Michael Lowenstein, Ph.D., CMC Thought Leadership Principal, Beyond Philosophy
A press contact, working on a client assignment, recently approached me with a fairly conventional statement and question: There’s a focus on low pricing and functional quality that exists in BtoB product and service purchase decisions. This often minimizes customer selection of vendors. So, aren’t BtoB customers more often “trapped” into supplier relationships compared to their BtoC customer counterparts? My answer: maybe in pre-Internet days this was more the case, but not now.
Extensive research into numerous BtoB sectors has repeatedly shown that even with the tighter decision parameters and more narrowed choices on supplier selection, such as pricing, the involvement of Purchasing and Procurement groups, and regulations and vendor qualification that may exist in business-to-business products and services, much of what drives initial and ongoing supplier choice is built around brand impression and peer-to-peer informal communication. Going back a couple of decades shows just how much decision-making weight is now represented by these two factors.
Twenty years ago, in their 1994 white paper entitled “Customer Loyalty:Toward an Integrated Conceptual Framework,” academics Alan S. Dick and Kunal Basu examined how attachment was a prerequisite for loyalty and that the attachment a customer feels toward a supplier, product, or service is driven by 1) the level, or degree, of preference and desirability (the extent of the customer’s conviction about the product or service) and 2) the amount of strategic, positive perceived differentiation offered (how significantly the customer distinguishes the product or service from alternatives). And, BtoB customer attachment, as we have now come to better understand, is based on a human-centered and emotion-based approach to marketing and relationships Dick and Basu then went on to conclude that four distinct types of loyalty emerge when low and high customer attachments are crossclassified with high and low repeat purchase patterns:
- Premium Loyalty (high attachment, high repeat purchase),
- Inertia Loyalty (low relative attachment and high repeat purchase),
- Latent Loyalty (high relative attachment and low repeat purchase), and
- No Loyalty (low relative attachment and low repeat purchase).
In its current iteration, the company employing this model classifies customers, on a matrix basis, as Truly Loyal, Accessible, Trapped, and High Risk. Loyal, Accessible, and High Risk are reasonable labels for behavioral proclivities, but ‘trapped’? BtoB customers are not trapped today, at least not with any frequency, because business decision-making dynamics have so significantly changed.
Twenty years ago, the word of mouth impact on decision-making was just beginning to emerge. By the early 1990’s, control of brand and supplier selection had shifted away from companies and moved almost entirely to consumers, a result of several pivotal, converging factors:
1) Growing Internet penetration and cell phone usage, as communications enablers
2) Over-saturation of ‘push’ advertising and promotional messaging through
traditional mass electronic and print media, and
3) Heightened public distrust in the honesty and authenticity of corporations.
Beginning around 1995-2000, major consulting organizations began to recognize that these critical changes were likely to have profound impact on businesses. These new dynamics meant that traditional thinking about customer satisfaction, and even loyalty, also needed to change. The new behavior was ultimately defined as customer advocacy, i.e. actions driven by a strong bond with the preferred, most favored brand and active, voluntary online and offline word-of-mouth on behalf of that brand.
BtoB clients frequently ask: “Because of the importance of brand perception and word-of-mouth in BtoC products and services, I understand how customer advocacy can provide highly actionable insights there. But, what about customer advocacy in BtoB products and services? Does it exist?”
What creates and sustains top-end loyalty in both the BtoB and BtoC worlds is, of course, excellent performance on “table stakes” tangible, basic value elements. Delivering at promised levels on pricing, completeness, accuracy, timeliness, reliability, and consistency are minimum standards for building a foundation level of trust and helping to build the supplier-customer relationship. Proactive, personalized – even anticipatory – service that exceeds expectations, two-way communication, and engagement help bond the customer to the supplier. This is true throughout the customer life cycle, from initial supplier selection and purchase through cross-sell, up-sell, and advocacy behavior.
Apart from procurement and pricing requirements sometimes encountered in business-to-business supplier selection and loyalty behavior situations, there are several factors that contribute directly to perceptions and marketplace actions. These include:
- Overall supplier brand impression/reputation – largely attitudinal, with some influence on purchase decisions;
- Level of expressed commitment to supplier – largely attitudinal;
- Overall performance satisfaction – impacts purchase intention;
- Perceived service quality – impacts both attitudes and purchase intentions.
Service quality is a critical measure of organizational performance and is a key condition of relationship quality. In turn, relationship quality links and contributes to the perception of satisfaction and trust, creating business outcomes of customer retention and advocacy. This is similar to the role of service in BtoC product and service supplier selection, but it takes on more importance, and leverage, in BtoB..
As reported in a BtoB analysis publication from Allegiance, a major consulting organization: “Focusing only on the end customer in a BtoB environment yields only part of your company’s story. After all, your business partners represent your company and products to their customers. Therefore, you need to make sure your business customers are properly advocating your brand.” Even though BtoB customer relationships are often higher-touch than in BtoC customer markets, companies that depend only on anecdotal, qualitative information leave much insight uncovered. There must be a proactive, formal and actionable advocacy-based research program to help stay ahead of the customer need curve.
Word-of-mouth, just as important in driving advocacy behavior, is critical in the business-to-business world. Simply, word-of-mouth gets business decision-makers to buy, and continue buying. According to the study – “Driving Word of Mouth Advocacy Among Business Executives: The Experiential Marketing Connection,” conducted in 2007 by Keller Fay Group and Jack Morton Worldwide – 53% of the 288 U.S. business decision-makers surveyed said that word-of-mouth from colleagues and friends would both get them to buy and contribute strongly to passing along positive comments themselves. This compares to 39% for sales representatives, 38% for meetings, events, and conferences, 37% for Internet, and 37% for trade shows and exhibits. Direct mail, print, TV, and radio advertising were cited by between 22% and 32% as having influence on work-related purchases.
So, despite the recognized differences between BtoB and BtoC service and product purchasing, does being trapped in an unwanted vendor relationship represent a frequent situation for business-to-business customers? Is business-to-business customer advocacy an oxymoron? Supported by the reality of study findings, I’d respond with an emphatic NO to both questions.
Republished with permission from CustomerThink.com
|Michael Lowenstein provides strategic consulting, research design and in-depth, leading-edge analysis that helps clients deliver outstanding business results through deeper customer experience, communication, relationship, employee and brand equity insights. Beyond Philosophy provide consulting, specialised research & training from our Global Headquarters in Tampa, Florida, USA.|