collaborative for cubes 2017 b2b benchmark report · b2b managers. the study began in november...
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COLLABORATIVE FOR CUBES™ 2017 B2B Benchmark Report
www.ccubes.net ©C-CUBES™(Donotcopy,circulateorsharewithoutwrittenpermission)
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C-CUBES™ B2B BENCHMARK,2017
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Strategic Planning & Execution: The CEO’s Challenge
Business-to-business (B2B) CEOs are under constant pressure to
increase sales, earnings before interest, taxes, depreciation, and
amortization(EBITDA),andmargins.Theymakefinancialinvestmentsin
strategicinitiativeslinkedtocapitalexpenditures(CAPEX)oroperational
expenditures(OPEX),hopingtoachievethedesiredgrowth.
Yettheireffortsfallshortinmanycases.Frequently,strategicinitiatives
aredrivenbyanexecutive’sintuition,ratherthanbyobjective,evidence-
basedcriteria.
Forexample,manyB2Bexecutivesinvestininitiativesrelatedtosafety
and sustainability. Others believe better customer communication will
increase sales and margins. Still others propose technological invest-
mentsinproductperformanceandquality.Butwhichofthesestrategic
areasshouldbeprioritizedforinvestmentsinCAPEXandOPEXtodrive
sales,margins,andEBITDA?
Alargebodyofestablishedresearchshowsthebestperformingfirms
useacustomer-basedapproachtodrivinginitiativesthatcansimulta-
neouslyincreaserevenueswhileloweringcosts.Thebestwaytolower
costs,surprisingly,istofocusthefirm’seffortsonafewstrategicareas
thatalignmostwithcustomerneeds.Bydoingthis, thefirmensures
it can satisfy customers better than competitors and simultaneously
increasesales,margins,andEBITDA.Thisoccursbecausethestrategic
areas, rather than being defined subjectively, are identified and
prioritizedbasedoncustomerneeds.
Acustomer-basedapproachtoexecutionandstrategyuniquelyallowsa
firmtoincreasesales,margins,andEBITDAsimultaneously.Theapproach
isbasedonsystematicmeasurementthatincorporatesthecustomer’sper-
spectiveanddrivestheexecutive-suite’sstrategicdecision-makingprocess.
COLLABORATIVE FOR CUBES™ 2017 B2B Benchmark Report
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Managing Sales, Margins, & EBITDA
A customer-based management perspective is best measured using
overallcustomersatisfactionanditscomponents.
Morethan30-yearsofresearchshowsincreasedcustomersatisfaction
is linked with higher repurchase rates, more cross-buying, and lower
service and retention costs. Satisfied customers help a firm lower
the cost of customer acquisition through positive word-of-mouth
(WOM)andrecommendationstofriendsandfamily.Satisfiedcustomers
also help lower a firm’s cost structure by making fewer returns and
reworkrequests,contributingtoorganicgrowthinthecustomerbase,
and lodging fewer complaints. They also have lower price sensitivity
(i.e.,theyarelesslikelytodefectwhencompetitorsofferlowerprices)
andaremoreforgiving.Whenthereisanoccasionalproductorservice
failure,highlysatisfiedcustomersmayattributeittoexternalcausesand
stayloyaltothefirm.
Benefits of Improving Customer Satisfaction
Because of the benefits of highly satisfied customers, satisfaction
must drive a firm’s most important strategic outcomes: sales,
margins, EBITDA, and stock-market metrics such as return on
investment(ROI),returnonassets(ROA),andstockreturns.
Increases the Expected Life of
Customer Relationships
THECUSTOMER
SATISFACTIONEFFECT
Predicts Sales, EBITDA, Margins,
& Stock Price
Builds Trust & Reputation Among
Stakeholders
Lowers Costs of Attracting
New Customers
Reduces Price Elasticity Among
Customers
Insulates Customers From the Competition
Lowers Future OPEX
Reduces Operating
Costs
Benefits of Improving Customer Satisfaction
Source: Vikas Mittal and Carly Frennea, “Customer Satisfaction: A Strategic Review and Guidelines for Managers.” MSI Fast Forward Series, Marketing Science Institute, Cambridge, MA, 2010. Available at SSRN: http://ssrn.com/abstract=2345469.
