How to Retain Business Customers
by Arthur Middleton Hughes

How do you build and maintain the loyalty of business customers? Here are a few simple procedures:

  • Find out who your profitable customers are. Many business customers are unprofitable. Why would you want to spend money trying to retain them? Before you try to build loyalty, determine the profitability of each customer, and divide them into five groups, from the most profitable (Gold) to the least profitable (the losers). To determine profitability you will have to get some software written that includes sales, margins, recency and frequency. The software should calculate every customer’s profitability on a monthly basis.

  • Spend service dollars on the gold customers. Your top 20% customers typically represent 80% of your profits. Don’t deluge them with marketing. Instead, figure out ways to give them super service – things that you could not afford to do for all your other customers. Airlines let their gold customers fly first class. Banks pick up their phone calls on the first ring. Marketing dollars should be spent on customers in the second, third and fourth quintiles. Don’t waste marketing dollars on the losers at the bottom.

  • Create advisory councils. Suppose that most of your business customers consist of environmental companies, transportation companies and construction companies. Set up three advisory panels, one for each group. Find out who the key influencers or decision makers are in each of the most profitable companies in each group, and invite them to become members of your advisory panel. Get their advice by email. Create stationery with their names and companies listed prominently. You can use this for acquisition, and you will have these advisory panel members as customers for life.

  • Get Caller ID for your customer service. Whenever a regular business customer calls you up, your customer service reps should be able to see their entire purchase history on the screen before they answer the call. This can be done by storing your customer’s phone numbers in the database, and tying the DB to your phone service caller ID, so that the appropriate record is on the screen. Your reps will know when they are talking to a Gold customer. They will know the problems that occurred in the past, and how they were resolved. You will make each customer feel that they are really well known and appreciated by your company – even though the customer service rep has never spoken to them before. This one, inexpensive, innovation could do more for retention than a thousand "we appreciate you" letters.

  • Have contests for the best use of your product. IMarket Inc. of Waltham, MA has an annual Bull’s Eye contest for customers who use their business name lists and SIC coding system. All customers are encouraged to enter, and many of them do. The winners receive free trips and recognition. IMarket uses the entries to advertise their services. The results are announced at a major trade show. It is a win-win situation for all.

  • Debrief your defecting customers. Why do your business customers stop trading with you? In most cases, marketers haven’t a clue. Frederick Reichheld in The Loyalty Effect outlines the use of a customer defection study. Such a study needs to be conducted by phone, and in depth to determine the root causes of the departure, business practices that need fixing, and sometimes to win the customer back. In one such study at MicroScan, they discovered that customers were concerned about the reliability of MicroScan’s instruments. MicroScan took corrective action. They shifted R&D priorities, redesigned their customer service protocols, and developed a new low-end model for small labs. The result: they began to retain more customers, and became market leaders. There is real gold in such studies, providing that your company is prepared to take the results seriously, and act to correct the problems uncovered.

  • Learn your repurchase rate. What is the real test of customer loyalty? It is the repurchase rate. How many of your existing customers will buy from you the next time that they buy in your category? Customer satisfaction surveys are, in many cases, worthless. American automobile manufacturers typically have satisfaction survey results of close to 90%, but repurchase rates of 30% to 40%. Many companies have not calculated their repurchase rates. If you are interested in customer loyalty, find a way to determine your current repurchase rate, and compare it with other rates in the industry. It may be a sobering experience. Once you know what it is, find a way to improve it. This is the way to build true, measurable, customer loyalty.

 

Arthur Middleton Hughes is Vice President of The Database Marketing Institute. Ltd. (Arthur.hughes@dbmarketing.com) which provides strategic advice on relationship marketing. Arthur is also Senior Strategist at e-Dialog.com (ahughes@e-Dialog.com) which provides precision e-mail marketing services for major corporations worldwide. Arthur is the author of Strategic Database Marketing 3rd ed. (McGraw Hill 2006). You may reach Arthur at (954) 767-4558 .

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