Customer loyalty is critical to any business. Obvious but true, especially for B2B companies who, unlike their consumer focussed counterparts, have a relatively limited pool of buyers to target.customerloyalty

This truism sees many B2B companies striving to satisfy and even delight customers. After all, the logic goes, if customers are happy then they won’t feel a need to change supplier – satisfaction leads inexorably to loyalty. Following on from this logic, market research studies tend to focus on measuring customer satisfaction and its cousin the Net Promoter Score (NPS). However, this logic is flawed and can lead to wasted investment on things that don’t really matter.

Let me explain.

We have this thing here at Circle called Circle Labs. Its mission is to take the received wisdom, rigorously challenge it and, if it turns out to be flawed, develop a better approach. Recently Circle Labs has been looking at customer loyalty and as part of this we surveyed several thousand B2B decision makers.

First we asked them how likely they are to buy from their current supplier the next time that they have a need. Then we isolated those who claimed to be loyal and asked them why that was. An analysis of their reasons reveals that in most B2B markets there are four distinct customer segments, each of them loyal for very different reasons.

The first segment are the ‘functionally loyal’ who stick with their incumbent supplier because they offer a tangible advantage when compared to competitors. This advantage is usually in one of four areas:

  • A better quality product or service
  • Higher levels of customer service
  • Being easier to do business with
  • Offering a price advantage

The second segment are the ‘emotionally loyal’. Sure, they value functional performance too, but the things that really make their supplier sticky are ‘softer’ in nature:

  • They trust the supplier and value their reliability
  • They have a close personal relationship with individuals in the supplier organisation
  • They simply like the organisation and the brand

The third segment are ‘locked-in’. They’re loyal not because they want to be, but because they have to be. Either change is not an option because their current supplier is the only one able to meet their needs, or change is unpalatable – the cost, effort or risk of moving supplier is just too high.

The fourth segment are loyal because they don’t care enough not to be. They are the ‘dis-engaged’ and there are two potential paths that led them to be so:

  • The supplier community pushes them towards inertia – all suppliers are seen as largely identical so there’s little perceived benefit in switching
  • They are inherently inert – either the product/service area makes limited business impact so is low down the list of corporate priorities, or as an individual their default position is to adopt the ‘path of least resistance’

These insights have important implications for customer satisfaction and loyalty research in B2B markets. Rather than simply measuring satisfaction across the customer base and then developing action plans to improve it, you should identify the prevalence of different ‘loyalty segments’ before deciding what actions, if any, to take. If ‘functionally loyal’ and ‘emotionally loyal’ customers dominate, then satisfaction and delight should absolutely be a focus and this should be framed in the context of the different motivations of these two groups. However, if the ‘locked-in’ and the ‘dis-engaged’ are more prevalent, then you may decide that investing in actions designed to improve customer satisfaction is not the best use of your time, resources and funds. Instead the most commercially sound approach might be to do just enough and no more.