In a B2B environment that is becoming increasingly competitive, there is growing interest in what actually drives business performance.
I was recently presented with some research by Professor Moira Clark of the Henley Centre for Customer Management, which concluded that making it easier for customers to do business is a sure-fire way of improving the bottom line. This takes the notion of customer experience one step further, and she claims that more companies are beginning to bring this line of thought into their strategic planning.
Essentially, it’s about having a customer-centric approach, and the research suggests that customer centricity in B2B drives business performance. The great challenge facing B2B companies, however, is how to change the business to become more customer-centric. For many, it may seem an unrealistic task.
It is tempting to think that many B2B companies are missing out on a big opportunity. In the past two years, I have interviewed around 20 CEOs and CMOs of B2B companies, covering a range of industry sectors including IT, finance, cement, manufacturing, professional services and pharmaceutical. In these in-depth interviews, some of them as part of my research into the contribution of marketing to B2B business performance, only one of them mentioned the idea of “making it easy for customers”, but simply as a passing comment. It certainly didn’t appear to be a strategic focus for these businesses.
And, although some (but not all) were focused on ensuring the company’s strategic value proposition was well understood, both by staff and customers, none have taken it so far as aspiring towards a customer-centric organization. There’s no shortage of talent and brains amongst those I have interviewed, so is it because the change required in the organization is too big?
Why make it easy to do business?
One of the traditional models for revealing the sources of performance is the service-profit chain, as introduced in a 1994 Harvard Business Review article. The service-profit chain describes the relationship between profitability, customer loyalty and satisfaction, retention and productivity of employees.
It is an established, but perhaps neglected fact that customer retention is a key factor in business performance. A study by Bain & Company in 1990 revealed that increasing customer retention rates by five percent increased profits by anything between 25 and 95 percent! More recent analyses as internet-driven processes have become more widespread have only served to confirm these findings.
Companies adopt different strategies for retaining customers. Cross-selling and upselling are two of the more obvious. More recently, attention has been turned towards offering customers an outstanding experience.
Digging deeper into this, research conducted by Professor Moira Clark and Andrew Bryan has revealed a new factor to business performance: the ‘ease of doing business’. Their findings suggest that the easier it is for a customer to do business with a company, the more likely it is that the customer will stay loyal. They point to tangible benefits including improved customer retention figures, fewer complaints, and an increase in positive word of mouth.
Reduce the customer effort
So, is it an insurmountable task to make it easier for the customer to do business with you? Professor Clark and her colleagues have identified some quite tangible means of building a more customer-centric business.
In simple terms, making it easy means reducing the ‘customer effort’ – the work the customer needs to do to resolve an issue. Since loyalty is a key factor for driving business performance, reducing customer effort has a direct impact on business performance. CEB Global has also studied the effect of this, concluding that an ‘effortless experience’ is the key to customer loyalty.
Whereas many businesses have adopted tools such as Net Promoter Scores and Customer Satisfaction Scores (CSAT) to monitor customer loyalty, these practices alone are seen as one-dimensional. More businesses are adding the customer effort score (CES) as another way of measuring the value of customer loyalty to the business. Some claim CES to be a better predictor of customer loyalty, but companies are probably best served by using all measures and not limiting themselves to just one.
For the management and marketing of B2B companies, there is a quite tangible way of using CES. It helps to identify the actions that need to be taken to make it easier for customers. This is from a holistic customer experience journey perspective to specific areas such as the website and customer support.
Delight where it counts
The theory behind all of this can be traced back to an oft-cited, typically insightful Harvard Business Review article, Stop Trying to Delight Your Customers, which explains that “loyalty has a lot more to do with how well companies deliver on their basic, even plain-vanilla promises than on how dazzling the service experience might be”.
The original Harvard report sparked great interest, partly because it debunked the commonly held perception that outstanding customer service delivers improved loyalty. Since then, others have attempted to delve deeper into understanding the issues at stake. Clark, for one, debates the idea that it is necessary to stop delighting customers completely. Instead, she suggests “delighting customers where they value it”.
Understanding where that value lies requires customer insight, which can be gained from in-depth research into customer needs. Professor Clark explains further: “The aim is to establish a strong competitive advantage by gaining a fresh, not yet obvious insight into customer behavior. But research is required to reveal the special insights. The aim is to create memorable experiences for the customer.”
