The Case for Improving the B2B Customer Experience - Marketing and Sales

A special report for Marketing and Sales executives

Introduction

“I preferred the other brandʼs product… but I bought yours instead…”—actual feedback from an agricultural machinery customer, 2014.[i]

Why didn’t this customer buy the product he truly preferred? How did the successful company win his business?

The deciding factor was not price. Instead, the winning dealer gave the customer a more positive experience during the sale. In this case, customer experience (CX) trumped product.

This striking comment—and thousands like it from other B2B customers—confirms the importance of the CX. Before the sale, a positive CX can drive a purchase decision. After the sale, it can ensure brand loyalty, repeat business, and positive referrals.

Why invest in improving the CX?

Most companies acknowledge the importance of taking care of their customers. But few apply the same level of resources to the CX as they do to other areas of marketing such as product, pricing, and promotions.

Until recently, there were good reasons for that:

  • The CX was not well defined or understood
  • Managers found it hard to evaluate its importance, compared to other pressing priorities
  • It was difficult to justify investing to improve the CX

 The purpose of this white paper

This white paper has been published to help B2B Marketing and Sales executives understand CX and the benefits that flow from improving it.

[perfectpullquote align=”full” cite=”” link=”” color=”” class=”” size=””]Improving the CX helps generate more revenue and sustain profitable growth.[/perfectpullquote]

This paper highlights a growing body of research that shows how improving the CX helps generate more revenue, create lasting competitive advantage, and sustain profitable growth.[ii]

What is the “Customer Experience”?

CX can be defined as the sum total of all the interactions a customer has with your company.

This encompasses every touch point, from the first time a prospect hears about your product or service, right through their research and buying decision. It includes any communications around the sale, plus your delivery. And it covers any time they ask for support through an in-person visit, phone call, e-mail, or web visit.

The CX encompasses every channel, person, and process your customers can use to interact with your company. For B2B firms, this can be complex. That’s because business customers often have many different individuals, departments, and locations that can make purchase decisions and ask for support.

It’s Not Customer Service

Customer service typically sees the customer through your company’s lens. CX turns this around to view your company through your customer’s eyes.

Some businesses consider customer service a necessary evil they’re obliged to provide after a sale. At best, they see customer service as a cost center to be managed as efficiently as possible.

But others recognize how the CX is linked to the goals of Marketing and Sales, such as creating a satisfied and loyal customer base and driving profitable growth.

It’s Not Customer Satisfaction or Loyalty

While the CX includes all the interactions a customer has with your company, customer satisfaction or loyalty are the outcomes generated by those interactions.

The customer experience is NOT customer service, customer satisfaction, or customer loyalty.

In fact, these outcomes are often used as metrics to judge the success of any CX improvement effort.

How important is the Customer Experience?

Since the CX includes all the interactions a customer has with your company, it follows that every interaction matters—even the smallest ones.

For example, a clean customer washroom often shows up on CX surveys. A recent newspaper article put it this way, “A clean bathroom can make or break a customer service experience if your company is in the hospitality or service industry.”[iii]

Of course, there’s much more to CX than just mopping your bathroom.

Proving the connection

Rules of thumb such as “take care of the customer, and the customer will take care of you” have become business clichés.

But until recently, little data was available to prove the connection between CX and business performance. Does the CX, in fact, influence business performance? And if so, by how much?

Is a great CX simply a nice‐to‐have? Or can it actually move your company’s dials on revenue growth, profits, and shareholder value? A growing body of research suggests the latter.

CX builds long-term shareholder value

Great CXs can help you build customer loyalty and generate referrals, which in turn grow your business, as shown in Figure 1.

figure_customer_service_improvements
Figure 1

Can a great CX actually improve your company’s revenue, profits, and shareholder value?

And a recent analysis of the stock performance of CX leaders versus laggards showed some startling results.

