The impact of customer loyalty on B2B product-led growth is unquestionable.
“The implications of consumer loyalty, for B2B companies, are enormous, and, if anything, as crucial as they are for consumer-facing companies”, says PwC’s John Rolston and Jon Glick in their article ‘The untapped potential of B2B customer loyalty programs’ for PwC publication strategy + business. They also say, “it can cost five times more to acquire a customer than to retain one, and on average the most loyal customers account for up to 80% of a company’s revenues”.
The positive impact loyal customers have on revenue and ROI is confirmed by ThinkImpact, a free source of statistics, trends and data cited by the likes of Forbes, HuffPost, and TechCrunch. They state that a 5% increase in customer retention results in a 25 – 29% increase in revenue and that retaining customers can increase profitability by 25% to a staggering 95%.
This is mainly because loyal customers tend to buy more frequently, spend more than new customers, and play a significant role in new customer acquisition, as shown by several studies which we will explore later.
Therefore, focusing on making customers happy from the beginning of their experience will support the revenue growth of digital products. But as John Rolston and Jon Glick say and Gartner reiterates, “B2B customers can be a tough nut to crack. Many times, the B2B buyer is actually more than one person”.
Navigating Complex B2B Deals
The Gartner article mentioned shows just how challenging B2B sales are to navigate, given that the average tech purchase involves between 14-23 people, most of whom (80%) are in senior operations or product roles.
As the spending increases, so will the size of the buying team, leading to the increased need for investments of time and resources by the product company to acquire a new customer. These costs can be reduced by leveraging existing customers to reassure and encourage potential buyers via online ratings, referrals and user demos, to aid purchasing decisions.
Once prospects become sworn customers of your product, selling to them needs less marketing and promotion spending. It is also easier and faster to upsell and cross-sell products to satisfied customers as their previous positive experiences with a product provide a solid foundation to support their purchase decision.
ThinkImpact states that for some companies (and in our experience, certainly for small and medium tech product companies), 70% of their value comes from loyal, high-value customers. It also shows that current customers spend an average of 67% more than new customers.
To highlight this with an example, a company purchasing a digital payroll system will be encouraged to purchase other HRM tools from the same supplier based on previous positive experiences with the tech product company, making extensive profiling of prospects and expensive outreach unnecessary to consolidate a sale.
Also, existing customers are likely to request new tools to be added to the product and test them for the product company, which leads to product enhancement or new product development opportunities, bringing in additional sources of revenue for the B2B product company.
Loyal customers don’t just happen — they are nurtured. Let us look at how.
Create raving customers
Most B2B businesses intuitively understand that they must create awareness for their product to encourage prospective customers to buy it. However, in our experience, very few pay attention to the stages in the buyer journey between awareness to conversion. A customer journey map can help your company stay focused and proactively support the customer through this process.
Many B2B tech product companies consider applying a more scientific approach such as the AARRR Pirate Metrics Framework useful to gain clear insights into different parts of the customer life cycle. Identifying metrics for each of the 5 stages in the AARRR framework and measuring performance against them is crucial to the product’s success. If this is correctly done, you will be able to identify which aspects need to be improved in each stage of the customer journey to support customer acquisition.
Here is how a cloud-based CRM system with a downloadable app for SMEs in the healthcare sector might use the AARRR Pirate framework:
- Acquisition (or awareness) – This is where the product company explores how people discover their product or company. Is it through a referral, an advertisement or cold calls?
Let us assume that the CRM system in the example places a higher significance on referrals (70%), 10% online adverts, and 20% direct sales. They can measure the number of referrals, click-throughs for adverts, the success rate of the use of landing pages (perhaps customers applying a code and availing a benefit related to the liked product), and the coverage of the sales funnel by the sales team.
- Activation – This is where the company tracks whether its potential customers are taking the desired actions.
The product company in our example will monitor how many SME healthcare companies have downloaded and activated the app, and how many queries customer service received during the activation process. Ensuring those queries were promptly and efficiently attended to will lead to the successful activation of the product in our example.
- Retention – Here, the product company evaluates whether its activated users continue to engage with the product. We have observed that companies with a sincere customer care philosophy and strategy have excellent retention results.
For example, the healthcare digital product company we spoke about may pay close attention to whether new users open and interact with the app more than 10 times in the first week, how many customer support queries have been received, and how many of those were resolved.
Speedily resolving issues and proactively supporting the customer will go a long way in the retention effort. In a recent McKinsey survey of 1000 B2B decision makers, lack of speed in interactions with their suppliers emerged as the number-one “pain point” and was mentioned twice as often as price.
Speedily resolving issues and proactively supporting the customer will go a long way in the retention effort. In a recent McKinsey survey of 1000 B2B decision makers, lack of speed in interactions with their suppliers emerged as the number-one “pain point”, and it was mentioned twice as often as price.
- Referral – This is where the company tries to measure whether the users like the product enough to tell others about it.
In our example, the company depends heavily on referrals (70%) to create product awareness. How many customers have left a positive online review about the product and how many 4-star or 5-star ratings the product received might be indicators our hypothetical company might be measuring, in addition to actual leads customers provide.
- Revenue – This is the phase where the identified prospects become paying customers of the product.
Our example company might measure a revenue per customer figure and how it fluctuates. The company will monitor whether the customers are adding more practitioners in their organisation as users to the system. Again, they will benefit from speedily interacting with the customer as suggested by the McKinsey insight we shared earlier, in the “retention” section.
Creating happy customers must not be left to chance. Nor should an ad-hoc approach be considered even slightly better. It has to be a well-thought strategy covering all 5 of the customer-lifecycle stages.
The ARRR Metrics framework will help a product company understand the user journey clearly and introduce strategies to augment the customer experience to grow the business. The information gathered from implementing the ARRR Metrics framework can be used to measure and fix gaps in a product’s performance across different customer-lifecycle stages and improve customer satisfaction.
It can help the product company explore opportunities to upsell and cross-sell products, as well as improve the usage of existing products and services to enable business success.
The untapped potential of B2B customer loyalty programs: https://www.strategy-business.com/article/The-untapped-potential-of-B2B-customer-loyalty-programs B2B Referral Statistics:https://www.thinkimpact.com/b2b-referral-statistics/ How to Market to B2B Technology Buyers: https://www.gartner.com/smarterwithgartner/how-to-market-to-b2b-technology-buyers AARRR Framework. The Definitive Guide to Pirate Metrics: https://www.designwithvalue.com/aarrr-framework