Use Your Data to Upgrade B-to-B Frequency

FOR TOO LONG, frequency programs have occupied a back seat in business-to-business marketing, despite the obvious advantages.

B-to-B marketers, after all, generally deal with smaller customer databases and higher transaction and lifetime customer values than their consumer-marketer peers. The 80-20 rule is even more pronounced in B-to-B channels than in consumer marketing, making the cultivation of best customers all the more important.

Up to now, B-to-B frequency programs have lagged in budget and sophistication compared with consumer frequency efforts. DIRECT’s 1998 database survey (February) found the average B-to-B database has only 36,000 records, compared with 460,000 for consumer-focused marketers. Yet B-to-B marketers haven’t taken advantage of that relatively small customer base for sophisticated communications.

A favorite tool of B-to-B marketers and their consumer counterparts is discounting. But B-to-B programs use this benefit even more than consumer marketers, according to the survey, which found 86% of B-to-B loyalty efforts employ discounts, compared with 65% overall.

Those statistics alone hint at three of the biggest mistakes that can be made in a frequency marketing program-over-reliance on discounts, under-use of communications and inadequate database development.

The problem with discounting is it almost always erodes a marketer’s pricing integrity. An equity-style frequency program, which involves a promotional currency that converts to a genuine benefit (i.e., free products or services) actually allows the marketer to avoid traditional discounting. Over-relying on discounts wastes the opportunity to recognize and reward high-value customers while reinforcing standard pricing.

Interestingly, B-to-B marketers, particularly younger marketing managers, are beginning to perceive as frequency programs what were traditionally considered “incentive” programs. While the two aren’t the same, many incentive efforts are logical opportunities for a “frequency transfusion.”

Traditional incentive programs are usually reward-driven and characterized by one-way communication. True B-to-B frequency programs are data-driven and distinguished by sophisticated two-way communication. Rewards aren’t absent from these programs, but they’re not the “star.” Instead, the relationship is the star, in that the rewards and other benefits are configured as evidence of the value of the relationship between the customer and the brand.

Managing the customer relationship is a greater challenge in B-to-B programs than in consumer efforts because the relationship is more complex, involving both an individual and a business. This requires the right blend of hard and soft benefits.

Hard benefits are tricky in a B-to-B program, because they absolutely must be business-related to avoid any possibility of motivating inappropriate employee purchase preference. Creative soft benefits are all the more essential in the form of special information, service and access.

Very much like consumer programs, B-to-B frequency programs can recognize the best customers by treating them differently. Information is a benefit when it enhances the customer’s ability to improve business performance. Extra dimensions of customer service are also perceived as evidence the marketer is acknowledging the customer’s special status.

All benefits in B-to-B programs must directly accrue to a corporate benefit, even when they are bestowed upon individual employees. Examples would be specialized training or professional education: A long-distance phone company could reward customer employees with a choice of free seminars on call center management, teleservices practices and call center technology.

Sticking too close to business, however, can fail to capture the imagination of employees. With that in mind, one phone company offered its B-to-B frequency program members a chance to redeem reward credits for a daylong Tom Peters seminar. It was business-related, but “business entertainment.”

On the other hand, when a frequency program’s membership is primarily business owners, mixing in business-related rewards that might also be used by the owner personally is fair and acceptable-and very effective. A free dinner for two might be promoted as a business-builder, as in “take a customer to dinner,” but nothing prevents the business owner from dining with her spouse instead.

Two-way communication-particularly communication aimed at developing the customer database -is another often-overlooked aspect of B-to-B programs. Benefits early in the program need to stimulate dialogue aimed at identifying ke y decision-makers and knowing how to reach them in the future. Subsequent communications should expand the customer record further.

But using information is as important as collecting it.

Communications should reflect individualized knowledge of the customer, adding relevance to the content and reflecting respect for the customer’s involvement in the program.