Leaders outperformed the S&P 500 by 35% in cumulative returns from 2007 through 2014. But laggards underperformed the S&P 500 by 45%.[iv]

Figure 2 shows the striking gap between CX leaders and laggards. This gap creates a profound difference in long‐term shareholder value, which some consider the ultimate measure of management effectiveness.

One study showed leaders in CX dramatically outdid laggards in long-term shareholder value.

The superior performance of CX leaders was most likely driven by a combination of top-line revenues and bottom-line profits, generated through effective partnerships between Sales and Marketing and Operations and Support.

Now let’s look specifically at how both Marketing and Sales can benefit directly from improvements in CX.

figure_customer_experience_leaders
Figure 2. Source: Watermark Consulting

How Marketing Benefits from Better CX

From the perspective of Marketing, a better CX can lead to:

  • More positive referrals, including word-of-mouth, online comments, and social media
  • More customer loyalty
  • More overall growth

More positive referrals

As you may know, the Net Promoter Score (NPS) is a key performance indicator that shows whether an existing customer is likely to recommend your company to a colleague.[v]

Better CX boosts many marketing metrics, including customer referrals, loyalty, and overall growth.

The three main customer segments are:

  • Detractors: those unlikely to recommend your firm, or likely to say something negative about their experience
  • Passives: those who will likely say nothing
  • Promoters: those who will likely recommend your firm, or say something positive about their experience

In The Daniel Group’s experience conducting voice-of-customer interviews for B2B farm machinery dealers, 1 in 3 customers had referred a peer to a dealer in the past six months, as shown in Figure 3.

Of these referrals, 91% came from those who self-identified as Promoters—already happy with the dealer—while only 9% were from Passives or Detractors customers.[vi]

That makes sense: Positive CXs translate into more referrals, while mediocre CXs generate fewer referrals.

figure_3b
Figure 3. Source: The Daniel Group

More customer loyalty

Our findings are confirmed by a recent study involving more than 7,500 consumer surveys across 175 U.S. firms. As shown in Figure 4, Forrester Research found high correlations between good CXs and many key measures of customer loyalty.

These include a customer’s willingness to repurchase, to recommend the company to others, and to stay loyal to a brand.[vii]

[perfectpullquote align=”full” cite=”” link=”” color=”” class=”” size=””]Positive CXs translate into more referrals, while mediocre CXs generate fewer referrals.[/perfectpullquote]

figure_pearson
Figure 4. Source: Forrester Research

 

More growth

Everyone likes to have loyal customers, but what do they mean for a business?

Customer loyalty means that a customer continues to buy from you, building their lifetime value to your company. And everyone knows it’s easier to make a repeat sale to an existing customer than to find a brand-new customer.

In fact, customer loyalty has been linked to better-than‐average revenue growth over the long term. Bain & Co. found that over a 20‐year period, leaders in company loyalty grew at twice the rate of their industry peers, as shown in Figure 5.[viii]

figure_customers_promoters
Figure 5. Source: Bain and Co.

The bottom line for Marketing

More referrals, more loyalty, and more growth: When all these metrics are moving in a positive direction, Marketing is achieving its mission. As well, all these metrics help build brand equity, an intangible on top of actual shareholder value.

How Sales Benefits from Better CX

From the perspective of Sales, a better CX can lead to:

  • A larger pipeline of prospects
  • Faster and easier conversion of prospects to purchasers
  • More add-on sales and repeat business

All this adds up to more revenues, flowing in faster and easier than ever.

Better CX boosts adds up to more revenues, flowing in faster and easier than ever.

Boosting a buyer’s self-image

As you know, B2B purchasing tends to be more formal and complex than B2C. But CX still has an influence on purchase decisions, even if it isn’t listed on the customer’s vendor scorecard.

