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B2B Customer Behavior White paper.


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B2B Customer Behavior White paper.

  1. 1. Does Customer AdvocacyExist in B2B?Ms. Jill Carnick, Vice PresidentMr. Saji Kumar, Senior Vice PresidentDr. Michael Lowenstein, Executive Vice President Participants in Market Probe workshops, webinars and conference presentations about our SHARE+ customer advocacy research framework frequently ask: “Because of the importance of brand perception and word-of-mouth in B2C products and services, I understand how customer advocacy can provide highly actionable insights there. What about customer advocacy in B2B products and services? Does it exist?” Extensive research into numerous B2B sectors has repeatedly shown that even with the tighter decision parameters such as pricing, and regulations and vendor qualification that may exist in business-to- business products and services, much of what drives initial and ongoing supplier choice is built around brand impression and peer-to-peer informal communication. What creates and sustains top-end loyalty is, of course, excellent performance on “table stakes” tangible, basic value elements. Delivering at promised levels on pricing, completeness, accuracy, timeliness, reliability, and consistency are minimum standards for building a foundation level of trust and helping to build the supplier-customer relationship. Proactive, personalized service that exceeds expectations, two-way communication, and engagement help bond the customer to the supplier. This is true throughout the customer life cycle, from initial supplier selection and purchase through cross-sell, up-sell, and advocacy behavior. This white paper will: • Present the rationale and case for monetizing, actionable advocacy measurement in B2B; • Offer a capsule B2B case study; • Present two sets of B2B actual advocacy research results: one for small business banking in Singapore and the other for business services in the United States. ©2010 Market Probe, All Rights Reserved
  2. 2. Business-to-Business Advocacy Measurement: It’s AboutPerformance, Trust and Relationships Apart from procurement and pricing requirements sometimes encountered in business-to-business supplier selection and loyalty behavior situations, there are several factors that contribute directly to perceptions and marketplace actions. These include: • Overall supplier brand impression/reputation – largely attitudinal, with some influence on purchase decisions; • Level of expressed commitment to supplier – largely attitudinal; • Overall performance satisfaction – impacts purchase intention; • Perceived service quality – impacts both attitudes and purchase intentions. Service quality is a critical measure of organizational performance and is a key condition of relationship quality. In turn, relationship quality links and contributes to the perception of satisfaction and trust, creating business outcomes of customer retention and advocacy. This is similar to the role of service in B2C product and service supplier selection. Interestingly, although trust in employees is often a major contributor to B2C customer behavior, in B2B studies, employee trust is assumed and has been found to be less of a factor. As reported in a B2B analysis publication from Allegiance, a major consulting organization: “Focusing only on the end customer in a B2B environment yields only part of your company’s story. After all, your business partners represent your company and products to their customers.Therefore, you need to make sure your business customers are properly advocating your brand.” Even though B2B customer relationships are often higher-touch than in B2C customer markets, companies that depend only on anecdotal, qualitative information leave much insight uncovered. There must be a proactive, formal and actionable advocacy-based research program to help stay ahead of the customer need curve. Word-of-mouth, just as important in driving advocacy behavior, is critical in the business-to-business world. Word-of-mouth gets business decision-makers to buy. According to the study, “Driving Word of Mouth Advocacy Among Business Executives: The Experiential Marketing Connection," conducted in 2007 by Keller Fay Group and Jack Morton Worldwide, 53% of the 288 U.S. business decision- makers surveyed said that word-of-mouth from colleagues and friends would both get them to buy and contribute strongly to passing along positive comments themselves. This compares to 39% for sales representatives, 38% for meetings, events, and conferences, 37% for Internet, and 37% for trade shows and exhibits. Direct mail, print, TV, and radio advertising were cited by between 22% and 32% as having influence on work-related purchases.
