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A Four-part Strategy for Maximizing
Small-business Account Holder Loyalty

It all boils down to one thing: great service

dollar storm
If you want to increase the odds that your small-business1 account holders don’t shop around for a new bank or credit union, we’ve got good news: Once they choose to open an account, they prefer to stay put.

“They don’t have time to think about you,” says Jeff Berry, senior leader at Warrillow & Co., a research and consulting firm that advises corporations on how to reach out to the small-business market. “They’ve already made their decision, and it’s easier not to switch. In this case, a little apathy is a good thing.”

Indeed, according to a 2008 Warrillow Marketing and Pulse survey, 81 percent of U.S. and Canadian enterprise marketers report that small- business clients are loyal. Likewise, 79 percent of small- business owners say that they remain loyal to current suppliers. So is that the end of the story? Does everyone live happily ever after?

Not necessarily, warns Berry. An uncertain economic environment, which we now are experiencing, can reverse this predisposition. Warrillow found that businesses are more likely to consider switching vendors during an economic downturn, such as a recession. A decline in cash flow or profitability can disrupt the inertia that keeps some small-business owners from becoming more price conscious and seeking greener pastures. Therefore, Berry recommends the following four strategies for keeping account holders happy and maximizing existing account holder value.

1Know How to Cross-sell

One way to keep clients happy is by communicating information that will help them grow their business. The vast majority (78 percent) agreed with this statement: “I appreciate when my suppliers provide me with information about the products and services they offer.”

“Small-business account holders want you to help them be more successful,” notes Berry, adding that the trick is to pinpoint to whom to direct your efforts and when. "Go easy on your marketing budget by not cross-selling to those who don’t need it, and by choosing the right time to make
your offer.”

The right time, perhaps not surprisingly, is during certain “trigger” events in a small-business lifecycle when the owner may be more motivated to switch providers. Warrillow found that the top three triggers — aside from the current uncertain economy — include attendance at “how-to” seminars, the introduction of a new product or service, and revenue growth of more than 20 percent (For more on how to maximize your cross-sell activities, click here.)

The best communications vehicle is e-mail; eight in 10 small-business owners prefer to receive information via e-mail versus the Postal Service, an account representative or the telephone. And these days the best offer is a free trial. Nearly two-thirds (65 percent) said they would opt for a freebie in 2008, compared with only 15 percent in 2002, when a discount was more popular, according to Warrillow surveys conducted in each of those years.

Additionally, you should acknowledge upfront that you have a current, long-term relationship with this account holder, says Berry. Small-business owners were nearly twice as likely to click through on an e-mail that said: “A special offer for your current business account” over a more generic “Thank you for being a valued customer” or “New ways we can help your business.” Likewise, they find it more appealing to know how long they’ve been doing business with you, not that they are “among the top 10 percent of customers.”

As Berry explains, “They don’t want to be reminded that they’re spending a lot of money. Current and ongoing quality and service remain paramount.”

2Actively Encourage Referrals

While the majority of enterprise companies (71 percent) have a referral program in place with their small-business clients, fewer than half (45 percent) proactively solicit them. A note of caution is appropriate here, because these business owners take referrals very seriously.

“For you, it’s about generating leads,” says Berry. “But every time a small- business owner refers someone to you, he is putting his reputation on the line.” If it doesn’t work out, the organization being referred can suffer, which in turn can damage the network of the account holder who did the referring. Given that the most popular marketing tool for small-business owners is word-of-mouth (83 percent use it, according to Warrillow, versus 25 percent or less for such vehicles as direct mail, trade shows and ads), it stands to reason that this network is highly valued and must be protected from the risk posed by bad referrals.

The good news for financial institutions, according to Warrillow, is that small-business owners are
slightly more likely than average (26 percent versus 25 percent) to recommend a financial institution to a colleague. This is about the same likelihood with which they might refer an accountant or a credit card company. But nearly all (88 percent) would prefer to give colleagues the financial institution’s contact information, rather than the other way around. “Allow your account holders to approach peers personally and on their own,” advises Berry. “This enables them to protect the privacy of their network.”

Warrillow found that about half (52 percent) of small-business owners are in favor of being offered incentives, while one in four prefers no incentive; the rest were neutral. By a wide margin, cash or account credit is preferred by both marketers and their small- business clients. As for how much, a good rule of thumb, says Berry, is 5 percent of the value of the referred relationship in its first year. But before doling out incentives, make sure your company is seen as relationship-oriented by providing "wow" moments that enhance trust.

3Budget for a Retention Plan

While seven in 10 marketers say customer retention is a goal, the majority (53 percent) do not make it a priority, allocating only 10 percent or less of their marketing funds to retention activities.

According to Berry, if a small business decides to change suppliers, it may blame the switch on price but, in reality, it is probably a service-related issue several months in the making. Therefore, once again, be alert for those “trigger” events during which the owner is more likely to look at competitors. And be aware that one of these triggers — a decline in small-business profitability — is more likely to occur during a down economy.

“Start thinking about retention as soon as you acquire an account holder,” advises Berry. “If there is a service disruption, simple gestures that acknowledge culpability can go a long way.”

4Ramp Up Rewards

When making purchases, nearly two in three small-business owners utilize loyalty and rewards programs offered by marketers, according to Warrillow’s research. While the market is not saturated and there is room for growth, a key challenge in expanding these programs is in their implementation. “Companies struggle with how to develop a program that satisfies both the user and the decision-maker, with finding the right rewards currency, and with whether to have a stand-alone program or join a partner coalition,” says Berry.

As with referral programs, small- business owners prefer “cash back” rewards over travel rewards and merchandise, Warrillow found. Berry recommends three additional strategies:

The bottom line is that more than half (58 percent) of small-business owners surveyed by Warrillow cited “strong service” as what they value most about a vendor. The next most cited factor — “fair pricing” — came in a distant second, mentioned by only 37 percent of respondents. “By far,” says Berry, “the most critical component for expanding your relationship with account holders is good service.”

1A small business is defined as a company with up to 99 employees.