By Andrew Dalglish - 1st August 2016
Customer loyalty is critical to any business. Obvious but true, especially for B2B companies who, unlike their consumer focused counterparts, have a relatively limited pool of buyers to target.
This truism sees many B2B companies striving to satisfy and even delight customers. After all, the logic goes, if customers are happy then they won’t feel a need to change supplier – satisfaction leads inexorably to loyalty. Following on from this logic, market research studies tend to focus on measuring customer satisfaction and its cousin the Net Promoter Score (NPS). However, this logic is flawed and can lead to wasted investment on things that don’t really matter.
Let me explain.
We have this thing here at Circle called Circle Labs. Its mission is to take the received wisdom, rigorously challenge it and, if it turns out to be flawed, develop a better approach. Recently Circle Labs has been looking at customer loyalty and as part of this we surveyed several thousand B2B decision makers.
First we asked them how likely they are to buy from their current supplier the next time that they have a need. Then we isolated those who claimed to be loyal and asked them why that was. An analysis of their reasons reveals that in most B2B markets there are four distinct customer segments, each of them loyal for very different reasons.
The first segment are the ‘functionally loyal’ who stick with their incumbent supplier because they offer a tangible advantage when compared to competitors. This advantage is usually in one of four areas:
The second segment are the ‘emotionally loyal’. Sure, they value functional performance too, but the things that really make their supplier sticky are ‘softer’ in nature:
The third segment are ‘locked-in’. They’re loyal not because they want to be, but because they have to be. Either change is not an option because their current supplier is the only one able to meet their needs, or change is unpalatable – the cost, effort or risk of moving supplier is just too high.
The fourth segment are loyal because they don’t care enough not to be. They are the ‘dis-engaged’ and there are two potential paths that led them to be so:
These insights have important implications for customer satisfaction and loyalty research in B2B markets. Rather than simply measuring satisfaction across the customer base and then developing action plans to improve it, you should identify the prevalence of different ‘loyalty segments’ before deciding what actions, if any, to take. If ‘functionally loyal’ and ‘emotionally loyal’ customers dominate, then satisfaction and delight should absolutely be a focus and this should be framed in the context of the different motivations of these two groups. However, if the ‘locked-in’ and the ‘dis-engaged’ are more prevalent, then you may decide that investing in actions designed to improve customer satisfaction is not the best use of your time, resources and funds. Instead the most commercially sound approach might be to do just enough and no more.
Read more about our approach to business-to-business (B2B) customer satisfaction surveys.
Andrew has specialised in B2B research for over a decade and co-founded Circle Research in 2006. He is a columnist for B2B Marketing Magazine, a regular contributor to Research Live and frequent speaker at leading events such as the B2B Leaders Forum, Customer Experience Live and the Social Media World Forum. Andrew is a Chartered Member of the MRS, teaches the MRS B2B research course and holds an MA in Psychology from Aberdeen University alongside an MSc in Marketing from Strathclyde University.