Business-to-customer relationships are all about creating loyalty, and over the past 50 years marketers have been developing strategies and tools to keep customers coming back for more. Yet researchers and marketers have paid much less attention to business-to-business (B2B) relationships even though losing B2B customer in an industry can be catastrophe – the equivalent of losing thousands of end customers.
Our research shows that with the right strategy, businesses can go about building loyal relationships with other businesses. The research is based on survey of 350 B2B relationships in the financial services industry throughout New Zealand.
The first thing we found is that the best way to create loyalty is to work on behaviour and use that to build true loyalty. It is reversal of previous research findings, which suggest that if you create loyal attitude then the behaviour will follow.
The starting point for loyalty is satisfaction. Yet customer satisfaction in itself does not lead to loyal relationship, and investing in improvements beyond industry benchmarks of satisfaction will not necessarily increase loyalty. The message is simple. Be careful not to over-invest in satisfaction.
Once customers are satisfied, business partners need to establish shared values. Shared values are the bond that holds relationships together and the stronger the sense of shared values, the stronger the business relationship.
The next step is to start developing what we call synthetic loyalty, that is, loyal behaviour without loyal attitude. The crux of establishing synthetic loyalty is to focus initially on getting more business (increasing intensity) rather than the long-term relationship. To achieve this, managers need to provide incentives such as purchasing discounts, volume bonuses and access to exclusive products and services. Synthetic loyalty is not the end goal for B2B relationships, but it is step along the way. Our research revealed that the transition from synthetic loyalty to true loyalty requires one further ingredient – trust.
Trust building strategies often start with the development of interpersonal relationships through social events and recognition of achievements. The ultimate goal of loyal relationship is to blur the boundaries between the two businesses to the point where they become inseparable.
Nevertheless, not all businesses are interested in true loyalty. In our research we identified three different groups who could be ‘potentially loyal’, which we called relationship seekers, reward seekers, and independence seekers.
The prime targets for true loyalty in any industry are the relationship seekers, who believe in the benefits of loyalty and expect loyalty in return. Relationship seekers are most likely to be already in ‘loyal relationship’, but they can become targets when their current relationship is not meeting their expectations.
Reward seekers are the prime targets for synthetic loyalty. While not particularly motivated to form loyal relationships, they will change their behaviour if the incentives are attractive enough. These must be followed up with personal relationship building activities.
The final group is the independence seekers. These people do not desire any kind of loyal relationship and will actively resist any strategies they perceive as affronts to their independence. For this group, every transaction must be profitable for the supplier as there is no guarantee that the relationship will endure beyond single transaction.
We found that loyalty in B2B relationships requires managed approach to lead the relationship through three distinct phases of satisfaction, synthetic loyalty and true loyalty. Ultimately, building loyal B2B relationships is good business. Our research identifies logical path that firms can take to develop these relationships.
Dr Dave McMillan is founding director of Simply Strategic, business-consulting specialist. Drs Carolyn Costley and Michèle Akoorie are associate professors at the University of Waikato Management School.
