Customers Loyalty is one of the major determinants of the volume of sales and

companys

market share. Business markets are different from consumer markets. Business
Markets have

fewer customers, larger transactions, involve customized product/price and brand

image matters

very little, whereas consumer markets have mass of buyers, general product design
is more

saleable, relatively smaller transactions, brand image matters a lot and the price is
a major

determinant of sales. Hence the thumb rules of consumer market loyalty cannot be
applied for the

business market. So in business market the suppliers must communicate directly to

customer

about the value they deliver rather than using conventional segmentation and
targeting approach

of the consumer market. Firms in business markets must employ the approaches
that are based on

benefits rather than features.

In order to communicate the benefits effectively first one should understand the
nature of benefits

involved in the particular product line for the business markets, the various
managerial

departments of the buyers and their interest areas. Along with this one must also
understand the

levels of business loyalty and the various types of consumers in order to estimate
the existing

level of business loyalty among the customers and to target various befits to
various types of

customers. Keeping these needs in mind the current assignment was undertaken.

Central idea of the assignment

The central idea of this assignment is to describe & analyse the benefit
typology and its

communication strategies for building the loyalty in business markets. This work
also focuses on

understanding the types of customers, their levels of loyalty, understanding

methodology for

linking the benefits to decision makers so as to design effective strategies for

communicating the

benefits. This assignment further aims at explaining the wrong presumptions in the
business

market about the business loyalty and its measures.

Benefits Typology

Most sellers assume that buyers know the value of offered products and services,
whereas most of

business customers dont keep track of all the products and services they get and
that they cannot

quantify the value of many benefits. In fact many buyers do not use some services
that suppliers

regularly provide, and they stop using others if suppliers charge for them. Hence it
becomes

imperative to communicate the benefits so as to build business loyalty. To

communicate benefits

first we must understand the typology of benefits based on their tangibility and the
financial or

non-financial nature.

First category of benefits is tangible financial benefits. This includes benefits like
energy use

efficiency of the machines, low cost of maintenance etc. These benefits can be
easily

communicated by the sellers and buyers can also verify them. There is no need to
communicate
much about such benefits, whereas Non-tangible financial benefits are an effective
way of

differentiating industrial products. But buyers cannot easily corroborate these

benefits even

though sellers can communicate these benefits very easily. Benefits like additional
gross profit

generated by use of additional consultancy services of the seller. Strategies for

communicating

this second category of benefits include using research report from independent
external

agencies, conducting pilot implementation case studies at the facilities of the

potential customer,

conducting comparative study using products and services from other providers etc.
Third category of benefits is Tangible nonfinancial benefits. These include benefits
which are

difficult for sellers to quantify, even though buyers recognize it. These include
benefits such as

level of operating comfort, corporate reputations, innovation capabilities etc. One of

difficulties

associated with these benefits is that it requires time and capital investment for its
creation.

Fourth category of benefits includes Nontangible nonfinancial benefits. These are

the benefits

which are difficult for the seller to convey and also difficult for the buyers to
physically

experience and quantify. This category includes benefits like extraordinary non-
formal services

provided by the sellers which are not mandatory. Even though these benefits are
difficult to

convey over and to experience, these are most critical ones in determining the
customer business

loyalty. Suppliers must learn to communicate business customers about the

nontangible
nonfinancial benefits they provide in order to build loyalty.

In summary to acquire customers, companies must try to be at level playing field

with rivals on

tangible financial benefits and strategize on tangible nonfinancial benefits to

distinguish their

products. They can build relationships by shifting customers focus from tangible
benefits to

nonfinancial nontangible benefits.

Linking Benefits to Decision Makers to communicate benefits at appropriate level

Every department of the customer organization is not interested in every benefit

associated with

particular sellers product. For example maintenance department manager is

interested in

maintenance cost associated with it and its frequency, whereas investment

manager is interested

in the breakeven point of the machine, its resource use efficiency etc. and top level
executive is

interested in, what addition impact the installation will make on the profit and
growth rate. Hence

it becomes necessary to identify the nature of managerial function and direct the
communication

of benefits to the particular management personnel. This is what the author calls as
Linking

Benefits to Decision Makers. To link the Befits to the appropriate decision makers
author has

developed The Benefit Stack and the Decision-Maker Stack model. In this model on
one side the

specific benefits of the product/service from a given seller are listed and are
matched with the

concerned decision team member, so as to easily communicate the benefits to the

concerned
decision maker. This will help in improving marketers understanding of the
importance of the

benefits. By linking the two stacks, the vendor can systematically tackle each
decision makers

concerns and communicate how it will meet his or her specific needs.

