To design a successful B2B incentive program, it is important to understand the various types of loyalty.
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A strategy based on customer behaviours is vital to a successful B2B marketing initiative, especially B2B loyalty programs. This is because behaviours shape how customers purchase products, engage and commit their dollars to a brand. In other words, behaviour defines their type of loyalty.
While price is a considerable aspect influencing loyalty (a strong incentive), there are other benefits and intrinsic values that customers look for in a brand. In B2B settings, relationships and personal connections are highly regarded and often critical in building loyalty.
Also, in today’s ever-changing market landscape, ethical operations and brand purpose are of value, and the way staff conduct themselves when talking to customers are strong motivators of loyalty.
First, for Australian and New Zealand markets, let’s define the difference between incentives and loyalty in a B2B context to answer the question.
Incentives and loyalty are closely interrelated. For example, an incentive program encourages transactions and behaviours that are important to a supplier or vendor relationship with partner clients and customers through rewards.
These behaviours result in loyalty created through recognition, built upon rewards —influencing the relationship, not just transactions and making personal and emotional connections with a brand.
The key here is to target behaviours with an incentive to build loyalty through relationships and recognition.
There are various ways to view ‘loyalty’, and we have identified five of the most common ways customers commit their business to a B2B brand. These types of loyalty result from different value propositions a brand presents to customers via an incentive program.
There is no doubt that business buyers and customers are looking for the price. Resellers need to keep their costs down and maintain or grow their margins. So, for some, product price tags are a top reason for staying loyal to a vendor or supplier. However, other forms of price induced loyalty are trade discounts, promotions, and special offers as they hold a monetary value.
When running an incentive, consider if you want to induce price loyalty and whether it is the best move for your brand. Reducing your price is not always the best decision when you look to incentivise via a sale, sign-on discount or rebate structure with your business customers.
Consider that customers may join your incentive or respond to an offer only to get their hands on the discount. Often only for the one time or the short term. A new account customer might enrol in an incentive program to get the benefits during their initial purchase and not purchase again; others may stick around and buy more than once. If you have led with price, you could see a switch when your customer sees a competitor’s offer. It’s hard to add value to a loyalty program if you have the cheapest price in town.
Consider how an incentive that results in price induced loyalty impacts your long-standing business relations. These businesses are with you not only for the competitive deals you agreed to or saw when they start buying from you but also for a whole other set of reasons. Their loyalty is different.
The customer loyalty type that B2C would love to compare notes on with B2B is relationship loyalty. All loyalty aims to create consistent, constant purchases based on the relationship between a business and its customers. In B2B, relationships are undoubtedly a leading indicator of loyalty. Most B2B companies are in a position to make relationships personal, meet face to face, and share experiences with those customers.
Fostering a good relationship with customers is paramount since selling to a business will yield much more profit than selling to consumers, where transactions are typically impersonal.
Therefore, with B2B loyalty programs that target business customers, it is imperative to have a design pillar to retain and recognise your most valuable clients to ensure their loyalty.
In the trade industry, strong relationships between customers and store or account managers are built over time and can evolve to mate-like status. This bond allows for brand loyalty, like building a community with similar business interactions, personalities, and demographics. In addition, the strength of relationships can remove certain purchase barriers in areas such as negotiations, contracts, and agreements.
Even when approached with the best price and terms, B2B customer loyalty built on a relationship is one of the hardest to shift. There are not only commercial influences but personal connections and mateship involved too
Relationship customer loyalty is mutually beneficial, as each party knows what the other is looking for. As a result, brands can align with the customer’s business goals and transform their customer loyalty from transactional to relationship-based.
In this sense, relationship and customer loyalty is a dynamic partnership designed to promote long term and mutual success.
Referred to as functional or cognitive loyalty, this type of loyalty is where a customer weighs up the value of a product or service and makes a calculated decision about whether to engage with the seller and make a purchase. This type of loyalty is common in B2B and defines a transactional relationship between buyer and seller.
The customer sees value in the purchase, realises the transaction, and there’s no further commitment —it’s functional. Through incentives or tactical promotions, brands can change customer behaviour and the consumer’s tendency to repurchase the product or service.
This is plausible, as brands want consistent business from their customers. However, this is not always necessarily a good indicator of B2B customer loyalty. Instead, it is a good indication of the number of transactions. Brands need to ascertain if repeat business results from a lack of alternatives or the amount of effort required to change suppliers.
A good example of transactional loyalty is when a business customer becomes a member or opens an account with a business to access better deals, exclusive offers, access first to new products or other benefits when they reach a certain purchase threshold.
This type of incentive and loyalty drives allegiance but is not built on passion or emotion for the brand. And as soon as there is another tangible offer making it a better transaction, customers will switch. It is, therefore, more important to win customers hearts or minds.
Emotional loyalty is a psychological preference and affective attachment. Emotional loyalty exists when connections beyond transactions and relationships form. Whilst positive perceptions and attitudes towards a brand occur within transactions and relationships (and can drive behaviours such as repeat purchases), this is not where emotional customer loyalty happens.
Instead, we are talking about devotion, which comes from customers’ positive associations with a particular product or brand and the feeling of commitment based on emotional preference.
Customers who exhibit emotional loyalty are devoted to a product or service, demonstrated by repeat purchases despite competitors’ efforts to lure them away. Thus, they emotionally have a brand preference. A good example in B2C are fans of brands such as Apple or Harley Davidson.
The question is, how to create devotion and loyalty for B2B brands? How to bring business customers closer to the brand emotionally? It involves understanding what business customers feel to create a personalised interaction with them, right from the first contact (whether personal or via advertising) up to closing a deal and aftersales interactions.
Incentives can achieve devotion (i.e. an “Elite” trip for top customers) where fans are created via the program. Being part of an “Elite” creates a halo effect and drives that emotional connection with the brand.
It is about giving customers a positive experience from end to end, which will make them feel, if not special, that the process of doing business with the brand is seamless, positive, and, most importantly, customer-centric.
Other aspects that come into play that build emotional loyalty are the company’s purpose, its values and ethical attitudes; the way the company and the staff conduct themselves and whether the company is doing the right thing by customers.
True loyalty is the B2B loyalty to strive for. It is a true commitment to a brand. It isn’t easy to establish, and it happens over time. But in this type of loyalty, customers will hardly switch brands.
True loyalty is built from parts of the previous four loyalty types —reciprocal relationships, where a strong two-way exchange of value supports itself. When a brand achieves this level of customer commitment, competitive offers, convenience, and the promise of ‘something better’ doesn’t matter because customers trust your business. The brand commands their loyalty.
Trust comes from delivering experiences a customer values and feels good about at all levels. It creates a sense of belonging that leads customers to believe you have their best interest in mind and shifts the focus from transaction to devotion.
Understanding these five types of B2B loyalty and how a business customer engages helps brands decide what kind of relationship they want to have with them. For example, knowing a customer’s allegiance to a brand is based purely on price makes relationships feel mercenary, but it also may be a strategy to win customers.
The benefit of the relationship may be due to convenience or lack of a better option, making customers stick to a brand. It may work well in some contexts, such as new markets, location or scarcity, but the relationship is transactional, not emotional.
B2B incentive programs drive loyalty. However, brands must consider what type of loyalty they have and want their incentive to create. What are the behaviours a brand wants its customers to change? Should their incentives focus on customer commitment to transactions or to take offers and drive incremental sales? A B2B incentive program must encourage and foster personal and relevant relationships, which result in long term gains and true loyalty.