Loyalty Does Not Exist
That's a bold statement, isn't it? An exaggeration for effect, sure.
But I bet, like me, you've sometimes wondered whether clients really are all that loyal.
Well, now there's hard data to back up our gut feeling. The results don't make for pleasant reading. But they do tell us what really works if you want to grow sales (especially in business-to-business).
But more of that in a second. Let's back up to set the context so this all makes sense.
Last week I headed over to Washington to attend the CEB‘s 2017 Sales & Marketing Thought Leader Roundtable. A rather eclectic bunch of sales and marketing experts sat round as the team from the CEB (I should technically say the CEB, now Gartner) presented the findings from their latest sales and marketing research and we discussed, debated and gave them feedback.
They've done two big studies so far this year. One in sales which I'm going to discuss in this article, and one in marketing (digital marketing through the business-to-business buying cycle) which I'll discuss in an upcoming article.
Now it's worth noting before we jump in that this research is focused on business-to-business – ie marketing and selling your products or services to other businesses. And the research was primarily done with large organisations, both from a buyer and seller perspective.
But what you'll find is that the results are equally applicable whether you work for a big company or run your own little solo business like me.
The CEB research covered many areas. but the findings that jumped out for me, in many ways because they go against so much of what is being preached today, were about the best ways to grow business with your best and biggest clients.
Most of us, in my experience, have an inbuilt mental model that the best way to win business from an existing client is to do great work for them and ideally to go the extra mile and delight them. Do great work for them and they'll be loyal to you.
The CEB research found the same perception in sales. When they interviewed salespeople of all types they got the same answer time and time again: the surest way to grow accounts is to service them above-and-beyond customer expectations.
Unfortunately, it turns out not to be true.
At least not when it comes to growth.
Now it does work when it comes to account retention. When account managers were perceived by customers as being focused on resolving their issues and ensuring they got full value from the products and services provided to them, there was a strong correlation with account retention. In fact, account managers who clients rated high at resolving issues and ensuring they got value from their purchases were twice as likely to retain their business as those who were rated low.
But when it came to growing the account, there was no correlation at all. Account managers who scored high on resolving issues and ensuring clients got value from their purchases were no more likely to grow sales in the account than those who scored low.
Crazy? Perhaps not.
If you assume that customers buy through loyalty then yes, it seems odd.
But think about the difference between retaining an account and growing it for a minute.
When you “retain” an account it basically means that clients buy the same thing from you this year as they did last year. When you “grow” an account it means they also bought something new: a different product or service or some kind of upgrade to the existing one.
The data shows that if you do a great job on service, clients are highly likely to buy the same thing from you again rather than switching suppliers. But are they doing so out of a sense of loyalty for your great service?
Perhaps. But I doubt some of the hard-nosed procurement managers in large organisations I've known are acting out of loyalty.
What's more likely is that they're simply acting out of self-interest. If you did a great job last year, it's likely you'll do a great job again this year. It's simply less risky for them to re-hire you to do the same thing again than it is to hire someone else.
With you, they can see your proven track record. With anyone else, they have to go on their promises alone.
Sure, your competitors might do a great job at persuading your buyer they can do just as good a job. They can show them testimonials. They can give a guarantee. They can bring them great new ideas on what to do differently that might get better results. That's why you don't win every time, even when you do a great job servicing a client.
But more often than not their real experience working with you trumps the promises anyone else can make.
Switch to growing an account and it's a different story though.
If you're trying to sell them new products and services, or even an upgrade to an existing one, they can't go on your track record because you haven't got one with this new product or service.
If they just bought based on loyalty, they'd reward your previous good performance by buying these new products and services from you too.
But they don't.
With new products and services you essentially have a level playing field with your competitors. It's your word vs your competitor's word about what they'd get from the new set of things they're thinking of buying from you.
It would be nice to think that all that great work you did, all that going the extra mile to delight your client, would get you a loyalty bonus and they'd be biased in your favour when it came to new opportunities.
But the data says that in the hard-nosed world of business-to-business, they're not. All the great work you did with your original products and services doesn’t make you any more likely to win the new business.
So what does?
It turns out that the primary things that drive the growth of an account are what the CEB label “Customer Improvement”. Specific behaviours that increase the likelihood that clients will buy new things from you, namely:
- Providing customers with unique, critical perspectives on improving their business.
- Laying out a vision for improving their business.
- Outlining the ROI of your commercial relationship.
You'll notice two things about these behaviours.
Firstly, they're future focused.
Retention is all about the past, how you performed in the last year. Clients can use that as a guide to how you'll perform in the same situation next year.
But when the situation is different next year, when you're talking about new products and services, the focus needs to shift. You need to be talking to them about how they can improve their business, not about what a great job you did or how you can resolve their issues with their current products and services.
Secondly, those factors are largely supplier-agnostic. It's about their business, not your products.
If you want clients to buy new things from you, you have to create a compelling picture of what their future could be like. Both in terms of how their business could change, how that can happen, and what the ROI will be for them.
Pretty much exactly the same things you'd have to do if you were an outsider trying to sell to that company, rather than an incumbent. The great news is that as the incumbent you have much more access to have those discussions and to paint that picture than an outsider – if you choose to use it.
By the way, the other minor factor that leads to account growth is increased confidence in the account team from exposing the client to a broader team. Obviously this is only possible when you have a broader team, but it speaks to the same future-focused agenda.
If a client is only exposed to the team working with them on the existing products and services they buy from you, then their confidence is limited to that existing set of products and services. If they see a broader team with wider capabilities then they're willing to believe to some degree that you could successfully deliver other products and services too.
So what does this mean for you?
I take two big implications from this research.
Firstly, be careful taking an evangelical approach to customer service. Delighting your clients is wonderful. It will absolutely help you retain them. But don't become obsessed by it.
If you're looking to grow a client account then at some point you're going to have to make a decision about how to spend your time. And eventually, there will come a tradeoff between spending even more time delighting the client with the work you're already doing with them and talking to them about other improvements they could make.
If you've already exceeded their expectations with the work you've done (or even just met them), then doing even more to delight them isn't going to help you sell more.
It feels good. It doesn’t bring up all those uncomfortable feelings that you get when you head into new territory with clients to challenge some of their thinking and talk about bigger business issues. But more delight doesn't equal more sales.
The second implication is that you need to make time for, and you need to get good at those business-level discussions about how your client's business could improve.
Make sure you're carving out time in your interactions with clients to ask them questions to find out what their other priorities are and the places where they're struggling. Make sure you're carving out time to look at their industry and their competitors and get up to speed on leading practices. Make sure you're carving out time to come up with interesting and valuable new ideas that could help your clients improve their business.
Then pluck up the courage to have those discussions.
It's oh-so-easy to just do more of what we find easy and what brings immediate gratification and positive feedback: delighting our clients.
But we also need to be having value-added discussions with our clients about what they could do differently to have more success. Those discussions aren't easy. But the growth of your sales depends on them.
Many thanks to the CEB and in particular to Brent Adamson and Kelly Blum for inviting me over to the Roundtable and for hosting such a great and insightful couple of days. You can find out more about the CEB/Gartner here.