Sales research into 4,000 B2B buyers by consulting firm CEB found that a buyer’s perception of how the purchase reflected on them as an individual was a stronger driver than anything else. The buyer’s self-interest outweighed the value to their companies, or the benefits to their colleagues.[ix]

In other words, companies that deliver a superior experience during the sale actually boost a buyer’s self-image. This can unlock a powerful motivation to buy.

The power of positive CX

CEB’s research into B2B sales also revealed that more than half of customer loyalty is driven by how a company sells—namely, the CX during the sale—not by what it sells.[x]

For instance, B2B sales reps who come prepared with valuable insights about opportunities or issues in the prospect’s business outperform salespeople who bring nothing more than a standard sales pitch.

Delivering a superior experience during the sale can unlock a powerful motivation to buy.

This is another example of how CX can be a “secret weapon” for Sales, so powerful it can even overcome certain objections about your product or service. And best of all, it’s more or less within the control of your Sales team.

The bottom line for Sales

More referrals and more positive word-of-mouth mean more leads for Sales to develop. More prospects turning into more purchases means higher commissions for your sales team, and better revenues for your company.

CX can be a “secret weapon” for Sales, so powerful it can even overcome objections about your product or service.

The Hidden Opportunity  in Smaller Customers

Here’s one unexpected area where improving your CX can pay off: You can use it to retain more of your small‐ and mid‐size accounts.

Many of your smaller customers may actually generate higher profit margins than your larger accounts. But in most companies, smaller accounts get less attention, and suffer lower retention rates.

“Companies often segment their customers… according to how much revenue each customer generates for the business,” advises the Deloitte Review. “Segmenting customers according to profitability can be much more useful in managing margins.”[xi]

Even a modest improvement in retaining your most profitable customers—or boosting your “share of wallet” from them—can drive significant growth, as shown in Figure 6.

How can you achieve this? One option worth trying is investing to improve your CX. This usually doesn’t involve making any price concessions or offering any special terms.

So don’t let big, must-win accounts distract all your attention and take the lion’s share of your resources.

We recommend that B2B companies analyze the profitability and retention rates of your small‐ to mid‐size customers. You may be surprised to find a hidden opportunity where CX could pay off.

figure_profitable_growth
Figure 6. Source: The Daniel Group

 

Should Our Company Invest to Improve Our CX?

Many B2B companies have created formal CX improvement programs and are spending more on them.[xii]

In a 2014 study by Accenture, more than 4 out of 5 B2B executives said CX is a strategic priority, and they would be investing more year‐over‐year in this area.[xiii]

This points to two possible courses of action:

  • If your competitors have not yet prioritized CX, your company has an opportunity to stand out and win market share by doing better
  • If your competitors are already investing in this area, your company may need to do more to meet rising customer expectations

Weighing the costs against the benefits

Of course, you must weigh the benefits of investing in CX against the cost, complexity, and risk.

CX improvement programs can be complex and demand a lot of effort.

Improving your CX can be complex and demand a lot of effort, but you can justify the investment.

“Putting the customer at the center is a more complicated, subtle, and arduous adventure than it sounds,” says one customer service author and consultant.[xiv] And the most powerful benefits often take several years to realize.

But in our experience, you can structure these efforts in phases. You can start small and capture some early wins to justify expanding your investment.

Delivering consistently excellent CX requires focus, resources, and patience. But you can justify the investment by the resulting gains in referrals, customer loyalty, revenues, growth, and shareholder value.

Taking the next step

The Daniel Group has helped more than 50 B2B companies implement customer feedback programs to improve the CX across a number of industries.

Some of these industries include heavy equipment, industrial compressors, machine tools, material handling, and transportation.

To find out more about how we can help your company to improve your CX, call Max Daniel at 704.248.9113 or email at maxdaniel@thedanielgroup.com


About The Daniel Group

The Daniel Group helps B2B clients measure, manage, and improve the customer experience.  Since 1989, we have provided services to a wide range of companies from Fortune 500 companies to independent manufacturers, distributors, material handling companies, and technology companies. Our ServiceConnect voice-of-customer feedback program is deployed at many leading heavy equipment, industrial, and transportation companies including 75% of Caterpillar dealers in North America, AGCO Corporation, and Okuma America Corporation among others.

