Mistakes in BTB Frequency-Marketing Programs

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Once the tool of savvy consumer marketers, frequency-marketing programs are cropping up all over the business-to-business arena. And for good reason: the 80-20 rule is even more pronounced in BTB channels, making the identification and cultivation of best customers all the more important.


And, because BTB marketers generally deal with smaller customer bases and higher transaction and lifetime customer values, it only makes sense to develop a systematized approach to improve share of customer.


Here's a look at some of the biggest mistakes that can be made in a BTB frequency-marketing program:


<B>Overreliance on discounts.<B> The problem with discounting is that it almost always erodes the marketer's pricing integrity. An equity-style frequency program, which involves a promotional currency that converts to a genuine hard benefit (i.e. tangible reward in the form of free product, service or travel that the customer would otherwise have to pay for) actually allows the marketer to avoid traditional discounting. An over-reliance on discounts wastes the opportunity to recognize and reward high-value customers while reinforcing standard pricing.


<B>Ineffective use of incentives.<B> Interestingly, some BTB marketers perceive as frequency programs what have traditionally been incentive programs. While the two are not the same, many incentive programs are logical opportunities for a frequency transfusion.


Traditional incentive programs are usually reward driven and characterized by one-way communication. True BTB frequency programs are data-driven and characterized by sophisticated two-way communications -- dialogue. Which isn't to say that rewards are absent from these programs. Instead, the relationship is the key, and rewards and benefits are configured as evidence of the value of the relationship. The dialogue between customer and marketer takes on a more prominent importance.


Managing the customer relationship is an even greater challenge in BTB programs than in consumer programs because the relationship is more complex, involving both an individual and a business. This complex relationship requires the right blend of hard benefits and soft benefits (intangible, status-reinforcing elements).


Hard benefits are tricky in a BTB program, because they absolutely must be business related to avoid any possibility of motivating inappropriate employee purchase preference. So, creative soft benefits are all the more essential in the form of special information, special service and special access. Information is a benefit when it enhances the customer's ability to improve business performance. Extra dimensions of customer service also are perceived as evidence that the marketer is acknowledging the customer's special status. And simply being able to obtain products or services before other customers can be a strong verification of a customer's unique status.


All benefits in BTB programs must directly accrue to a corporate benefit, even when they are bestowed upon individual employees. Examples would be professional training or education. A long distance company, for example, rewarded customers with a choice of free seminars on call center management, teleservices practices and call center technology. Sticking too close to business, however, can fail to capture the imagination of employees. With that in mind, one phone company offered its BTB frequency program members a chance to redeem reward credits for a day-long Tom Peters seminar. It was


business related, but it was also business entertainment.


On the other hand, when a frequency program's membership is primarily business owners, mixing in business-related rewards that might also be used by the owner personally is fair, acceptable and very effective. A free dinner for two might be promoted as a business-builder, but nothing prevents the business owner from dining with her spouse instead.


<B>Inadequate database development. <B> Two-way communication -- particularly communication aimed at developing the customer database -- is another often-overlooked aspect of BTB programs. Though most companies know what customers buy, the billing database seldom has the information needed to customize relationship-building communications with customers, such as size of the customer's business, his use for the product or service purchased and special situations based on his industry, geography or business life cycle. Even basic address and key contact data is sometimes missing.


Thus, benefits early in the program need to stimulate dialogue aimed at identifying the key decision makers/influencers and knowing how to reach them in the future. Subsequent communications should expand the customer record further. Mailings should include short surveys. Customer service calls should include two or three extra questions aimed at filling data gaps. Even personal sales calls should involve collecting specific information for the database.


As important as collecting the information, however, is using it. Communications should reflect individualized knowledge of the customer, adding relevance to the content and reflecting respect for the customer's involvement in the program.


All of this goes well beyond the traditional incentive or reminder program that may pass for loyalty marketing at most companies. Fundamentally, it's the difference between yesterday's preoccupation with mass approaches and share of market and today's new focus on individualized methods and share of customer. Is it time for an upgrade in your business?


<I>Richard G. Barlow is president of Frequency Marketing Inc., Cincinnati. His e-mail address is rick.barlow@frequencymarketing.com.<I>
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