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Strategic Planning & Execution: Five Issues a CEO Should Address
Knowingsatisfactiondrivesfinancialoutcomesisnotenoughtomakea
CEOsuccessful.Tomaketheinsightsactionable,seniorexecutivesmust
addressfiveissues:
1. What is the precise link between customer satisfaction and financial
metrics? Executives benefit from having a precise and validated
functionthattranslatessatisfactionimprovementsintosales,margins,
andEBITDA.Inotherwords,CEOsmustknowtheexpectedchange
infinancialoutcomesforevery1-point increaseinoverallcustomer
satisfaction.
2.What one, two, or three strategic priorities should be a firm’s focus
to meet customer needs? A reliable methodology that describes
the key strategic areas and helps CEOs weight them in order
oftheirimpactonsales,margins,andEBITDAisrequired.CEOsmust
knowthemostimportantstrategicareassotheycanallocateCAPEX
andOPEXaccordingly.
3.What are the execution levers in the prioritized strategic priorities
that will achieve specific outcomes? Within each strategic area,
firmemployeesatthedirectorlevelmustknowthespecificexecution
leverstosuccessfullymanagetheCAPEX/OPEXallocation.
4.How is the firm performing relative to competitors and over time?
Companies must measure and benchmark performance relative to
previousperiods,competitors,andbest-in-classfirms.Thisenables
seniorexecutivestomodifytheirstrategicplanasneededovertime.
5.Does the firm have a customer-driven strategic process that goes
beyond budget updating?Mostcompaniesconfusebudgetingwith
strategic planning. A useful strategic planning process starts with
customerneedsandfocusesthecompany’sCAPEX/OPEXallocation
inthatdirection.
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2017 B2B Benchmark Survey: Methodology Overview
TheB2Bmarket lacksareliablesetofdataandmethodology linking
customersatisfactiontofinancialoutcomes.The2017B2BBenchmark
study,conductedbytheCollaborative forCustomer-basedExecution
andStrategy(C-CUBES™),solvesthisproblem.
The2017B2BBenchmarkstudyisamonthlystudyofB2Bmanagers.
Dataforthe2017B2BBenchmarkstudycomefromanationalsurveyof
B2Bmanagers.ThestudybeganinNovember2016.Presently,ittracks
customer satisfaction on amonthly basis. Thecurrent report includes
dataforthemonthsofNovember2016toJune2017.
The reportedB2Banalysis isbasedondata from7,959 respondents.
It is one of the largest and most comprehensive studies of B2B
managerseverconducted.Eachmonth,additionalmanagersaresur-
veyedtoexpandthedataset.
The study uses a nationally representative panel of managers
provided by one of the most respected providers in the industry.
The respondents cover a wide variety of industries, jobs, rank, and
experience. The B2B suppliers rated in the study cover a industries
including manufacturing, computer hardware, IT services, office
supplies,andretail.
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Survey Measurement
Each B2B respondent fills out a comprehensive survey about
one of his or her suppliers. The survey takes about 14 minutes
to complete online. Respondents rate the supplier on eight strategic
areasdevelopedbasedonextensivequalitativeresearchandapre-test
ofmorethan750B2Bmanagers.
Thesurvey includes the followingsections,witheach itemmeasured
usinga7-pointLikertscalethatisbalancedandlabeled:
1. Measurementofeightstrategicareas, includingexecution levers in
eacharea.
2.Overallcustomersatisfaction.
3.Loyaltymetrics.
4.Priceelasticity.
5.Commitment(emotional,rational,habitual,economic).
6.Global/localidentity.
7. Perceivedswitchingcosts/barriers(financial,relational,procedural).
8.Demographicsandfirmographics.
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Survey Design & Pre-Testing
Thestudydesignusesseveralstepstoincorporatebestpracticesinmea-
suringthevoiceofthecustomerandsurveydesign.Thesestepsinclude:
• Asystematicreviewoftheacademicliteratureexaminingcustomer
satisfactionanditscomponentsinaB2Bsetting.
• Focus groups and in-depth interviews with more than 50 CEOs,
executives,managers,andbuyersinindustrialandB2Bsettings.
• Apre-testsurveywith750managers intheB2Bsectortovalidate
thescales,items,andanalyticalframework.Thisincludedestimating
the reliability and discriminant validity of the constructs using
exploratoryandconfirmatoryfactoranalysis.
• Feedbackfromindustryparticipantsontheresultsofthepre-test.
Survey Administration
Thesurveyisadministeredonlineinpartnershipwiththesamplesupplier.
