Article

B2B Loyalty Programs: an Underestimated Potential

Par 10 March 2020 April 17th, 2024 Aucuns Commentaires

B2B companies know the value of a customer. Their loyalty is precious, and their satisfaction paramount. Despite this, few companies consider creating a loyalty program. Yet this strategy is more profitable than B2C, thanks to lower development costs.

 

Adding strategy to relationships

Customer loyalty is more volatile than ever. With increased competition and more accessible technology, it’s imperative to change one’s methods for a structured and strategic data-driven approach. Where once relationships were built around a long-term lunch, today they’re built around data.

In Quebec, several major companies such as RONA, BMR, Westburne and Lumen have understood this approach and have created loyalty programs aimed at entrepreneurs and/or buyers. Far from freebies or birthday gifts, this type of program is strategically designed, from A to Z, for the realities and goals of a B2B company. Specifically, the program aims to:

  • Retaining the best customers
  • Increase purchases from high-potential customers (share-of-wallet)
  • Reduce costs (production, delivery or resources)
  • Increase referrals of new customers (sponsorship)
  • Reduce dependence on volume discounts or rebates

To retain their customers, B2B companies – like B2C companies – need to get to know their customers better. B2B customers are getting younger and more technophile. According to Google, the proportion of B2B buyers aged between 18 and 34 has increased by 70% in recent years¹. The B2B sector is therefore not immune to digital demand (mobile-first and personalization) and the expectations of millennials.

Demographic change in B2B | Credit: Think with Google

B2B companies must also seek to develop a committed relationship with their customers. And engagement means loyalty. Not surprisingly, 55% of B2B marketers say that improving engagement is a top priority². And 81% are changing their budgets to focus more on customer relations. They see personalization, customer experience and the use of data as the biggest opportunities over the next five years.

Less complex, less expensive

Good news for B2B business leaders: creating a loyalty program costs less. Why? Because it’s easier to set up than a B2C program.

1. Fewer points of sale

Generally, a B2B company uses fewer physical points of sale (or none at all), thus limiting the cost of integrating or modifying POS systems.

2. Available database

As B2B purchases are mainly made online or by telephone, purchasing data is centralized, available and up-to-date. Mechanisms for tracking customer purchases are already well in place.

3. Team expertise

In many B2B companies, sales representatives are able to help develop a program. Through their close relationship with customers, they can identify the best customers, the main targets of a loyalty program. It is then possible to estimate their share-of-wallet in order to identify the customers who will make the new program profitable more quickly.

4. Limited number of customers

B2B companies have fewer customers than B2C companies, although both are subject to Pareto’s Law: 20% to 30% of customers account for 75% to 85% of sales. Program development is therefore less complex.

5. Technology and accessible solutions

Technological solutions (CRM and others) are becoming more numerous and less expensive. Several platforms are available to efficiently manage the premiums offered to customers.

High profitability

The cost savings generated by developing a loyalty program mean that this strategy offers a higher return on investment (ROI) in B2B than in B2C. A well-developed B2B program can generate an ROI of up to 300% annually. Some studies show that properly implemented incentives can increase sales by up to 22%. On the more qualitative side, these programs improve the performance of partners (distributors and others) and get them more involved in the sales process.

With so many benefits, why aren’t we seeing more loyalty programs in B2B? Having worked with a number of B2B companies, the R3 Marketing team has found that many managers misunderstand the role and economic impact of such a strategy. Without guidance or structure, it’s hard for them to see what needs to be done.

Contact us to find out more about our B2B process.

 


¹ SNYDER, Kelsey and HILAL, Pashmeena. The Changing Face of B2B Marketing, 2015
² Adobe Research
Hans Laroche

Hans Laroche

With over 35 years of experience in relationship marketing, loyalty program management, and development, Hans Laroche contributes to the relationship strategies of numerous companies, including Nespresso, The Royal Canadian Mint, Fido, belairdirect, Cirque du Soleil, Énergir, McKesson, and Desjardins. He has also been sharing his passion with master's students at ESG UQAM and the University of Sherbrooke for 30 years.

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