20 February 2018

Customer Retention For B2C And B2B Businesses

Richard Hancock
Written by Richard Hancock

Richard Hancock is Regional Director for The Marketing Centre and specialises in working with small and mid-size businesses. He has over 30 years experience working across the FMCG, Digital Entertainment, Technology & Telecoms industries, both in the UK & overseas.

 In a growth-driven world, businesses often focus on the new: new markets, clients, products or services. Too often they miss our most reliable source of profit – existing customers. The probability of selling to an existing customer is somewhere between 60% and 70%  compared to between 5% and 20% for successfully selling to a new prospect. They’re also cheaper to market to, it costs three times as much to win a new customer as it does to retain an old one. 

Existing customers have already bought into your offering and your marketing. You know something about them – what they bought, at the very least, and ideally why they bought it.  They’re an easier proposition than someone who needs to be made aware, warmed up and converted from scratch.

That’s why customer retention is such an important element of marketing theory. So, what do you need to know?

What do small and medium-sized businesses need to know?

Small businesses have an innate upper hand when it comes to customer retention. Customers and clients generally experience a more personal service when there’s a smaller team serving them. Over on the High Street, 84% of Britons rate the personal touch of independent shops as average to very good – and there’s no reason to believe this doesn’t carry over to B2B.

However, there are challenges to delivering a personal service. Customers with complaints increasingly expect to speak to a senior figure and expect a swifter response. Delivering this kind of personal service is easy enough when you start out. As organisations grow, though, it’s easy to lose connections made.

B2B vs B2C

While B2C customer relations are often based on transactions, B2B is usually a much longer play – an agreement that often naturally lends itself to forming a long-standing relationship between the parties involved. Large businesses can often court a prospect for months, sometimes years. In advertising, the top 40 client-agency relationships have lasted an average of 22 years, and even the industry average as a whole is a healthy 3.2 years.

B2B is about relationship building from the outset, which means retention tactics are on the cards from the start. You’re trying to ensure that every contact between you and them ends with a positive impression. If at any stage the relationship sours, though, all the previous work can be lost. Seven in ten clients are not especially committed to you or your offering, which means they’ll go elsewhere if a better offer presents itself.

B2C relationships are more direct – but it’s not all about the price, the product and the point of sale. Brand plays a huge role in customer loyalty. B2C clients need to work hard on their branding, sales processes, and customer journey to ensure that relationships continue past the point of sale. Thanking your customers, following up their purchase, and keeping yourself front-of-mind is crucial here.

What should be in your customer retention plan?

  • Regular comms. Relationships are the bedrock of retention – to stay top of mind, you need to be reminding your former customers that you exist and that they did business with you. Email is particularly useful here, being less intrusive than a phone call, although calls are useful for the strategic discussions which improve B2B relationships.
  • Customer marketing. Messages and offers tailored to existing customers, ideally tying into the goods or services they previously bought. Consider offering discounts on the same or similar products, or recommendations for other offerings in the same line.
  • Surveys are the other way to justify continued contact. They’re useful for several reasons: they identify areas for improvement, they collect data about the customer’s perceptions of value and use for the offering, and they build a positive association in their own right, since from the customer’s point of view, the company cares enough to solicit opinions.
  • Contact with the human side of the business. Again, this is about relationships and personalisation. It’s an old truism – contact with the same person makes customers and clients feel cared-about.
  • Reporting. Track engagement through metrics like email open and clickthrough rates, completed surveys and successful calls.
  • Measures of success. These metrics constitute the bottom line, showing whether you’re succeeding in your marketing.

Metrics – how do you know you’re doing well?

The exact metrics you focus on will vary – they have to make sense for your business and your offering. For some businesses, raw retention rates – the percentage of customers who are still paying attention – will be worth focusing on. For businesses looking to improve their after-sales service, support satisfaction ratings derived from surveys will be the most important metric.

Chances are, however, you’ll be looking at one of the following:

  • Customer lifetime value. What are your customers spending, and how can you increase that figure?
  • Retention, tracked against competitors. How many of your customers are sticking around?
  • Net Promoter Score. An NPS measures the willingness of customers to recommend a company’s products or services to others. Ask for a score out of 10, Customers that give you a 6 or below are detractors, a score of 7 or 8 are called passives, and a 9 or 10 are Promoters. To calculate your Net Promoter Score, detract the percentage of detractors from the percentage of promoters.
  • Client referrals. Are customers advocating for your business and driving growth in their own right?
  • Conversion rates by lead source. How many of your new prospects are coming from referrals?

Myths – what you don’t need to know

Promotional products – pens, calendars, notepaper and so on – are about you, not the buyer. Often, they end up shoved in a drawer or thrown away, and are nowhere to be seen when the buyer reaches a pain point and is looking for a product to address it. It’s better to send high-value gifts to selected clients than to bung everyone a biro just because you can.

Rewards schemes seem like a great idea, but in practice, it’s another account with another set of points and discounts which are probably going to be ignored. It’s far better to offer a simple thank-you discount – 10% off their next purchase – or a free after-sales service. If you want to offer points, consider joining up with an existing, major, cross-brand scheme such as Nectar – something people use and value.

More messages don’t automatically mean more engagement. Quite the opposite, in fact – customers and clients feel pestered, and disengage, potentially blacklisting you or adding your email to their spam filter, which will affect your marketing efforts elsewhere. Consider the type, quality and purpose of every message you send out. What doesn’t offer value to the recipient isn’t worth sending.

If you’re convinced by customer retention, but not sure where to start with your marketing, take our free Marketing 360 Healthcheck to see how you’re doing right now.


Ready to take
your marketing seriously?

Since 2010, we’ve helped business owners make sense of marketing.
To make smarter decisions and make the most of their investment.

So if you’re tired of switching from one thing to the next hoping one will stick, maybe it’s time to try a different approach.