Eachmonth,thesurveylinkissenttoanewsample.Participantswho
havetherankofmanagerorabovearescreenedintothesurvey.Each
participant rates a supplier from whom they have made a purchase,
ensuringeachsurveyislinkedtoaB2Bsupplier.
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Financial Metrics
More than40%of theB2Bsuppliers rated in the surveyarepublicly
tradedcompanies.Forthesuppliers,theC-CUBES™teammatchesthe
surveydatatothefirm’sfinancialmetrics,includingbutnotlimitedto:
• Firmsizeasmeasuredbytotalassetsandnumberofemployees.
• Sales,revenues,EBITDA,andmargins.
• Selling,generalandadministrativeexpenses.
• Tobin’sq,astock-marketmeasureoffirmvalue.
• Firmrisk(systematicandidiosyncratic).
• ROI,ROA,andreturnonequity(ROE).
TheC-CUBES™team links thesurvey tofinancialmetricsbybuilding
econometricmodelsthatstatisticallyisolatetheuniqueassociationof
overallcustomersatisfactionwitheachoutcome.Themodelsstatistically
ruleoutextraneousissues,suchasbusinesscycles,firm-specificfactors,
andotherextraneousconfounds.
Because the survey is linked to objective financial metrics, several
advantagesaccruetothestrategicprocess:
• Thesurveyinferencesaremorerobustandactionablethansurveys
that rely only on subjective or self-reported financial performance
measures.
• Theunderlyingmodellinkingcustomermetricstosales,margins,and
EBITDAisusedtoderiveastatisticalmodelthatcanbeusedbyan
individualfirmtoquantifytherelationshipsinrealtime.
• A simulator can be developed to quantify the outcome of each
strategiccustomersatisfactioninitiativeinrealfinancialterms.
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Customer Satisfaction’s Effect on Sales, Margins, & EBITDA
WhatcanCEOsexpectintermsofgainsinsales,margins,andEBITDA
iftheircompanyimprovescustomersatisfaction?
The C-CUBES™ team estimated these associations using data from
morethan3,000observations.Thefollowingassociationsareprovided
asabenchmark.
Sales
Foracompanywith$10billioninannualsales,howwilleachpointchange
inoverallcustomersatisfactionimprovesales?Thefigurebelowshows
salesfora$10billioncompanyasoverallsatisfactionincreases.Eachunit
increaseinsatisfactionisassociatedwithahealthyincreaseinannualsales.
2017 Customer Satisfaction and Sales ($Billion)
Inthedissatisfiedzone,salesincreasesarerelativelyflat.Fortheaverage
firminthesample,salesincreasefrom$10billionto$12.2billionwhen
customers go from Extremely Dissatisfied to Neither Satisfied nor
Dissatisfied.
Amongsatisfiedcustomers,eachunitincreaseincustomersatisfaction
bringsanasymmetricallyhigherincreaseinsales.Whenclientsgofrom
NeitherSatisfiednorDissatisfiedtoVerySatisfied,salesincreasefrom
$12.1billionto$13.9billion.GoingtoExtremelySatisfiedisassociated
withsalesof$14.8billion.
2017 Customer Satisfaction and Sales ($Billion)
10.0 10.7 11.4 12.2 13.0 13.9 14.8
Sale
s ($
Billio
n)
Overall Satisfaction
Extremelydissatisfied
Verydissatisfied
Somewhatdissatisfied
Extremelysatisfied
Verysatisfied
Somewhatsatisfied
Neithersatisfied nordissatisfied
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EBITDA
ManyB2BboardsandCEOsuseEBITDAasthekeymetricforevaluating
theshortandmedium-termhealthof theircompany.Forafirmwith
annualsalesof$10billionandEBITDAof$1billion,whathappensas
customersatisfactionincreases?Theresultsareshownbelow.
Inthedissatisfiedzone,EBITDAincreasesaremorepronouncedthanin
thesatisfactionzone.Companiesstartingwith$1billioninEBITDAcan
expectanincreaseto$1.21billionwhencustomersgofromExtremely
DissatisfiedtoNeitherSatisfiednorDissatisfied.
2017 Customer Satisfaction and EBITDA ($Million)
Among satisfied customers, EBITDA increases are less pronounced.
Whenclientsgo fromNeitherSatisfiednorDissatisfied toExtremely
Satisfied, EBITDA changes from $1.21 billion to $1.27 billion. Between
VerySatisfiedandExtremelySatisfiedcustomers,EBITDAisessentially
flatat$1.27billion.
