Know-How Exchange : Customer Behavior

Matthew,

Interesting question. Thanks for posting. I'm sure we'll all learn a lot from the responses.

In the usual sense of customer loyalty programs - where there is a card or some tracking of customer buying and a reward for larger buyers - I've never really considered such a program for B2B customers. I guess this is because it's very common practice to reward larger customers with such things as:

1. Lower price points for higher volume


2. Direct sales versus distribution or sales reps


3. Access to corporate management


4. Special terms and condition


5. Manufacturing line priority

In the companies for which I worked, we called these programs Tier 1 Customer Programs, or something like that.

And other programs. My questions for you is this: What are you defining as a a "loyalty program?" What do your customers expect and want (what they want and expect are not necessarily the same thing)?

In your posting, you said, "[Customer service] are afraid that sales and marketing will "bug" the customers. Funny thing is - we have never really marketed to our customers base." WHAT??? WHO the heck is customer service to dictate all interactuons concerning the customer? Usually, customer service is a part of sales - under direction of the sales director or VP. The job of sales is to manage that relationship - a personal relationship because sales generally is out to visit face to face with the customer. Customer service implements the terms of the relationship. Marketing defines the relationship needs for a segment of customers - the rules engagement based on the corporate strategy. Sales and customer service live within those bounds. If marketing needs to visit a customer to determine, so be it. It has to be done. With respect to a "loyalty program," if I were in customer service, I'd be more concerned with the amount of work increase it means to me implementing this program - like keeping track of the rules for each customer, any statistics that need to be tracked within the program, etc. Are you sure this isn't their hangup with the idea?

You also posted, "Funny thing is - we have never really marketed to our customers base. Any suggestions you have would be great!if you don't marketto your customers, WHO is your marketing department marketing to? What do they do all day? Do you include in this statement that you don't sell to them also? Again, who is the sales department selling to and what are they doing all day?

One other thing with respect to a customer loyalty program: What are your goals? Why do you want to implement it? Implement it to achieve what?

Perhaps we're not aligned in vocabulary. Could you please explain these statements? I think understanding this and your goals and a bit more about what you are thinking about is fundamental to knowing your present situation and then how to improve.

I hope this helps.

Wayde

Matthew,

Thank you for the clarification. I know "operations driven" companies. I worked for one. I also worked for an engineering driven company. Both of these, as well as a sales-driven or even a marketing driven are working with half their extremities removed. None of them work. They all can reach a certain size and never figure out how to grow beyond that size. I call how these types of organizations operate Ignorant Arrogance. It's dysfunctional behavior. If I could talk to your CEO, I would draw him a picture of how his company is operating today and how he could change it. First, SALES either doesn't have the right incentives or they are just not good sales people. Sales people should be very hungry and want money. They should want to be in front of customers day and night to reach their financial gains. They should hate to be in an office or on a phone. And if their incentives are structured to reward them for sales (with prospecting NEW sales rewarded higher than maintaining the steady stream from those customers who continue reorder without any attention), then they will be out there digging for that nugget. Marketing's job is not to drive sales to do their job. Marketing positions the company and its products such that customers see their needs being met better than the competitors can meet those needs. They make it such that when a sales person goes into the customer's office, the customer says, "Yes, I know you! Let's talk about how I can order your product!" If marketing does a great job, then customers come insisting that they be allowed to buy the products. Lead generation? Maybe, I suppose. But, you know what? Sales ALSO has to generate their OWN leads - you know, pick up the phone and cold call for an appointment? Prospecting, lead generation - these often are thrown over the wall from sales to marketing because most people don't have a clue what market does. So, they must just be an extension of sales! They should serve sales.

As far as your loyalty program - what you have to work with and the control you have within your company culture - I see where you are coming from. Customer touches like direct mailings help when that's all you can do. They are better than nothing. If you can generate sales directly from that without a sales person ever visiting - great! That will work for some products (especially commodity products that don't take much thought to buy - machined nuts and screws, for the most part, discounting the high end stuff, anyway). If that's what you have, then certainly you will be living only because operations is efficient. And having a sales guy call on a customer who is buying a trillion items at $1.57 wouldn't make sense. But, direct mail is not a loyalty program either. Let me put the loyalty program aside for a minute and talk about marketing.

In marketing, as you know, you need to know your customer and his needs. You need to know your competitors and how well they satisfy those needs. You need to know your core competencies and how to leverage those into unique selling points and how to satisfy customers' needs better than the competitors. Then, you great strategies - Strategic actions to utilize the strengths of the company to take advantage of opportunities and overcome threats. Actions to mitigate weaknesses. Brand strategy, product strategy, pricing strategy, communications strategy - how to get to the right customer segment with the right message, etc. WIth these in place, then you put together a marketing plan with goals, objectives, and activities. The activities are coordinated such that 1+1+1+1=10, not 4. Integrated marketing. If you do a direct mailer, drive them to the website. Encourage them to register for an email newsletter with a promotional product. Follow up with a call, welcoming them. Aim the sales team to the top tier customers for a direct visit. The goal could be to provide more customer touches so that you can have top of mind brand awareness. A measurement could be a "before and after" survey for brand awareness. The objective would be to increase revenues by 10% by capturing 5 more of the top 25 customers over the next year. Then, marketing holds reviews - weekly or as needed for the activities - are the actions being completed on time, on budget? Monthly to determine if the objectives are on track - if not, why not and what can you do about it. And then quarterly to make sure your strategy is still sound. What's changed in the world? What do we do about it? How does the strategy align with the corporate strategy? How can it be made to align closer? By putting this kind of marketing process into place, you will be able to demonstrate the value of marketing and differentiate it versus sales and customer service. You will be able to demonstrate return on investment - something operations understands very well. You will show tangible results.

Now, back to a loyalty program. A direct mail piece isn't a loyalty program, it's a marketing activity. A discount program could be part of a loyalty program, but it also could be part of a pricing strategy. Or it could be a proactive short term tactic to sell out an underutilized production line. You'd identify this during one of your quarterly reviews when you are checking your marketing strategy for alignment with the corporate strategy. Having customer loyalty as a goal and a set of actions to increase that, set objectives, and measure the results - that's a good thing. But, that's just part of the marketing process. Calling it a "loyalty program," to me, sounds like a temporary thing. Customer loyalty should be a part of the corporate culture or at least part of the marketing strategy and plan and tied to corporate goals - revenue and profit being two of the ones I'd try to tie with. Calling it a program will make your CEO want to look for an end and an impact this week.

Maybe you have a good marketing process in place. But, if you don't, I'd take a step back and set forth a plan to put one in place - with a goal in the plan of "loyal customers," as measured by share, repeat buying, etc. The activities to support that goal should be fit together so they are all steps in the process of acquiring and keeping loyal customers.

I hope this makes sense to you, Matthew. Good luck! If I can help you, feel free to contact me off-forum. My email address is in my profile.

Wayde