A collection of articles written by Customer 1st
5 steps to building a better relationship with B2B customers
Stephanie Edwards explores the typical deficiencies of customer service encountered by B2B customers - and how to rectify these shortcomings.
Firstly let me emphasise that, whatever your job role in the business to business arena, you have customers. Whether they are external, an end-user, perhaps a large retailer or an internal customer, such as a colleague in the warehouse or in the procurement office, they are all customers. Whether you are a supply chain manager or a customer orders assistant you are all part of the cycle of service excellence.
Consider a global manufacturer that employs thousands of people, perhaps only 5% of the employees will ever regularly interact with an external customer, for example sales or commercial employees. This leaves 95% of the business remote from the external customers. However, everything you do with both internal and external customers impacts on business success as our external customer service is an eventual output of our internal customer service!
Until the 1990s, many organisations thought of customer service as an activity solely concerned with the resolution of customer problems. It was often characterised as 'customer care'. As such, most organisations were both reactive and passive towards customers. Activity was mainly directed towards cost control, and as a function, customer service tended to be both neglected and starved of resources - including human resources.
Now, most successful businesses, and those that have ambitions to remain successful, recognise that excellence in customer service forms an essential element of their strategy. Success in today's highly competitive environment is built on many foundations and organisations that ignore the importance of customer service do so at their peril.
How do you manage your key customers?
Successful businesses categorise customers into different types. Think about the approach of Johnston and Clark [Robert Johnston and Graham Clark, Service Operations Management: Improving Service Delivery, FT/Prentice-Hall, 2nd edition, 2005, p72]. This categorises customers in the following ways:
- External versus internal customers;
- Intermediaries versus end-users;
- Valuable and not-so-valuable customers.
External versus internal customers
In many sectors, particularly for end-user services such as banks, it is usually clear who the customer actually is. Johnston suggests that customers are the individuals, or groups of people, external to the organisation, who are receiving and often paying for the service. Another approach is that of Roger Tunks [Fast Track to Quality, McGraw-Hill, 1992]. He defines the external customer simply as the one outside the company who receives the final product or service. This is acceptable as far as it goes, but perhaps does not discriminate adequately between those who receive the product or service and pay for it, and those who receive the product or service without payment.
Internal customers, by contrast, are individuals, or groups of individuals, who are a part of the same organisation - but from a different unit or function - they are often your colleagues. Their common feature as internal customers is that they receive a service from others within your organisation, such as the Human Resources or Information Technology functions. In supply chain organisations, apart from retailers, often the majority of employees support the few customer-facing staff therefore having predominantly internal relationships.
In recent years many service improvement programmes for organisations, aimed at enhancing the service experience for external customers, have found it worthwhile to concentrate resources initially on creating a positive, customer-focused culture amongst the internal service providers. This is because there is now widespread recognition for what Johnston calls the Internal Service Rule. Namely, the level of external customer service will never exceed the level of internal customer service.
Intermediaries versus end-users or consumers
In some sectors the product or service provider does not deal directly with end-users. Instead they work in partnership with B2B customers such as wholesalers, distributors or agents. Such traditional arrangements have begun to change, however. This is seen in the financial sector - for example, insurance companies have set up their own direct-to-customer operations. They want to reduce the transaction costs for commodity-type services such as car insurance - and also they would like to create direct relationships with their end-user customers.
Direct-to-customer operations are now much more technologically feasible via the internet, and in some cases have been developed in response to changing customer expectations. Many manufacturers now find themselves dealing with end consumers through customer care departments established to gather feedback from end-users about their experience of the manufactured products.
Product companies are also following an outsourcing trend. Common intermediaries are the third party logistics service providers who carry out activities like transportation and manufacturing operations on behalf of the product companies. Developing relationships with our customers is made even harder now that third party companies delivering our products may have more real contact with our customers than we do!
Valuable and not-so-valuable customers
Commercial organisations will normally prioritise their service towards customers who can create the most value for the organisation. High value customers are identified by assessing their lifetime value. Typically, they spend more and their spending increases over time. They may also be prepared to pay premium prices. Understanding this concept helps some enterprises to treat their customers with respect. It encourages them to invest in customer service while not focusing too much on the profitability from each separate customer transaction; what counts is the customer's lifetime profitability to the business.
Valued customers are those who are positively disposed to the organisation and thus easier to deal with. Servicing such customers becomes less costly with time. They often function as what Frederick Reichheld [Loyalty Rules, Harvard Business School Press (2001)] calls 'active promoters' - providing positive, word-of-mouth advertising for the organisation to their colleagues and friends. Some businesses define their customer service model according to this, identifying each customer as A, B or C - with A-rated customers receiving the best customer service from that supplier.
Institute of Customer Service research [Customer Priorities, What Customers Want, 2005] made several observations about the typical deficiencies of customer service encountered by B2B customers:
- Broken promises, such as failure to respond to telephone calls or emails;
- Delayed response times, for example more than 24 hours for emails;
- Remoteness of human contact - where organisations prefer automated systems, even though customers do not;
- A reliance on impersonal scripts and therefore a reluctance to listen to or empathise with the customer;
- A reluctance to apologise, even when it is clear that the organisation has failed;
- Processes that are not customer-focused;
- A reluctance to welcome and act on complaints.
Therefore, in order to maintain a successful relationship with your B2B customers you must go a step further than you have to in your relationships with customers. I do not believe this is solely concerned with keeping to a set of rules or regulations, and not overstepping boundaries. Whilst you do need to operate in that way, avoiding pitfalls, you should also benefit from learning how great customer service is delivered by others. Whether it is learning from your own internal customers, seeing the way they treat you and their colleagues, by acquiring new skills through training, or simply by accessing information in books and websites about customer service, all will provide you with the motivation and capability to go the extra mile for your customers.