Levels of Loyalty

Once customer base is created, companies must also focus on relationship

development with

customers and grow their loyalty over a period of time in order to retain the
customer base. Many

companies use level of satisfaction alone or in combination with revenues they

generate from the

same customer over time. Both of these are not the comprehensive measures of the
loyalty of the

customer. Also these measures do not provide the quantitative measures to

compare the rewards

from loyalty with the costs of managing customers. This comparative measurement
of rewards

from loyalty with the costs of managing customers is necessary in order to decide
how much time

and money they should expend on customer relationships. This can be done by
using the tool,

what author calls it as The Loyalty Ladder. The ladder is based on hierarchical
pattern of

exhibition of particular set of characteristics by the customers in a predictable

sequence as they

move up the loyalty ladder.

According to author at lower level of loyalty customers loyalty characteristic is

limited to the

willingness to buy more products or services at this stage and expand the scope of
its relationship
with the vendor. In the next higher stage of loyalty ladder, customer speaks
positively about the

vendors product and endorses the vendor company openly. In the third higher level
of loyalty

ladder, the buyer customer resists vendors competitors blandishments and the
customer is less

likely to switch to the product of other company even if competitor is providing the
product of superior quality or at lower prices in the expectation that the existing
supplier will provide higher

quality product in the future. In the next higher level of loyalty ladder customer is
willing to even

pay premium price to the preferred supplier. The customer believes that the
feedback it provides

will foster future improvements and wants to help the supplier develop new
products and

services. In the higher most level of vendor customer is even willing to invest in the
suppliers

production activities in order to help supplier develop new products and services.

As the customer loyalty increases exit barriers are reduced, investments reduce
vendors risks,

reduces customer acquisition costs and also helps in promotion of company in

output industry.

Types of Customers

To determine whether to invest in, maintain, or divest a relationship with a

customer, compare the

advantages of having that buyer remain on its current rung of the loyalty ladder
with the cost of

moving it up and the savings from moving it down. That calculation yields four
customer

categories. First category of Buyers is the Commodity Buyers. Such buyers

interested only in

basic offering and have no interest in value-added and additional complementary

services
provided by the seller. Such buyers exhibit high probability of switching over to the
next seller

when product is offered at lower price. Next category of buyers is the

Underperformers. This

category of customers operates in industries with high fixed costs and includes
showcase

accounts that companies use to enhance their reputations. Next category of the
customers is the

Partners. Such customers are expensive to serve, but the returns usually justify the
effort, they

want turnkey solutions from suppliers and choose not to develop in-house expertise
or make

investments that would reduce their need for vendors services. They view suppliers
as valueadding partners and look for long-term commitments. These customers also
want the latest and

best products and are willing to pay premiums for them. Last category of customers
is Most

Valuable Customers. They are as loyal as partners but often less expensive to serve.

Loophole in argument:

Author argues that there is very little correlation between satisfaction scores and
customer loyalty

in business markets. Even though statistical analysis shows such results the author
probably

ignores the possibility that the effect of satisfaction may be masked by other factors
like change

in market situation. It is well established in numerous past researches that buying

behaviour is

highly influenced by the amount of satisfaction drawn from the product. Of course
the business

buyer who is not dissatisfied with service will not go for the product from that seller.

Probably author has failed to capture the various dimensions of the satisfaction.
Author need to
review the measures of satisfaction and if possible cross validate the obtained
measures of

satisfaction with the previous established once.

Conclusion: In order to turn the commodity buyers into most valuable customers
suppliers must

think of investing in building relationships, integrate their procurement and supply

chain

processes, deliver additional incentives like passing on some of its savings to

customers when

extra revenues are earned and creating awareness among customers about
additional services and

benefits.