2017 Customer Satisfaction and EBITDA ($Million)
1,000 1,082 1,153 1,209 1,248 1,267 1,268
EB
ITD
A (
$M
illio
n)
Overall Satisfaction
Extremelydissatisfied
Verydissatisfied
Somewhatdissatisfied
Extremelysatisfied
Verysatisfied
Somewhatsatisfied
Neithersatisfied nordissatisfied
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Margins
Considerafirmwith$10billion insalesand$500million inmargins.
How does each unit increase in overall customer satisfaction change
margins?
2017 Customer Satisfaction and Margin ($Million)
Inthedissatisfiedzone,marginincreasesarepronounced,goingfrom
$500 million to $685 million when customers shift from Extremely
DissatisfiedtoNeitherSatisfiednorDissatisfied.
Moving from Neither Satisfied nor Dissatisfied to Very Satisfied,
improvements in margins are incremental and modest – from $685
million to $717 million. But going from Very Satisfied to Extremely
Satisfieddecreasesmarginsfrom$717millionto$698million.
2017 Customer Satisfaction and Margin ($Million)
500
574
637 685 712 717
698
Gro
ss M
arg
in (
$M
illio
n)
Overall Satisfaction
Extremelydissatisfied
Verydissatisfied
Somewhatdissatisfied
Extremelysatisfied
Verysatisfied
Somewhatsatisfied
Neithersatisfied nordissatisfied
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Jointly Managing Sales, EBITDA, & Margins
SomeB2Bexecutivesfocusonlyonsalesgrowth,assumingitwillauto-
maticallygrowEBITDAandmargins.ButtheC-CUBES™analysisshows
B2Bfirmscannottreatsales,EBITDA,andmarginsinterchangeably.For
eachunitincreaseinoverallcustomersatisfaction:
• Salesshowapatternofincreasingmarginalreturns.
• EBITDAshowsapatternofdiminishingmarginalreturns.
• Marginsshowapatternofdecreasingmarginalreturns.
Whydoes thishappen?Whencustomersaredissatisfied,acompany
can pick low-hanging fruit to make EBITDA gains. In contrast, when
customer-basedperformanceasmeasuredbycustomersatisfactionis
alreadyhigh,firmsneedtodigdeepertomovetheneedle.Astheyfind
incrementaladvancesincustomersatisfaction,theyerodemarginsand
EBITDAevenastheyincreasesales.
B2Bfirmscangotoofartoachievethehighestcustomersatisfaction
levels. While this may grow sales, it may not maximize EBITDA and
margins. The C-CUBES™-research reveals several reasons for this
counterintuitiveresult:
• Manyfirmsmaximizesalesbyloweringpricesorbuildinginproduct
features.Inbothcases,theymaygrowsalesattheexpenseofmargins
andEBITDA.
• Firmssometimespursue“difficulttosatisfycustomers”whoseneeds
are not aligned with the firm’s offerings. To completely satisfying
suchcustomers,B2Bfirmscanspendmore,decreasingmarginsand
EBITDA.
• Thesweetspotformaximizingfinancialperformanceissomewhere
around Very Satisfied customers, rather than Extremely Satisfied
customers.
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How Satisfied Are B2B Customers?
C-CUBES™ measures overall customer satisfaction using a single-
item measure of cumulative satisfaction (1=extremely dissatisfied,
7=extremelysatisfied).Thepatternisshownbelow.
Overall Customer Satisfaction
For the overall sample, almost 85% of B2B managers/executives are
in the satisfied zone, with 23% being Somewhat Satisfied, 41% being
VerySatisfied,and21%beingExtremelySatisfied.Lessthan5%ofB2B
customers report being Extremely Dissatisfied, Very Dissatisfied, or
NeitherSatisfiednorDissatisfiedwiththeirsupplier.
C-CUBES™ tracks a variety of industry sectors. Some noteworthy
patternsfromthesector-wisebreakdowninclude:
• B2Bcustomerspurchasingnon-manufacturingsuppliesandservices
tendtohavethelowestproportionofExtremelySatisfiedcustomers
(18%each).
• Manufacturing goods has the highest proportion of Extremely
Satisfiedcustomers(24%).
• B2B customers purchasing non-manufacturing services have the
lowestproportionofVerySatisfiedcustomers(37%).
