The Challenge of B2B Customer Centricity

There has been a lot of focus recently on customer value.  Terms like customer experience, relationship management, and customer-centricity have become common in the business press.  But almost all of the focus has been on the B2C business environment.  Now we have some data from Gallup that is based upon the B2B environment – and it isn’t pretty.

Gallup has just published an extensive report titled, “Guide to Customer Centricity: Analytics and Advice for B2B Leaders.”  According to Gallup, 71% of B2B customers would change to a different seller in a heartbeat.  The customer does not feel valued.  So if a better deal comes along, they will jump at it.  For most products and services there is little differentiation between the major competitors in the B2B industry segments.  As Gallup says, “There is often little in the company’s product or service itself that helps it support long-term business growth.”

New products or product offerings are not sustainable because competition will soon match with similar features and functions.  Pricing is not sustainable because someone can always go lower to “buy share.”  Service delivery is not sustainable because that again is something that is easily matched by the competition.  So what is left?

Sustainable long-term growth comes from building and growing customer relationships.  But most B2B companies have not invested in the relationship.   As Gallup noted, “They invest in Lean, Six Sigma and other methodologies that are crucial for keeping costs down, but they don’t have a plan for maximizing their customer relationships.”  Forming lasting relationships takes time and effort.  And that time and effort is not episodic; it is continual.  (Just think about the time and effort needed to form and maintain a good marriage relationship.)  It is not a quick hit business sales blitz or a new app for your phone.

Transform your company to create a customer-centric organization and build lasting customer relationships. It is as much about your company’s culture as it is about relationship management data and account teams.  Speaking of account teams, the relationship that is built between the customer and the salesperson may quickly be destroyed if the delivery is consistently late, or if the invoice is full of errors.

Let’s look a little closer at the relationship.  One of the Gallup findings is that strong customer relationships are built upon collaboration.  But many companies with B2B offerings are reluctant to collaborate.  Their fear is that if they share too much of their knowledge and insights, the customers will be able to create and operate the products and services that the seller is selling.  But, the only reason that the customer would consider such a thing is if they have become frustrated with the quality, price, and service they are receiving.  When the seller focuses on creating customer success and customer value, the customer is likely to send even more business their way.

The Gallup report also talks about the need for positive, proactive customer engagement. A roadmap and an action plan are needed to make that engagement happen.  It isn’t osmosis that creates engagement.  Management must plan, and execute carefully if they want to develop strong customer relationships at all points of customer-seller interactions. The report continues to highlight the importance of a seller’s supplier network and the use of data analytics.  All of these become tools to be used by an empowered cross-functional customer account team.

The report is a long one, 88 pages, and there are no easy answers.  If you are looking for “seven easy steps to attain customer centricity,” you are out of luck.  As Gallup notes, “this is hard work and often requires an organizational transformation.”  However, if you don’t make the changes, while your competitors do, you won’t stay in the game.  Remember, 71% of your customers are ready to switch as soon as another seller shows them that they care more about customer value and customer success.

 

Note: This post was originally posted by our Director Ray Sheen at his blog, ray-sheen@blogspot.com and then on LinkedIn Pulse. Thank you, Ray. Thank you, Gallup, for your impressive report.

More from The Religence Team: It was no surprise to us that Gallup found that B2B customers with high customer engagement scores achieve:

  • 50% higher revenue/sales,
  • 34% higher profitability,
  • 55% higher share of wallet.

We say that profitable customers behave differently from normal or low profit customers. They want a relationship. It matters to their infrastructure, their supply chain, their mission critical systems. They buy on value, not price. The low profit customers are a drain on a company’s resources. It cost more to engage with them, for very little, if any return. In our starting benchmark, profitable customers cost 3X more the engage in retention than the others, but the return was 16X greater.

Quoting the Gallup report on the importance of collaborating with customers: “In every partnership where the level of transparency exists, there is a fundamental understanding that each company is in business to make money and that both businesses should be allowed to earn a living.” Well put.

Several of our Why Fly Blind blog posts are additive. Here are a few:

  • One on mapping mutual Customer Effort and improving on other traditional methods of measuring value. Traditional methods focus more on B2C than on high-value B2B and on lagging and hypothetical indicators instead of leading indicators. They are not actionable or operational enough to manage in the Relationship Age. Our Value Creation Mapping tool, which takes both a company and customer perspective, is.
  • Another actionable tool quantifies a Customer Success Score, to rate a company’s alignment for a customer focus.
  • And another is our Operational CRI System to track the customer experience. This post introduces our breakthrough metric Relationship Value (RV). And this one says why RV is needed. We will post one on RV use cases this spring. Be in Touch if you’d like to see it in advance.
  • Our post to introduce CX Performance Management speaks to a System of Record for the System of Engagement, tied to business outcomes. We will be posting a couple of blogs on profitability and value creation this spring. Be in Touch if you’d like to see them in advance.
  • Our CX Performance Management workshop series is a good introduction to our game-changing approach.

 

Customer Experience Wisdom: ”When customers share their thoughts and opinions, they expect to see change. … Ignoring the voice of the customer can be exponentially more harmful than not asking for feedback at all,” Gallup. We agree. See our post Why Ask WHY.

We’d add that after talking to hundreds and hundreds of customers for clients over the years, the reason their customers buy is rarely the same reason the company expects. Why customers stay is yet another matter. There may be a little twist to the reason. Or a different reason entirely. Or a reason that our client didn’t consider that significant until their customers pointed it out.

Questions: Do you know the behavior and profit patterns of your top priority customers? Do you know what they value? Do you know which ones buy on value, not price? If not,

Be In Touch. Request our thought leadership paper, Relationship: Foundation of Value. Let’s explore ways that we might collaborate to help move you toward greater customer-centricity!