The link between customer loyalty and revenue growth has emerged in a new report
Small and mid-sized manufacturers, wholesalers and distributors could unlock an average of ÂŁ66,000 in repeat sales with a renewed focus on customer loyalty, a new report reveals.
The findings are based on the profit that firms could win from customers who don’t spend beyond their third purchase, and uncover the customer base that most SMEs fail to catch in their revenue stream.
The link between customer loyalty and revenue growth emerged in a new report, published following a research project between Oxford Brookes Business School and ProspectSoft.
Researchers reviewed 15.8 million sales from firms trading with more than two million businesses, over a period of six months, to understand the opportunities available to SME firms supplying products in the B2B market.
Using sales data and average order value across five vertical sectors, the report calculates how much revenue is missed on repeat sales.
Suppliers to the construction industry have the most to gain from customer retention strategies, with researchers estimating that they could be sitting on more than ÂŁ119,000.
The engineering equipment industry is next on the list at just over ÂŁ70,000.
ProspectSoft worked with researchers from Oxford Brookes Business School as part of a knowledge transfer partnership (KTP), which looked at the growth barriers facing UK supply chain businesses.
They also concluded that loyal customers spend more overall, and that repeat orders can speed up the sales cycle and ease cash flow concerns.
This is down to returning customers typically placing their second order after 136 days – and their third after just 65 days.
Andrew Ardron, founder of ProspectSoft, which is part of the Access Group, said: “Business-to-business sales trended upwards by 7.6% in the second quarter of this year, according to our data.
"However, with tough trading conditions continuing, including high costs, firms will need to make the most of every opportunity.
“While it’s always great to win new customers, securing more orders from existing ones, and building trust and loyalty with them, is generally more cost-effective and offers cash flow certainty.
“Customers who go on to make a fourth purchase can be classed as loyal – so it’s important to drill into the data to see where they’re dropping off and then develop strategies to retain them.
"Our work with Oxford Brookes Business School suggests that businesses are not yet making full use of this data to increase loyalty and drive growth.”
His comments were echoed by Methuselah Singh, KTP Associate at Oxford Brookes Business School, who added: “Do B2B firms focus too much on finding new customers at the expense of growing valuable customer loyalty?
"Each business will have a different answer, but we can now at least put a number on the potential upside of building repeat sales.
“Encouraging customers to place further orders is vital for product businesses.”