Updated: Mar 17
If you are in a mature industry where an unhappy customer can switch to another provider to get a similar product from another well-respected brand, customers do not usually become antagonistic— they just go.
In these B2B businesses, where multi-million dollar deals are common, companies can lose their entire profits for the year if an account plummets. If you are the supplier and do not deliver, you are at risk of losing your job. Not only that, but you will have a dissatisfied client who potentially looks foolish for putting their trust in you. This is why sales equity is such a big deal in the B2B space. So where does the value come from?
Loyal Behavior vs. Sales Equity Earned You would think that the more sales equity you earn, the more “loyal behavior” your customer would demonstrate. And you would expect a graph depicted below— the higher the earned sales equity, the higher the customer’s loyal behavior, right?
But our research shows it does not work that way. You do not get a perfect line where each incremental improvement you make in your earned sales equity leads to a corresponding increase in customer loyalty. Instead, our data shows this:
You see, customers do not often discriminate so finely. At the end of the day, customers ask themselves:
Are you the same as they could get elsewhere?
Are you better than they could get elsewhere?
Are you worse than they could get elsewhere?
The industry “average” is the zone in the middle of the chart where the customer perceives you to be the same as other businesses. That is the “Transactional Vendor Zone.” When you are in the vendor zone, it does not matter if you are a little bit above or below the average, you are “average” in your customer’s mind.
There are a couple of reasons for this. Firstly, customers do not think, “Jane did a little better on this transaction, so I will send a little more business her way.” Nor do clients think, “Jane did a little worse on this transaction so I am out of here!” Secondly, changing suppliers is both inconvenient and expensive. Plus, customers do not want to have that awkward conversation to explain that they do not want to do business with you anymore.
Even if a customer’s poor perception is not enough for them to completely drop their supplier, they can still marginalize it by the product or service in a limited capacity or as a backup supplier. You are probably marginalizing a few companies yourself right now! According to one source, consumers carried an average of 3.7 credit cards in their wallets. But, you probably only use one or two regularly— why is that? It is possible that your lukewarm relationship with the new card companies has placed them squarely in the transactional zone, which is called the Zero Growth Zone. You are not dropping them, but you are not using them either. Consequently, they are not getting nearly as much business from you as they could.
Unfortunately, the story is not much better on the right side of the vendor zone, at least initially. Even though the client knows you are a little better than average, there are those switching costs to contend with. They will have to drop their current vendor to go with you; they will have to get you approved as a supplier and get you set up on their billing system. Many customers will think that switching is just not worth the hassle. So even though you’re at least a little bit better, you do not necessarily get the loyalty uptick you might expect.
But if you stick with it, eventually your customer will perceive you to be “better enough.” You will break out of the “pack” and get a dramatic increase in loyal behavior from your customer, as shown on the chart below. And you do that by building high levels of sales equity!
Want tips on strengthening your B2B relationship? Follow us on Linkedin at “Encompass CX” to be the first ones to know our tips!
Co-written by Alexis Audeh