Creating Impact in B2B Relationships

Gallup Business Journal: businessjournal.gallup.com

Creating Impact in B2B Relationships

Good products and service are just the starting point

by Ed O'Boyle and Craig Kamins

B2B companies

that narrowly

focus on product

and price are

doing the bare

minimum

required to

survive.

If you asked business-to-business (B2B) companies what they do, most would tell you that they

provide products and services to other companies -- and that doing this at the lowest possible

price is the key to success. This is true. Quality service and products at a reasonable price is a

basic component of operating a B2B company. But B2B organizations that see this as their only

function are gravely misguided -- and easily replaced.

Business-to-business companies that are narrowly focused on product

and price are doing the bare minimum required to survive. Yet Gallup

analysis shows that this approach is all too common -- the majority of

B2B companies operate this way.

If your company wants to move beyond price wars, you need to rethink

your mission and strategy. Being successful takes more than delivering

a product or a service; it requires helping your customers succeed by

improving their performance. The more your company can help your

customers thrive, the stronger your partnership becomes. B2B companies that fail to understand

how their products or services help their customers succeed lose two important competitive

advantages: the steadfast advantage of customer engagement and the lucrative advantage of

customer impact.

Creating customer engagement

Customer engagement goes beyond merely satisfying customers to provide an important

foundation for creating customer impact. Gallup defines engagement as an emotional connection

based on Confidence, Integrity, Pride, and Passion. Customer engagement is fundamental to

customer impact because it establishes an element of partnership, which requires a genuine

connection between your organization and its customers. (See graphic "How Engaged Are Your

Customers?")

The idea of engaging customers may seem

elementary, but few companies have mastered it

-- though the value of doing more than just

satisfying customers cannot be overstated. Fully

engaged customers deliver a 23% premium over

average customers in share of wallet,

profitability, revenue, and relationship growth.

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Success will come

from recognizing

the true business

of a B2B

company:

Simply put, if you aren't creating an emotional

connection with your customers, your

organization's sustainability and growth will

suffer.

A typical B2B company has an optimal

relationship with fewer than one in seven of its

customers. Gallup has conducted thousands of

interviews over the last few years with B2B

customers and has found that only 13% of B2B

customers are fully engaged. At one

professional services firm, for example, Gallup

tracked the customer engagement scores across

75 of the company's top accounts in Year 0

(baseline) then compared those scores to account growth in Year 1. We found that low

engagement scores were a prime indicator of future revenue decline:

• Of the accounts with high engagement scores (at or above 4 out of a possible high score

of 5), 21% of the accounts grew by 20% or more the next year, while 34% declined by 20%

or more.

• Of the accounts with low engagement scores (below 4 out of a possible high score of 5),

15% of the accounts grew by 20% or more the next year, while 60% declined by 20% or

more.

Customer engagement levels give you the clearest view into the status of your company's

accounts and are particularly efficient at identifying at-risk accounts. Given that most B2B

companies must deal with long and sometimes inconsistent purchasing cycles while balancing

multiple customer stakeholders, it could be easy to miss the warning signs that a customer

relationship is becoming unstable. Without a process for regularly monitoring customer

relationships, a company might not discover that it has a problem until a customer announces

that it is reducing its contract size or taking its business elsewhere.

Creating customer impact

Even when a B2B company's product is highly commoditized, the organization has a distinct

opportunity to establish a strategic advantage over its competitors by creating customer

engagement and driving customer impact. Gallup defines customer impact as providing a

meaningful change in a customer's business (or business processes) that significantly improves

the customer's bottom line. It means helping a customer be more successful by doing business

with your company than it could be by doing business with any other organization.

Creating impact requires providing a meaningful change in a customer's

productivity or profitability. Sometimes, that impact comes from

providing the customer with specific recommendations or other value-

added solutions that:



creating an

impact.• allow the customer to use its products and services more

efficiently or effectively

• identify unseen product or service opportunities

• enhance the customer's standing in the marketplace and thus its potential for future growth

• have some broader effect on the customer's cost structure, perhaps through more effective

supply chain management, inventory control, or process improvement

Companies that employ this strategic approach can shift their customer relationships from "price"

to "advice." This requires a high level of expertise and in-depth knowledge of the organization

and the marketplace in which it operates. To obtain this level of trust, B2B companies must:

• know the customer's business

• bring the customer new ideas

• make those ideas work for the customer by tailoring them to the customer's marketplace

and workplace

This advice-based approach deepens a customer relationship. It also provides a "stickiness" that

is difficult to duplicate because it is often based on access that competitors won't have -- and it

more than offsets the value of any proposed reduction in price.



Gallup recently analyzed the customer engagement and impact scores for the relationship

managers (RMs) at a financial services company. Based on our analysis of a survey

administered to the RMs' customer accounts, we found that customer engagement levels varied

by RM -- but customer impact scores were universally low.

This was a surprise to the RMs, and many of them said that customer impact, as Gallup defines

it, "wasn't really part of their job." From their perspective, their job was to sell and provide service

to their accounts. Their supervisors agreed, saying that as a company, they had never really

talked about their customers' business goals.

But within minutes of receiving this feedback, supervisors and RMs were talking about ways they

could learn more about their customers' business goals and how they could support them. This

discussion sparked an intellectual renaissance in the division. Within a week, the RMs were

sending emails to their Gallup team outlining the conversations they were having with their

customers, their reinvigorated relationships, and their optimistic plans for the future.

What leaders should do

Implementing a customer impact approach doesn't negate the importance of the functional

drivers of engagement, particularly quality, utility, service, and responsiveness. Those elements,

while essential, can be easily matched by your competition. To create impact, your organization

must satisfy those functional requirements; generate high levels of emotional engagement; and

produce tangible, positive, lucrative change for your customers.

If your organization wants to implement this approach, it's crucial to have a strategy to move

forward. First, you must articulate what makes your company different from your competitors and

reinforce that difference at every customer touchpoint. A lack of alignment costs time and energy

and undermines customer impact.

Second, your organization should immediately start a dialogue with your most important

customers. Ask them what their business goals are, then partner with them to find a way to solve

their problems and meet their needs. Next, follow up by creating business-level plans with your

account teams, building in accountability and performance metrics.

Developing and implementing a customer impact strategy takes real effort. It requires a new way

of thinking and working, and it starts with a substantial investment in discussion and research

internally and with key customers. It also requires your organization to revise its accountability

plans, its performance metrics, and its own idea of success. Ultimately, success will come from

recognizing the true business of a B2B company: It's more than selling a product -- it's creating

an impact.

Ed O'Boyle is Practice Leader, Marketplace, for Gallup.

Craig Kamins is a Senior Practice Consultant for Gallup.





RELEASE DATE: 27 March 2012

SOURCE: http://businessjournal.gallup.com

CONTACT: Gallup Business Journal

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Creating Impact in B2B Relationships