Fewer than 1 in 7 B2B Customer Relationships Are Optimal
B2B companies looking to gain a competitive edge must look beyond product and price to create long-term customer impact and engagement.
In "Creating Impact in B2B Relationships," a report by global research and performance consulting firm Gallup, it's estimated that the average B2B company has an "optimal" relationship with fewer than one in seven of its customers. Gallup reveals that a price-focused strategy, with an emphasis on year-over-year cost reduction, does not hold as much weight as properly managing the life cycle of a customer.
"It's becoming more difficult to stay ahead of your competitors with just a product-oriented differentiation," explains Ed O'Boyle, global practice leader of Gallup Marketplace. "You have to add more to the relationship there. B2B in particular has a maniacal focus on the features, products, and delivery mechanism but sometimes fails to recognize the strength of the relationship that they need to build."
The report identifies two components needed to create an impactful customer relationship. Customer engagement, as defined by Gallup, is the relationship between a company and its customers and how well that company delivers on its brand promise in upholding its end of a contract deal. Customer impact, O'Boyle says, is asking, "'How do the things that I do every day help you and your company fulfill...your brand promise?' to make you more successful [in] delivering on your mission and purpose."
The report also notes that fully engaged customers average a 23 percent premium over typical customers in overall wallet share, profitability, revenue, and relationship growth. To effectively engage a customer in the B2B sector, it's necessary to first understand the level of engagement your company has with that customer, it says.
A "fully engaged" customer has a strong emotional attachment and attitudinal loyalty to a product or service. "Engaged" customers are emotionally attached but can switch if another offer comes along. A customer who is "not engaged" is attitudinally neutral to a product or service. And the "actively disengaged" customer is detached and might even be antagonistic toward a company, the Gallup study indicated.
After tracking 75 top accounts at an unnamed professional services firm, Gallup reported that low engagement scores were an indicator of future revenue decline. Of the accounts that scored four on a five-point scale, 21 percent of the accounts grew by 20 percent or more the next year. Of the accounts with low engagement scores, tallying less than four out of the possible five, only 15 percent were expected to grow by 20 percent or more the next year.
"We started to have a dialogue about where their cash flow is and where their opportunities are for market expansion and what roles they were playing in delivering that, and the interesting thing was, they said, 'It's not something we talk about,'" O'Boyle explains. "They had talked about pending loans, accounts they were going to open, and doing a cash sweep at the end of the day…but the question is, 'Do you ever have a conversation with the buyer?' And if not, how do you get there?"
How to Make an Impact
Ed O'Boyle, global practice leader of Gallup Marketplace, shared the following ideas to help companies become more impact-focused:
Leadership alignment is key. Upper management will need to be committed to making a customer impact–minded strategy work.
Create a 360-degree view of the customer. A sales-oriented account representative will focus on growing the top line revenue. A service-oriented rep will try to ensure on-time delivery and service efficiencies. Companies should not only measure service and sales feedback, but also evaluate feedback from the customer, what the potential is of that customer, and where they&'d like the relationship to go, and then use that to plan for the future and how to invest in the account.
Align the right players. Have a game plan for how to staff an account and what other services you'd like to bring to the account. Bring your best plays and your best players.
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