Overall Customer Satisfaction
4%
2%
2%
2%
3%
13%
8%
10%
9%
11%
24%
21%
25%
22%
23%
37%
44%
44%
41%
41%
18%
22%
18%
24%
21%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Non-Manufacturing Services
Manufacturing Services
Non-Manufacturing Supplies
Manufacturing Goods
Overall
Extremely dissatisfied Very dissatisfied Somewhat dissatisfied Neither satisfied nor dissatisfied Somewhat satisfied Very satisfied Extremely satisfied
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Which B2B Companies Have the Most Satisfied Customers?
Thefirmswiththehighestaverageratingonoverallcustomersatisfaction
inthestudyareshownbelow.Keytakeawaysinclude:
• The2016-2017listoffirmscutsacrossmanysectors,including
– Retail(Wal-Mart,Lowe’s,Costco).
– IThardwareandservices
(Apple,Amazon,CiscoSystems,Microsoft).
– Manufacturing(Nike,3M,Grainger).
– Services(MetropolitanLifeInsurance,UPS,FedEx).
• Manyofthetop-ratedB2BcompaniesalsohaveastrongB2Cpresence.
• Theoverallcustomersatisfactionratingsrangefromanaverageof
5.5-6.2,thezonethatseemstojointlyoptimizesales,margins,andEBITDA.
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How Loyal Are B2B Customers?
C-CUBES™measuresseveralcustomerloyaltymetrics,asshownbelow.
Each metric is measured using a Likert scale (1=extremely unlikely,
7=extremelylikely).
Loyalty Metrics
• Intermsofrepurchase,69%areExtremelyLikelyorVeryLikelyto
repurchasefromtheircurrentsupplier.
• More than 80% would recommend their supplier, with 27% being
ExtremelyLikely,34%beingVeryLikely,and20%beingSomewhat
Likelytorecommendtheircurrentsupplier.
• Regardingrepeatbusiness,61%saidtheyareExtremely/VeryLikely
toinvitetheircurrentsuppliertobidontheirnextproduct/service.
• Over 80% of B2B managers/executives say positive things about
theirsupplier:30%areExtremelyLikely,33%areVeryLikely,and20%
areSomewhatLikely.
• Morethantwo-thirdsofthecustomerswouldnotengageinnegative
word-of-mouth.Only9%areExtremelyLikelytosaynegativethings
abouttheircurrentsupplier.
Loyalty Metrics
22% 19% 12%
3%
3%
3%
2%
16%
12%
14%
12%
9%
11%
20%
21%
20%
17%
13%
33%
34%
34%
36%
9%
30%
27%
27%
33%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Negative WOM Engagement
Positive Word-of-Mouth (WOM) Engagement
Will Invite to Bid
Will Recommend
Will Repurchase
Extremely unlikely Very unlikely Somewhat unlikely
Neither unlikely nor likely Somewhat likely Very likely
Extremely likely
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In general, firms in the B2B sector can create high levels of loyalty
amongtheirclientbasebyincreasingoverallsatisfaction.Theanalysis
showedthecorrelationbetweenoverallsatisfactionandeachofthese
metricsisstrong,exceeding0.75,withthemaximumpossiblebeing1.
Customer Satisfaction with Strategic Areas
C-CUBES™ not only measures overall customer satisfaction and
loyalty,butalsoeightstrategicareasassociatedwithoverallcustomer
satisfaction. The overall satisfaction metric allows C-CUBES™ to link
customerneedswithsales,margins,andEBITDA.
Theeightstrategicareasallowexecutivestounderstandandprioritize
the initiativesthatdriveoverallcustomersatisfactionandthedesired
financial outcomes. The eight areas provide guidance on strategic
initiativesthatshouldbecomethebasisofafirm’sCAPEXandOPEX
spendingdecisions.
The strategic areas were developed based on an extensive research
process, including an assessment of published academic papers,
in-depthconversationswithexecutives, andapre-test surveyof750
managersintheB2Bsector.
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Customer Satisfaction with Strategic Areas
Severalnoteworthypatternsemergeinthedata:
• Among the strategic areas, the largest proportion of Extremely/
Very Satisfied customers occurs for product/service quality (63%)
andsafety(60%).Thisishigherthanallotherareas,whichstandat
49%-57%.
• The largest proportion of Extremely Satisfied customers occurs in
thestrategicareaofsafety(24%),whichissignificantlyhigherthan
theproportionofsuchcustomersintheotherareas(17%-20%).
