.g., points accrual and redemption model, tiers, and benefits) should be simple.
4. Lead with digital. B2B loyalty programs require the same digital-first mindset as B2C programs to accelerate the customer engagement flywheel. Some trailblazing companies have developed mobile apps with dashboards that provide their salespeople and customers a clear window into customers’ operations—for example, sales breakdowns, inventory information, product mix, trends specific to their business, and performance relative to competitors. This data helps customers optimise their business and helps both sides grow more profitably. Such a benefit is especially attractive to SMEs, many of which lack their own native digital strategy. And you can offer the program via various digital channels to suit your customers’ different needs. With data, you also can tailor your loyalty offerings to customer preferences, purchasing habits, and interests.
5. Create the best possible customer experience. The best B2C programs create passionate fans and advocates. They are responsive to feedback and insights, and they create opportunities for customers to have memorable, positive brand experiences. Although customers have traditionally responded to financial incentives such as volume-based discounts, these come at a higher cost and do little to help SME customers. The best programs demonstrate that you care for your customers by helping them meet their needs.
The time for loyalty programs is now
It won’t be long before loyalty programs begin to take off throughout the B2B world, particularly as the economy springs back from its pandemic lows. And once relationships become sticky, the switching costs for customers will only grow. This should be incentive enough for companies to get serious about showing some love to customers.
A version of this article was originally published in strategy+business on June 1, 2021.
- John Rolston is a leading practitioner in PwC’s consumer markets and digital practices, specialising in customer-centric marketing transformation. Based in Chicago, he is a director with PwC US.
- Jon Glick is an advisor to executives in PwC’s customer strategy consulting practice. He leads a cross-functional team working with clients to develop, innovate, and grow loyalty programs and life-cycle marketing functions. Based in Chicago, he is a principal with PwC US.
- PwC US director Mark Baker and PwC US senior manager Whitney Nystrom also contributed to this article.