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Customer loyalty is key

In today’s fast moving global marketplace customer retention and loyalty is key; particularly in the B2B world where companies will often talk about 85%+ of their business coming from existing customers … but this is under pressure and changing.

Increasing competition with decreasing customer loyalty

The global marketplace, deregulation, and supply chain sophistication have fundamentally changed the ability of manufacturers to operate in markets and areas of the globe which were not previously accessible or economically viable. This, coupled with huge variations in manufacturing costs around the world, has led to global competition on a level which few had accurately predicted.

Fast-moving nimble competitors are incredibly quick to provide alternative products and services to compete with those of the market leading manufacturers; ‘me-too’ products are everywhere. Building product manufacturers who could previously expect a level of repeat business and on-going sales from hard-won customers are now seeing that market eroded, both in terms of product and service sales.

Customer loyalty has become increasingly fragile as customers see alternatives to paying a premium to buy from the market leader. The importance of relationships and continuity has been eroded in the customer’s mind, which in turn has led to much greater price sensitivity and commoditisation of products and services.

Dependency on channel partners

Many building product manufacturers have multiple routes to market. As well as their own employed internal and external sales people, many manufacturers work through channel partners. These channel partners may have exclusivity deals tying them to that particular manufacturer’s products or be acting as channel partner for a number of potentially competing products. Channel partners often have little or no emotional loyalty to a particular manufacturer.

For the channel partner the key questions are:

(a) Which manufacturer’s products are easiest to sell?

(b) Which products give me the best margin?

Manufacturers selling through channel may have little or no contact with the end customer; their relationship, and potential loyalty, is with the channel.

How well do we really know our customers?

All this leads us to a stark reality – many manufacturers have lost contact with their end customers.

What their end customers are actually saying and/or require is being lost or distorted, however innocently in many cases, by the involvement of the channel partner.

The voice of the customer may no longer be aligned with the voice of the manufacturer’s business. Manufacturers are investing in costly marketing initiatives and promotions where sales potential is increasingly difficult to validate and the impact of the promotions hard to monitor, all because of the disconnection from the end customer. Costly marketing campaigns may well be encouraging end customers to approach the channel partners to buy a manufacturer’s product BUT, understandably, the channel partner may seek to substitute that manufacturer’s product with a comparable product if this offers better margin for the channel partner.

So where does all the above leave the building product manufacturer?

Manufacturers need to be able to communicate directly with their end customers to ensure that loyalty is to the manufacturer’s brand and not that of the channel partner. Channel partners will rightly remain an integral part of fulfilling those orders but only by hearing the voice of the customer for themselves can manufacturers be confident that their marketing initiatives and promotions are correctly targeted and communicated to the end customer and that those customers are hearing the voice of the business.

Marketing functions need to have direct reliable data about customer needs and buying behaviours in order to make sound marketing spend decisions; many marketing functions that operate through channel partners simply don’t have sufficient data to enable them to make those decisions and track the impact. One marketing manager described marketing spend in the absence of reliable data as “like tipping money into a black hole!”

What are smart manufacturers doing to address these issues?

So what is the key to attracting, retaining, and growing sales in an increasingly competitive marketplace, where channel partners are a manufacturer’s key route to market?

1. Communicate directly with your customers

The manufacturer needs to have a complete picture of which product and/or service is being bought by which end customer and, importantly, why. When any customer places an order – even if it is fulfilled by a channel partner and they get credited for the sale – the manufacturer must have access to this information in real time.

2. Incentivise customers & channel partners

End customers and channel partners must be incentivised and motivated to be loyal to the manufacturer’s brand/products and/or services. In the case of premium priced products particularly, those incentives may often be non-financial but of high perceived value to the end customer.

3. Incentivise your sales people & give them real time customer data

Sales people must also be incentivised and motivated to focus on the sales activities that add most contribution to the business. Often the key to this is access to customer feedback and sales to enable the sales people to use their time more productively, measure their success in real time, and gain the recognition and reward they seek.

So, in summary, taking more control of the end customer relationship will give you the data and market intelligence to put the power back in your hands to enable you to build greater loyalty to your brand.

A guest blog by Mark Maclure

Mark has over 25 years’ experience in the world of marketing communications. He is a founding director of Stream: digital marketing, software and communication specialists. Stream focus on improving Sales Productivity by engaging, inspiring and rewarding audiences.

Stream’s digital solutions include: e-commerce loyalty platforms, interactive communication portals, e-learning applications, points based reward schemes, motivation and incentive programmes, online membership benefits, event registration sites, surveys, social media blogs and forums. They are now starting to be adopted by companies in the construction sector.

To learn more about how Stream could help your business email learn@cadvantage.co.uk

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