Harvard Business Review: Building Loyalty in Business Markets

Harvard Business Review articles are always a good read; I’m never disappointed. I manage to read about a half dozen each month and wish I had time to read more. While each article is notable, I felt that the one I read recently was particularly valuable.

Narayandas, Das. “Building Loyalty in Business Markets”, Harvard Business Review, September 1, 2005. Boston: Harvard Business Press. (Yes, it’s an older article… and yes, I realize that I didn’t use the Harvard referencing system in this bibliographic reference!)

In this article, Harvard business admin professor Das Narayandas offers a number of tools to help businesses identify and articulate product or service benefits, and to help businesses know when and who to market to:

  • He outlines 4 categories of benefits to help marketers identify where their products offer value
  • He helps link benefits to decision makers by using two “stacks” — a seller stack and a buyer stack — and he shows how benefits listed in the seller’s stack resonate with specific company roles in the buyer stack.
  • He talks about levels of customer loyalty and provides a “loyalty ladder” which helps companies identify how loyal their customers are (and how loyal they could be).
  • He describes the four kinds of buyers and places them on a grid to compare the buyer’s loyalty with the seller’s cost of marketing to them.

All this is packed into 9 pages. It’s definitely worth the reprint price.

Here’s how I’m using this information in my business: Selfishly, I’m always on the lookout for ways to position my offering with the most attractive benefits highlighted, and for ways to keep clients coming back. More importantly, I’m always on the lookout for tools that will help me to more quickly and accurately analyze a client’s situation and then provide the most compelling ideas and strategies to help them communicate what they do. The tools contained in this article do exactly that.

Success story: 1600% increase in clients

A client contacted me some time ago to talk about helping them to generate more business. As usual, I spent some time analyzing their business model, their sales funnel, their offering, and their target market. Then, last month, we implemented some marketing systems. Until that point they were averaging 3.5 new customers per month to their professional services firm.

I just received their numbers for the first half of July — the “early stage” result of our effort. They are generating 1.9 new clients per day.

Yes, you read that correctly. From 3.5 clients per month to 1.9 clients per day. They acquired more customers in one week than they did during the last quarter. That is more than a 1600% increase in clients.

We didn’t add any new marketing channels (in fact, we removed some). We didn’t spend money on any new marketing collateral. All we did was:

  1. Map out their sales funnel and make sure that everything was working together.
  2. Revisit their current marketing tools to modify them slightly.
  3. Automate their marketing.

Barriers to entry in the condiments industry

Starting a small business can be challenging: What do you sell? How do you price your product/service? How do you get it to the market? In some cases, just entering the industry can be challenging because of barriers.

Here’s a great example of a barrier to entry and how it is being overcome:

My aunt owns a restaurant in Ojochal, Costa Rica and along with her food she offers little bottles of homemade hot sauce — called Jungle Heat — that are quite popular. A few years ago, she and I worked together to explore the possibility of bringing her product to a Canadian/US market. But there were barriers to entry:

  • Barrier #1 — Certification compliance: Although her food complied with FDA requirements for recipes and production, the cost of getting the appropriate labels, certifications, and approval was extremely high: At the time, $26,000 just for Canada (and I don’t recall the number for the US).
  • Barrier #2 — Distribution: Although she had a bottler, a brand, and some interest from potential points of sale, the distribution channel was lacking.
  • Barrier #3 — Production scalability: Although she had the ability to bottle some hot sauce in her restaurant, there was a scalability issue. What happens if she needed to fill large orders? And, who would look after the restaurant? A factory solution seemed obvious but connections here were lacking.

There wasn’t quite enough interest for her to get investors to cover the costs of the first barrier and we lacked the experience in the industry to handle the second barrier.

So the idea was shelved and we continued serving customers in her restaurant. Then a series of happy coincidences and quality connections helped her. This year, things have really opened up for Jungle Heat again. While there were a number of reasons (greater interest in the European market, and some iinvestors who came knocking as a result of the European possibility), one of the biggest solutions to the barrier to entry came in the form of Kamuk, a private label sauce manufacturer.

This Costa Rican-based company produces and bottles hot sauce (and other types of sauces) for distribution worldwide. They’ll take your recipe and bottle it for you. Or, you can work with them to develop your own ideas.

I realize this isn’t a new concept but I mention it here as an excellent example of how a company overcomes a barrier to entry. In the case of Jungle Heat, a private label hot sauce manufacturer has solved a number of her problems (and made her company far more attractive to investors).

Kudos to Kamuk, too, because they have a great model: They’re not just order-takers (where you send your hot sauce recipe to them for production). They’re also developers; you can come to them with an idea and they’ll help you find the right recipe. That makes sense, because the key to selling hot sauce is the brand. Some people might buy hot sauce for a particular taste but I suspect that most people more frequently buy hot sauce because of the brand itself. A visit to HotSauce.com, the “original hot sauce emporium”, will show you what I mean: Names like “Satan’s Blood”, “Sudden Death”, and “Ass Kicking Chipotle” are good examples. I’m sure the flavors are good but people are buying the brand.

Jungle Heat faced a few barriers to entry which Kamuk helped to overcome. If you work with start-ups, ventures, entrepreneurs, and new businesses, consider how you can resolve the barriers to entry that they face. In many ways, that can be a prime selling point for you.