An important finding from Clark’s research is that it’s not enough to analyze the quantitative data from customer questionnaires. You also need solicit free-text comments, which are likely to reveal key insights into why customers are loyal to the company. Real-life feedback can also be gained through targeted workshops with customers.
Reduce cognitive effort
‘Customer effort’ can be categorized according to cognitive, time, emotional and physical effort. Perhaps the most interesting for B2B marketers is cognitive effort. Business leaders would do well to consider how they can help customers reduce the thinking required to engage with their brand.
A strong brand makes an impact. But when looking at cognitive effort, the case for investing in strengthening the brand becomes even more interesting. A strong brand requires little cognitive effort. Professor Clark refers to brain scan studies showing that the brain reacts significantly less to a familiar, strong brand.
If you’re familiar with Daniel Kahneman’s notions of fast and slow thinking, you’ll recognize that a strong brand elicits a ‘system 1’ response. Just as you instinctively know the answer to 2 + 2, you know what a strong brand stands for. It establishes a feeling of familiarity and ease, and you don’t need to think about what it means. It requires less energy to engage with a strong brand.
The connection between a strong brand and ‘ease of doing business’ is quite compelling. It suggests there are significant upsides in investing in the brand to ensure your audience recognizes your brand and knows what it stands for.
Focus on customers, not competitors
At the same time, there is increasing evidence that focusing on customer needs pays better dividends than focusing on competitors. Traditionally, leaders have been focused on playing cat and mouse with their competitors. But in today’s fast-paced business environment, this misses the point. By the time your business has responded to competition, your customers – and their customers – may have moved on. So it’s better to understand and be able to meet their needs than simply beat competitors.
Clark also stressed how the company’s employees not only play a big part in providing the customer experience, but also in delivering critical competitive advantage. But it’s important that employees’ efforts are focused on the right things.
Employee engagement is often cited as an important factor in providing competitive advantage. But employee engagement can have a negative effect on business performance, as has been shown in companies that focus so much on employee needs that they neglect customers. Instead, companies need to create a positive service climate in the company, in which employees are engaged, but focused on customer needs. It is about empowering employees to improve the customer experience.
Empowering staff to resolve issues is a good start to making it easier for the customer, and this type of empowerment drives business performance. The CEO of an 8000-employee heavy machinery manufacturer told me earlier this year that he was very keen to invest in employee education, even in challenging market conditions and when the company was reducing staff numbers. Another CEO of a highly successful Danish IT services company has a well-known mantra for driving business performance: “Happy employees make happy clients who buy more.” This has been a driving force behind the company’s continuous growth over the last 10 years.
An offshore energy company I work with has also taken this to heart, making employee empowerment a strategic pillar. The company invests significantly in staff training, despite a volatile, low-margin oil and gas market. Staff can apply the latest digital tools available to them to develop solutions specifically for the customer. This is a bold move, and one that requires a visionary, long-term approach, but this approach to customer centricity is seen by executive management as essential to its differentiated value offering.
It’s clear to me that they all confirm Clark and Bryan’s findings, who say it is about empowering staff to say ‘yes’. But it’s not a blanket yes; it’s a yes to “how can I make it easier for you to do business with us?”.
Overall, achieving the end goal of customer centricity means incremental change. It is a big deal and, rather than seeing it as an overnight sea change, the company will be best served by identifying the areas of the business that can be tweaked to deliver greater customer value – and then starting to allow that to happen. It won’t happen immediately, but the consequences will be well worth the effort.
In addition to the links provided in the article, I can recommend the following sources:
Putting the Service-Profit Chain to Work by James L. Heskett, Thomas O. Jones, Gary Loveman, W Earl Sasser, Jr., and Leonard A. Schlesinger, Harvard Business Review, March-April 1994
Customer Effort: Help or hype? by Professor Moira Clark and Andrew Bryan, The Henley Centre for Customer Management, April 2013
Measuring Customer Satisfaction and Understanding Customer Effort in a B2B Context by Tony Harrington and Andrew Bryan, The Henley Centre for Customer Management, December 2013Like this post? Subscribe now and get notified about new content!