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Contracts And Loyalty

May 20, 2013

Periodically, companies ask whether there are good examples of b2b loyalty or ‘preferred customer’ programs.

The question seems mostly to arise when and organization is struggling to achieve differentiation. Facing an erosion of their negotiation a power and influence, they wonder whether they can achieve heightened status through ‘preferential’ terms and conditions.

This approach always seems to run into problems. One is the difficulty of segmenting customers. A public program carries significant risk; for example, will a ‘gold’ customer feel especially flattered and how will you explain to a ‘bronze’ customer why they are receiving worse service – and why they shouldn’t move to one of your competitors?

A second challenge is usually to identify tangible benefits for the high-status customers. They have already pushed you on price and risk – that is usually why the program is being considered. So what do you offer next?

It seems to me that loyalty programs in the business to business environment are a sign of desperation. Essentially, they are an admission that the company has no real distinguishing value and is struggling to develop a coherent approach to marketing and market segmentation.

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