I have always been intrigued by company loyalty programs. I have noticed that even in my own behavior, loyalty programs do influence where I go and what I will buy, even to the point of the credit card I use.
Somehow, it seems almost too good to be true to buy a ticket on Southwest Airlines, getting one step closer to a “free” ticket and using an American Airlines credit card on the purchase to get one step closer to a “free” ticket on that airline at the same time. Similar behavior and thinking causes me to purchase all of my office supplies, including computers, from one vendor. That vendor gives me a 10-percent rebate monthly on my total purchases. That makes my next month’s supplies seem to be greatly discounted when I use the rebate coupon.
‘How do you feel about the airlines loyalty program when those “free” seats you “earned” are sold out?’
It seems to me as if these loyalty programs achieve what they were designed to achieve: They cause me to make repeated purchases with the company involved because of the program— even if other objective criteria, such as price, might have otherwise caused me to go elsewhere.
Does the same type of loyalty extend to business-to-business engagements? I am not convinced. I have a client who makes durable goods, hardware for production equipment. When I have done “Voice of the Customer” interviews for this client and others like this client, a different type of behavior has emerged: loyalty to the salesperson!
For these customers, the salesperson is the key. Much of the hardware that is sold is viewed as a commodity. There are several manufacturers in this business, and their products are viewed as competitive. This fact creates a lot of pricing pressure. The customers in this market can differentiate the different products a little based upon customer service and product quality but not enough to generate true “puppy” loyalty to the company. However, these customers could articulate a huge difference in salespeople!
Each of the customers had favorite salespeople. Why? The characteristics of the salesperson that were key were easy to identify: knowledge of the customer’s business and processes, knowledge of the industry, knowledge of the salesperson’s own products and a long-term relationship built primarily on trust. All of these attributes were assigned to the salesperson, not to the company!
When the salesperson changed brands, the customers often followed. The trust factor was key, despite loyalty programs that were very similar to the frequent-flier programs and others I patronize as a consumer.
B2B companies have tried formal loyalty programs, getting customers to agree to special service and pricing arrangements. The customer gains access to the latest available technology and products, as well as the opportunity to test new products and ideas. For buyers at the corporate level, such agreements make sense and create the opportunity for the vending company to create loyalty beyond the trusted salesperson. This strategy shows promise for the future. The issue then becomes where the buying decisions are made. If they are made centrally, company-to-company loyalty programs may have a chance to succeed. If the decisions are made locally, the trust factor for the salesperson becomes the key attribute, even to the extent that the customer is willing to ignore some pricing differences.
When my client wanted to enter a new market, the company would hire an experienced and trusted salesperson from a competitor to penetrate the segment. This trusted salesperson could get an audience with the customers in that segment and could be trusted by them to recommend products and services that would work because he or she would know their business and industry.
This strategy worked well for penetrating a market, but the strategy was self-defeating in the long run because the loyalty was to the salesperson, not to the vending company and its products and services. When I interviewed salespeople who had engendered this type of loyalty from clients, they told me that their most important attribute was their ability to listen to the customer. Listening was the key to selling.
How does the vending company transfer this loyalty from the salesperson to the company and its products? The successful strategies involve creating incentives the way airlines and office-supply stores do. When a new salesperson comes on board, give the customers a good reason to continue. But be careful to design your loyalty programs to not only create loyalty but also to avoid dissatisfaction. How do you feel about the airlines loyalty program when those “free” seats you “earned” are sold out? You may see it as a slap in the face, instead of a reward for loyalty, leaving you more dissatisfied and less loyal than you would have been with no “award”.
Similarly, in the B2B world, the loyalty reward must be made available to all who have earned it. Customers feel cheated if they earn an award, such as the “free” airline ticket but then are not allowed to use it because of some arbitrary restriction. The strategies that appear to work in B2B situations are rewards that include: special pricing, extended warranties for service or service pricing and the ability to test new products. The idea of testing products that are uniquely suited to their environment and context creates excitement among customers and fits into the current strategies of “mass customization” in selling: customizing the buying and selling arrangements based upon the customer’s unique needs.
Are business customers as loyal as puppies? I think not! But you can transfer the relationships good salespeople have fostered by developing creative and thoughtful incentive programs.