Customer acquisition is the only viable growth strategy in B2B, says Ehrenberg-Bass’s Romaniuk

The majority of B2B marketers believe brands grow through customer loyalty rather than customer acquisition, but that couldn’t be further from the truth, according to a major new study by Ehrenberg-Bass Institute’s Professor Jenni Romaniuk.

News 4 years ago Unknown author

Think you’re going to grow your B2B brand by focusing on customer loyalty? According to the law of double jeopardy, you’re wrong, and that has implications for everything from growth KPIs to marketing strategy.

A major new study by Ehrenberg-Bass Institute’s Professor Jenni Romaniuk, Professor John Dawes and Sahar Faghidno for the LinkedIn B2B Institute confirms the marketing law of double jeopardy applies to B2B brands just as much as B2C, and therefore the only clear path towards growth for B2B brands is through customer acquisition.

It also outlines how B2B marketers can apply these lessons practically to their growth strategies.

The law of double jeopardy, which was first discovered in the 1960s, reveals that loyalty is largely a predictable function of market share, increasing as brands grow the size of their customer base. It is therefore normal for smaller brands to suffer twice as much compared to their larger competitors, by having fewer users who are also less loyal.

While previous research has shown the law of double jeopardy does apply to B2B brands, Romaniuk’s study further illustrates the phenomenon with new examples of the law taking effect across two B2B markets – UK business banking and US business insurance.

The research focuses on loyalty metrics for UK banking and defection metrics (the probability of a customer switching away from the current brand at next renewal) for US business insurance.

In both instances, brands with fewer customers have lower loyalty or higher defection levels (see tables above and below).

In the UK, Barclays serves 42% of potential B2B customers, the highest penetration in the market. Some 27% of those customers are ‘solely loyal’, using Barclays for all banking products, while 31% say it is their favourite provider.

At the other end of the spectrum, Metro serves 11% of potential B2B customers. Just 3% of those are solely loyal, while 15% say it is their favourite.

Read the full article in Marketing Week.