  3. 3. How does that word get spread? In more than 17,000 conversations by business decision-makers from June 2006 through January, 2007, as monitored by Keller Fay, 75% were conducted face-to-face compared to 19% by phone, the next most frequent communication medium. This proportion is much higher than by B2C consumers, who are more likely to communicate via the Internet. Other surveys have confirmed word-of-mouth’s leverage in B2B marketing. Nearly half of the business respondents in a MarketingSherpa and CNET study said that peer-to-peer informal communication had the highest impact on buying decisions for technology and services. Word-of-mouth will only be positive if companies have been identified as creating strong brand impression and consistently outstanding, value-based customer experiences.Capsule B2B Case Study: Computer and Peripherals ServiceExperience-Based Advocacy Behavior Senior executives of our client, a major producer of computer and peripheral equipment, issued a mandate for their customer service operation: be world-class, performing at such a consistently high and value-producing level that the service experience would positively drive downstream business outcomes. Customer advocacy research was conducted in 20 countries worldwide to identify likely behavior based on service experiences, irrespective of support channel. Advocacy research results showed that demonstrating knowledge, speed of responsiveness, and courtesy were insufficient to strategically and positively differentiate service. There was a need to proactively “take ownership” of the customer’s service issue, to personalize it beyond the merely reactive and institutional response usually experienced by customers, thus creating a stronger bond and relationship. Knowledge, responsiveness, and courtesy were the expected “table stakes” elements of performance. This critical and highly leveraging finding was identified in all service channels, products and countries studied. Note: In previous customer service satisfaction research studies conducted by this client, “taking ownership” was only one of an array of attributes where level of satisfaction was measured. Here, this single service factor was key to driving higher levels of downstream monetizing behavior resulting directly from the service experience.
  4. 4. Our client took several initiatives as a result of this research: • Major overhaul of service processes, built around greater service proactivity; • Training/retraining of staff to go beyond the reactive basics of performance; • Staff incentive program based on “taking ownership” scores and overall research results. When follow-up advocacy research was conducted with this service population, there was a significant increase in the proportion of customers likely to purchase from our client specifically as a result of the service they had experienced.Actual B2B Advocacy Research Results We selected two business-to-business customer advocacy studies to share from those we have conducted. Our studies for Singapore SME Business Banking and United States Business Services represent the spectrum, types of results and actionable insights provided for clients through our SHARE+ customer advocacy research framework. Singapore SME Business Banking Singapore is one of the most progressive financial and banking hubs in Southeast Asia. A recent study was conducted to determine some of the key drivers underlying customer advocacy levels towards banks, in particular among SME customers. A web-based survey methodology was used and invitations were sent to business executives who have sole or shared responsibility in selecting banks and financial services companies for their organizations. Companies surveyed had yearly revenues of less than 100 million Singapore dollars. Three weeks of data collection yielded 175 survey responses.
  5. 5. In applying Market Probe’s SHARE+ customer advocacy researchframework to the SME responses, only 12% of SME respondentswere identified as Advocates of their primary bank for all businesstransactions. The largest group of customers, 38%, was Allegiants.Allegiants are an “aspirational” segment: building them to the Advocacylevel will increase their monetizing power for the primary bank. Closeto a third (30%) of the respondents were in the Alienated category (seeFigure 1 below). Figure 1Although the consumption of banking products is generally notconsidered to be as emotional or relationship-based as that of consumerservices and high-ticket products, our findings revealed that theemotional element of trust is instrumental in driving up the level ofcustomer advocacy behavior. Advocate and Allegiant customers tendedto exhibit significantly stronger levels of trust, expressed in multipleways, toward their primary banks compared to Ambivalent andAlienated customers.Results of our study showed that customer trust is cultivated throughpositive interactions with the banks. Two customer touch-points thatare key in establishing the trust of Advocates are the account managersand customer interactions with general staff of the bank. Morespecifically, our research revealed that customers with high advocacyscores are generally those who are more satisfied with interactionswith their account managers in terms of accessibility, promptness inresponse, empowerment to solve problems, and offering good financialadvice.
  6. 6. In addition, it was found that these trust-building experiences withaccount managers have to be complemented by the overall interactionwith other bank employees whom the customers encounter.Performance elements including friendliness, perceived competence andthe ability to render prompt and efficient service support the positiveinteraction. Results showed that it is critical for banks to present apositive, customer-centric culture that encapsulates their entire serviceoffering through training and recruitment of the right people. Table 1We also learned through the research that banking and financial productstended to be perceived as having better quality and more favorablepricing by the primary bank’s customers identified as Advocates.
