Minimize the impact of customer churn in b-to-b

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John F. Hood
John F. Hood
One of the big challenges facing business-to-business marketers is churn in the customer file. Churn is the result of the struggle to replace customers who leave with new customers. The goal is to gain more new customers than are lost, in order to generate growth.

Like last year, 2010 will be a challenging environment in which to control the churn.

Businesses, which fail at the rate of about 11% per year in normal times, are failing at much higher rates due to the recession, and many marketers have reduced budgets because of sales declines.

One possible solution is to redirect some of those limited marketing resources to stable parts of the b-to-b universe, namely institutions. The good news is that institutions like schools, hospitals, and government offices, are a much bigger part of b-to-b than generally recognized, and they are especially important right now because of their stability.

While businesses lose customers, institutions must continue to serve full populations. Schools must be open for students. Hospitals and nursing homes must serve their patients. Government agencies must serve their constituents in even greater quantities when times are tough.

In addition, the greatest portion of the $787- billion stimulus package that is not tax cuts is going directly to institutions. Better yet, most of the new money has not yet been spent.

The bad news is that businesses are different than institutions. B-to-b marketers must understand the critical differences between business and institution behaviors prior to developing an institutional marketing strategy – if they want to get the greatest benefit.

It can be difficult to identify the institutional decision maker, though. The rules of institutional purchasing make the decision maker hard to pinpoint because the institutional purchase order process “hides” the decision maker's name. Often the name on the purchase order is the name of the accounting administrator who approved the requisition, not the decision maker who made the requisition and specified the product and supplier. Accounting administrator names rather than decision maker names often appear on response databases.

In addition, many b-to-b marketers rely on response databases overlaid with SIC and employee size information to enhance segmentation.

This is where marketers leave money on the table with institutions. The only way to get the decision maker names is from compiled databases. Using compiled names is anathema to some b-to-b marketers because response names work so much better in businesses, but institutions are not businesses. Learn how and why institutions operate differently, tune your marketing to take advantage of those distinctions, and you can maximize the potential of this stable, well-funded sector of b-to-b.

John Hood is president of MCH. Reach him at johnh@mailings.com.

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