• B2B customers are less satisfied in the areas of sustainability and
socialresponsibility.ThelargestproportionofNeitherDissatisfiednor
Satisfiedcustomersoccursinthestrategicareaofsustainabilityand
social responsibility (24%),significantlyhigher thantheproportion
ofsuchcustomersintheotherareas(10%-19%).
Customer Satisfaction in Strategic Areas
1%
3%
3%
3%
3%
3%
3%
3%
19%
15%
18%
24%
15%
14%
10%
14%
19%
23%
23%
22%
25%
24%
21%
25%
36%
38%
35%
32%
37%
37%
43%
37%
24%
17%
19%
17%
17%
19%
20%
20%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Safety
Sales & Bidding
Project Management
Sustainability &Social Responsibility
Pricing & Billing
Communication
Product/Service Quality
Ongoing Service& Support
Extremely dissatisfied Very dissatisfied Somewhat dissatisfied
Neither dissatisfied nor satisfied Somewhat satisfied Very satisfied
Extremely satisfied
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Strategic Area Potency Index
C-CUBES™ uses a proprietary statistical approach that identifies the
extenttowhichoverallcustomersatisfactionrespondstoeachstrategic
area.TheapproachisvalidatedbyC-CUBES™-researchscholarsthrough
publicationsinthemostrigorousacademicjournals.
Themoreoverallcustomersatisfactionrespondstoimprovementsina
strategicarea,thehighertheweightassignedtothearea.Theweightis
indexedto100anddeemedtheexecutionleverpotencyindexforeach
strategicarea.
Ahigherpotency index fora strategicareasignifies it ismoreconse-
quential indrivingoverallsatisfaction,whichdrivessales,EBITDA,and
margins.Thus,thepotencyindexalsoquantifiesastrategicarea’sability
toimpactthesefinancialconsequences.Therelativeweight,orpotency
index,foreachstrategicareaisshownbelow.
Strategic Areas: Weight in Driving Overall SatisfactionStrategic Areas: Weight in Driving Overall Satisfaction
Ongoing Service & Support34%
Product/Service Quality17%
Communication15%
Pricing & Billing - 9%
Sustainability & Social Responsibility – 7%
Project Management – 7%
Sales & BiddingSafety
CCUBES Customer Score
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The y-axis in the figure represents the C-CUBES™ Execution Lever
Potency Index, the relative weight of each strategic area in driving
overallcustomersatisfaction.Thesizeofeachbarrepresentsthestrategic
area’sweight.Theareaswithhigherweightaremoreimpactfulforoverall
satisfactionandfinancialoutcomes.
• Ongoingserviceandsupport,at34%,emergesas theclear leader
indrivingoverallcustomersatisfaction,sales,EBITDA,andmargins.
• Product/servicequality(17%)andcommunication(15%)emergeas
thenexttwomostcriticalstrategicareas.
• The top-three strategic areas contribute 66% to overall customer
satisfaction.
• Thenextthreeareas–pricingandbilling(9%),sustainability/social
responsibility(7%),andprojectmanagement(7%)–contribute23%
tooverallcustomersatisfaction.
• Combined,theabovesixareasmeet89%ofcustomerneeds,providing
a high level of potency in moving the needle on overall customer
satisfaction.
• Twoareas–initialsalesandbiddingandsafety–appeartobeperipheral
tooverallcustomersatisfactionandfinancialperformance.
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Strategic Area Potency Across Industry Sectors
Therelativepotencyoftheeightstrategicareasisstableacrossindustry
sectors.Thefigurebelowshowstherelativepotencyforfoursectors.
Exceptformanufacturingservices,thethreemostcriticalareasareon-
goingserviceandsupport,product/servicequality,andcommunication,
satisfyingbetween65%and68%ofcustomerneeds.Inmanufacturing
services,thethreefocalareasareongoingserviceandsupport(27%),
projectmanagement(19%),andsustainability&socialresponsibility(17%).