To learn more about how we may be able to help you improve your customer experience, please visit us at www.thedanielgroup.com, or contact a member of our management team:

Lynn Daniel

Lynn Daniel
President
704.749.5018
lynndaniel@thedanielgroup.com

Doug Fowler

Doug Fowler
Chief Operating Officer
704.816.7703
dougfowler@thedanielgroup.com

Max Daniel

Max Daniel
Business Development Manager
704.248.9113
maxdaniel@thedanielgroup.com


The Case for Improving the B2B Customer Experience is a publication of The Daniel Group, Ltd. and is copyrighted.  This White Paper may not be reproduced without the permission of The Daniel Group, Ltd.


Sources

[i]: The Daniel Group, 2014, customer feedback interview, edited for brevity and confidentiality

[ii]: “B2B Customer Experience: Start Playing to Win and Stop Playing Not to Lose”, Accenture, 2014, retrieved November 15, 2015 from  https://www.accenture.com/usen/insightb2bglobalcustomerexperiencestartplayingtowin

[iii]: Jonathan Lister, “The Impact of a Clean Restroom on Business”, Houston Chronicle, retrieved November 15, 2015 from http://smallbusiness.chron.com/impact-clean-restroom-business-38421.html

[iv]: “The 2015 Customer Experience ROI Study”, Watermark Consulting, retrieved November 15, 2015, from http://www.watermarkconsult.net/docs/Watermark-Customer-Experience-ROI-Study.pdf

Watermark defines CX Leaders and Laggards as the top and bottom 10 public companies rates in Forrester Research’s 2007-2015 Customer Experience Index studies

[v]: Net Promoter, Net Promoter Score, Net Promoter System and NPS are trademarks or registered trademarks of Bain & Company, Satmetrix Systems, and Fred Reichheld

[vi]: The Daniel Group, internal research, 2013

[vii]: Maxie Schmidt-Subramanian, “The Business Impact of Customer Experience 2014”, Forrester Research, retrieved November 15, 2015, from http://resources.moxiesoft.com/rs/moxiesoft/images/%0DBusiness_Impact_Of_CX_2014.pdf

[viii]: “How is Net Promoter Score related to growth?” Bain & Company,  retrieved November 15, 2015, from http://www.netpromotersystem.com/about/how-is-nps-related-to-growth.aspx

[ix]: Brent Adamson, Karl Schmidt and Anna Bird, “Why Self Image Matters in B2B Sales”, Harvard Business Review, April 2, 2015, retrieved November 15, 2015 from https://hbr.org/2015/04/why-self-image-matters-in-b2b-sales

[x]: Matthew Dixon and Brent Adamson. The Challenger Sale: Taking Control of the Customer Conversation. New York: Portfolio/Penguin, 2011

[xi]: Ed Johnson, Mike Simonetto, Julie Meehan and Ranjit Singh, “How Profitable Are Your Customers Anyway?” Deloitte Review, Issue 4 2009, retrieved November 15, 2015 from http://dupress.com/articles/how-profitable-are-your-customers-really/

[xii]: Bain & Company maintains a public list of companies at www.netpromotersystem.com/about/companies-using-nps.aspx#Service  who cite their use of the Net Promoter System, a customer loyalty metric, including many B2B firms.

[xiii]: Ibid, “B2B Customer Experience: Stop Playing to Win and Stop Playing Not to Lose”, Accenture

[xvi]: Micah Solomon, “Building Customer Loyalty the Hard (And Only) Way”, Forbes.com, July 22, 2013, retrieved November 15, 2015, from http://www.forbes.com/sites/groupthink/2013/07/22/building-customer-loyalty-the-hard-and-only-way/