  7. 7. United States Business ServicesMarket Probe has been providing research services to a leading nationalstaffing provider for more than a decade. In our ongoing efforts tobring actionable CRM findings to our client, Market Probe developedresearch programs for the staffing provider that are strategic in natureand ever-evolving. Our SHARE+ advocacy research protocol offeredour client a means to understand the relationship between customerattitudes and behaviors, and business outcomes. Web-based surveyinvitations were sent to the company’s clients who had placed atemporary staffing order within the past month. Close to 700 surveyresponses were received.Market Probe’s study revealed that an overwhelming 75% of thestaffing agency’s customers are communicating to others about theagency through offline and online channels. As a result, we are ableto use our advocacy framework to help classify customers into thefollowing segments: Advocate, Allegiant, Ambivalent and Alienated.Because the results produced very few respondents in the individualAmbivalent and Alienated categories, we combined the two categoriesfor our analyses, and they took on less overall importance. Figure 2Forty-one percent of our client’s customers in the study emerged asAdvocates, with almost the same percentage falling into the category ofAllegiant. Our combined category of Ambivalent/Alienated resulted ina low 16% of our client’s customers, a reflection of how positively ourclient is perceived.
  8. 8. Figure 3 illustrates a central concept of Market Probe’s SHARE+framework: linking advocacy behaviors to business outcomes. Forour client, we identified three key customer behaviors that need tobe explored to increase revenue: Retention, Growth, and Use ofCompetition. These findings are quite compelling. As the index of allrespondents is 100, we can see that Advocates are 111% of the averageof all customers in terms of continuing to do business with the staffingprovider. Conversely, 89% of Alienated and Ambivalent intend tocontinue the relationship; that means a potential of 11% churn withinthis combined group. Share-of-wallet – the percent of expenditureallocated to the staffing provider – shows a similar pattern. Advocatesemerge at 115%, or 15% higher than other customer groups.Allegiants score at 107% and Alienated/Ambivalents drop to 70%, or30% lower share-of-wallet than the other two groups. Figure 3*Conversely, when looking at the use of other staffing agencies by thecompany’s customers, it was clear that even some negativism couldresult in potential business loss. Alienated/Ambivalent clients havethe greatest competitive agency use percentage of 192, i.e., theywere almost twice as likely to be using a competitive agency, whereasAdvocates emerge significantly lower at 54%, or half the amountof competitive agency use as other clients. These are significantmonetizing behaviors that need to be understood in order to driverevenue growth. *Numbers have been changed to protect client confidentiality
  9. 9. The next step in analysis and guidance to our client was to identifywhich tactics can be used to move the staffing agency’s customers up theAdvocacy Ladder. Applying our “swing voter” multivariate technique,we learned that the agency’s ability to anticipate future needs trulydistinguishes the Advocates from the Alienated and Ambivalent group.This element of performance is more than twice as high in terms ofleverage as the next most important element, the client’s perceptionof trust (see Figure 4, below). It is essential to building advocacy forour client. This is underscored in the following testimonial, the staffingprovider “… made an effort to ensure that our business needs were being metby matching us with the MOST qualified person that could meet not only ourtemporary, but our anticipated permanent needs.” Figure 4*It was particularly noteworthy that, although our client had measured“anticipates future needs” for some time, until advocacy analysis wasconducted, its critical importance as a positive and distinct decision-making driver had never been identified.Performance has the potential to undermine advocacy behavior.Maintaining a reputation as an expert in the industry and anticipatingfuture needs are important values that must be performed well. We seethese as the most critical steps to reduce the number of Alienated andAmbivalent clients. *Numbers have been changed to protect client confidentiality
  10. 10. In order for our client to protect and build advocacy levels, the staffing provider must continue to find innovative ways to meet the staffing needs of its customers. This element of service performance was found to have almost four times the impact on driving customer advocacy behavior (see Figure 5, below) when compared to follow-up regarding staff performance. Again, though our client had measured innovation for several years, its unique importance in driving advocacy had never been singled out. Figure 5* In terms of service performance, the staffing provider’s ability to provide quality employees is most critical to reducing the Alienated/ Ambivalent group. Insufficient efforts to follow up regarding the performance of the employee can also undermine client advocacy, and so should receive some due-diligence attention.Concluding Thoughts on B2B Customer Advocacy Customer advocacy is very much alive and well in business-to-business products and services. Multiple studies demonstrate that word-of- mouth and brand reputation are essential decision-making levers. If anything, due to the more critical nature of touch points, performance, brand perception, and relationships in B2B, advocacy may well be more important in this arena than in the business-to-consumer world. *Numbers have been changed to protect client confidentiality