Key Drivers by SectorKey Drivers - Manufacturing Goods Sector
Ongoing Service & Support33%
Communication18%
Product/Service Quality14%
Pricing & Billing - 10%
Sustainability & Social Responsibility – 8%
Project Management – 8%
Sales & BiddingSafety
CCUBES Customer Score
Key Drivers - Manufacturing Services
Ongoing Service & Support33%
Project Management19%
Sustainability & Social Responsibility 17%
Communication17%
Product/Service Quality - 11%
SafetySales & Bidding / Pricing & Billing
SafetyCCUBES Customer Score
Key Drivers - Non-Manufacturing Supplies
Ongoing Service & Support33%
Product/Service Quality20%
Communication13%
Pricing & Billing12%
Sustainability & Social Responsibility
Project Management
Sales & BiddingSafety
CCUBES Customer Score
Key Drivers - Non-Manufacturing Services
CCUBES Customer Score
Manufacturing Goods
Non-Manufacturing Supplies
Manufacturing Services
Non-Manufacturing Services
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Strategic Planning Pitfalls
Aprevalentbutincorrectdecisionmadebymanyexecutivesistouse
theseresultstoascribeastrategicweighttothedifferentareas.
Lookingonlyatcustomersatisfactionscores,anexecutivemayconclude
thatbecausetheyarehighestwithrespecttosafetyand lowestwith
respect to sustainability/social responsibility, these areas should
drive CAPEX/OPEX investments. Presumably, investing in safety will
helpdoubledownonastrength,and investing insustainability/social
responsibilitywillhelprectifyaweakness.
But this decision making ignores the potency indices across areas.
Becauseongoingserviceandsupporthasthehighestpotency index,
it contributes most toward overall customer satisfaction. In fact, the
contributions of safety and sustainability/social responsibility are
relatively lowwhen it comes todrivingoverall customer satisfaction,
sales,margins,andEBITDA.
Thepitfallsthatanycustomer-basedstrategicplanningprocessshould
avoidincludethefollowing:
• Highperformanceonastrategicareashouldnotbeconfusedwith
highimportance.Someareaswhereacompanyperformswellmay
notbeasimportantfordrivingoverallcustomersatisfaction.
• The importance of a strategic area is determined by its statistical
contribution to overall customer satisfaction. Thus, if increased
performance on the strategic area also leads to increased overall
customersatisfaction,theareaisimportant.
• If high performance on a strategic area leaves overall customer
satisfactionunchanged,ithasalowstrategicweight,orrelativelylow
importance.
Onlybyunderstandingtherelativestrategicweightofastrategicarea
can B2B firms make correct strategic decisions. C-CUBES™ provides
deeper insights by showing the relative potency or weight of each
strategicareainmeetingoverallcustomersatisfactionneeds.
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Ongoing Service and Support Execution Levers
Afteridentifyingcriticalstrategicareas,B2Bcompaniesmustexecute
onthem.Thus,executivesneedtoidentifythespecificexecutionlevers
andtheirrelativepotencyindexwithineachstrategicarea.
C-CUBES™providestherelativeweightandperformanceofspecificex-
ecution levers associated with each strategic area. Because ongoing
serviceandsupportemergedasthemost importantstrategicareain
all industries studied, the execution levers for this strategic area are
describednext.
They-axisinthefigurebelow,theC-CUBES™ExecutionLeverPotency
Index,showstherelativeweightofeachexecutionleverforongoingservice
andsupport.Thesizeofeachbarrepresentstheexecutionlever’sweight.
Execution Levers of Ongoing Service and SupportExecution Levers of Ongoing Service & Support
Fast & Accurate Resolution of Problems22%
Timely Upgrades22%
Solves Problems in One-Shot15%
Accessibility of Service/Support Dept12%
Ongoing Training & Support10%
Replacement Parts Availability
Ongoing Documentation & Support
Recommends Preventive Maintenance
CCUBES Customer Score
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Key Takeaways:
• Themajorexecutionleversforongoingserviceandsupportinclude:
– Providingfastandaccurateresolutionofproblems(22%).
– Timelyupgrades(22%).
– Solvingproblemsinoneshot(15%).
– Accessibilityofservice/supportdepartment(12%).
– Ongoingtrainingandsupport(10%).
• Together, these execution levers account for 81% of the potential
leverageinimprovingperformanceonthestrategicarea.
The C-CUBES™ approach helps executives not only prioritize key
strategic areas, but also specific execution levers within the high-
prioritystrategicarea.Thisprovidesaconsistent,logical,andmeasurable
blueprintforstrategicaction.
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Ongoing Service and Support: Monitoring Execution Levers
B2Bfirmsmustalsomonitorprogressandperformanceonkeyexecution
levers in the priority strategic areas. C-CUBES™ therefore measures
satisfactiononeachlever.Thesatisfactionlevelfortheexecutionlevers
inthestrategicareaofongoingserviceandsupportareshownbelow.