Organisations often claim to be customer-focused as a means of differentiating themselves from competitors, or in order to improve productivity and financial performance. The reality, however, is that some organisations forget who their customers are and what their needs are.
There is a need for increased professionalism in those that work in the B2B world. One way of achieving this is for organisations to empower their people to manage the customer relationship. This will enable them to provide solutions and support your customers in the best possible way. This benefits both the customer and your organisation, and makes managing customer relationships a lot more rewarding for you.
Confidentiality in B2B customer relationships often comes down to issues of trust, openness and honesty. When, for example, you are serving both a customer and their competitors, you need to be particularly careful of confidentiality, loyalty and the wider competitive considerations. You certainly need to follow your organisation's guidelines when it comes to choosing which of a number of your customers to supply a shortage product to.
Ensure also that you fully consider your customer's end-users. If the supply of product fails, your customer will normally fail as well. However, this is where you need trust and honesty - to share responsibility for any such problems. B2B customers who identified ideal attributes that they wanted from their suppliers, stated that first and foremost comes mutual trust and transparency, leading to respect. So ensure, for the good of your valuable customer relationships, you work in a style that is open, honest and direct.
To meet and exceed the expectations of your customers, you need to be familiar with your customer service framework. This sets out how you and your colleagues will help the organisation achieve service excellence. Therefore, it makes perfect sense that you should let your customers know about it. One of the best ways of doing that, as well as actually taking customers through your mission, objectives, structure and policies, perhaps in a contract meeting, is to ensure that you deliver the promise. Customers will love to see that the way you do business with them aligns with your organisation's vision for customer service. You will be representing an organisation that does as it says it will do!
From the ICS's research report, Excellence in Managing the Business-to-Business Customer Relationship [Frost, Dutton and Ells, 2007], the following key points are relevant here:
- Most customers would be prepared to pay a higher contract price to find a partner that offers higher levels of customer service.
- B2B suppliers should have clear policies, procedures and protocols, ensuring that each customer is treated fairly and consistently.
- Avoid an intense, sales-based culture with your customers. It can be seen as aggressive and is not generally welcomed.
- Customers dislike organisations that 'talk big' but 'deliver small'; they like those that are flexible and responsive.
- Many customers are reluctant to commit to one lone supplier, preferring to spread risk. They are concerned not to put too much power in the hands of one supplier, as some perceive that this power could be abused, encouraging the supplier to become arrogant.
- Good communication is essential and key to success; it needs to be regular, at the right level, and consistent.
- Customers like to be respected and well-treated. They are not interested in their suppliers' problems or internal politics. They like to work through one trusted point of contact that can add value.
- Complacency, lack of responsiveness and failure to deliver will usually lead to customer frustration and a breakdown in the B2B relationship. Are you empowered to manage your customer relationships and make a real difference? If you can add value you will maximise your chances of really engaging customers and developing longer-term relationships.
- Customers avoid suppliers that talk 'big' but deliver 'small' in the contract negotiation process, as this indicates how they may subsequently perform. Poor contract negotiations often damage business relationships. Customers do not want to deal with weak managers who cannot deliver. The right people, in the right place exhibiting sound interpersonal skills are paramount.
- Many customers adopt a detailed supplier monitoring system to ensure maximum value and flexibility from the contract and to reduce risk. For example they often routinely collect and analyse data on delivery, performance, number of rejects and prices.
- Be a helper and advisor to your customers. If you have knowledge or expertise around a particular issue that the customer is struggling with, offer to help. This will work wonders in strengthening the relationship, and may also pay dividends when you, too need help.
The report quoted one comment from a B2B supplier's customer that indicates how not to do it: "The price that one supplier came up with was just so attractive that we had no choice really than to go with them. But we absolutely abhorred the people that we were dealing with and this was not just a personal thing. Because of the price we then drove a very hard contract to make sure that they actually did supply the product at the price they quoted and when it was due to be delivered. If they didn't there were very, very high penalties."
Lastly, are your communication channels clear? Communication needs to be both frequent and of a consistent standard. A danger is that poor communication can be felt to be intentional to cover up some operational weakness. In that case the B2B relationship can be seriously undermined. Communication through the supply chains should be analysed on a regular basis. Avoiding suspicion is crucial and it is of benefit to all organisations to keep, agree and share accurate records.
Poor customer service represents contract termination in most cases. First and foremost are mutual trust and transparency, and this leads to respect on both sides of the relationship. Customers seek in particular communication that features openness, honesty and directness. Where there are mistakes, accept them, take responsibility for them and then find an appropriate way of dealing with the poor performance that caused them - but avoid adopting a blame culture.
Mutual support is seen as key and customers need to feel good about the organisations they are working with. The key point of contact for a customer needs to apply excellent communication skills to be that reliable and trusted representative of the organisation.
As Professor Fornell says, satisfied customers reward companies with, among other things, their repeat business, which has a huge effect on cumulative profits. [Source: Claus Fornell, "The science of satisfaction", Harvard Business Review, March-April 2001]
My final point is that no B2B customer relationship will remain static. In today's more global and competitive markets, success will only be achieved by organisations that focus on customer service, embrace change, and who also have a pragmatic yet innovative approach to their customers. Successful organisations are now truly obsessed with their customers. They focus resources and time on identifying their customers' expectations, giving them more than they expect, winning and retaining their loyalty, and generally putting the customer at the heart of everything they do. I see this customer obsession as the single most important factor in business success and the best route to gaining competitive advantage.