Satisfaction with Execution Levers: Ongoing Service & Support
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Fast & Accurate Resolution of Problems
Satisfaction with Execution Levers of Ongoing Service & Support
3%
3%
3%
4%
3%
4%
3%
3%
21%
16%
18%
22%
14%
15%
14%
15%
21%
22%
22%
21%
21%
23%
24%
22%
32%
35%
32%
31%
35%
32%
35%
34%
20%
22%
23%
20%
24%
24%
23%
23%
Recommends Preventive Maintenance
Ongoing Documentation & Support
Replacement Parts Availability
Ongoing Training & Support
Accessibility of Service/Support Dept.
Solves Problems in One-shot
Timely Upgrades
Extremely dissatisfied Very dissatisfied
Somewhat dissatisfied Neither dissatisfied nor satisfied
Somewhat satisfied Very satisfied
Extremely satisfied
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Key Takeaways:
• The largest combined proportion of Extremely Satisfied and Very
Satisfied customers occurs for accessibility of service/support
department. This execution lever has a 12% weight in driving the
strategicarea.
• More than 75% of the customers are Somewhat/Very/Extremely
Satisfiedwiththethreemostpotentexecutionlevers:
– Fastandaccurateresolutionofproblems(79%).
– Timelyupgrades(82%).
– Solvesproblemsinoneshot(79%).
Intermsofimplementation,anystrategicinitiativetoimproveongoing-
serviceandsupportshouldfocusontheseexecutionlevers.Forexample,
technologycouldbeusedtoresolvecustomerproblemsfasterandwith
greateraccuracy.Servicerepsmaybetrainedtoensureproblemsare
solvedinoneattempt.
Atthesametime,C-CUBES™providesmetricstomonitorimprovements
andperformanceonanongoingbasis.Inthelong-term,theseimprove-
mentscanbelinkedtooverallsatisfaction,sales,EBITDA,andmargins.
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Simulating Financial Outcomes of Strategic-Area Performance Changes
Once strategic areas have been prioritized and execution levers
identified,afirm’sexecutiveteamcanworkwithfinanceandaccounting,
human resources, sales/marketing, and operations to shift resources.
Thebudgetmaybere-alignedtoreflectthenewweightofeachmajor
strategicpriority.Duetoconstrainedfunding,someactivitiesnotaligned
withcustomerpositioningshouldbeeliminated.
ForanyproposedCAPEXorOPEXinitiativetoimproveastrategicarea,
executives must ask, “what is the specific simulated improvement to
financialoutcomes?”
C-CUBES™hasdevelopedafinancialcalculatortosimulateoutcomes
forachosensetofstrategicinitiatives.Belowisanexampleofafinancial
calculator.
Financial Calculator: Simulating Performance
SimulatedBase Case
Sales/Bidding 50 50
Product/ServiceQuality
50 50
Pricing&Billing 75 50
Communication 50 50
ProjectManagement
50 50
Safety 50 50
CSR 50 50
OngoingService&Support
50 50
Financial Calculator: Simulating Performance
4046.28
1917.45
4027.42
1899.75
1500 2000 2500 3000 3500 4000 4500
Pre
dic
ted
Sale
s P
red
icte
d M
arg
in
Performance Simulator
Base Case Simulated
$Million
SimulatedBase Case
Sales/Bidding 50 50
Product/ Service Quality
50 50
Pricing & Billing 75 50
Communication 50 50
Project Management
50 50
Safety 50 50
CSR 50 50
Ongoing Service & Support
50 50
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In theexample, eachof theeight strategic areashavea scoreof50
outof amaximumof 100.This is associatedwithbasecase salesof
$4.03billionandmarginof$1.9billion,asshowninthepurplebarsof
thegraph.
Whathappensifallstrategicareasremainat50,exceptpricing,which
moves to 75? Sales would increase by $18.86 million and margin by
$17.7million.Answeringthesequestionsprovidesconcreteandaction-
ableguidancetomeasuretheROI/ROAofanyCAPEX/OPEXspenton
pricing.
C-CUBES™cancustomizethelinksbetweenstrategicareaperformance
andfinancialoutcomesforspecificfirmsbytailoringtheeconometric
modelsandmakingthemcontext-relevanttoanygivencompany.
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Organic Business Growth
The B2B survey respondents indicated how they learned about the
suppliertheyratedinamulti-categoryresponseformat.Thedistribution
oftheirresponsesisshownbelow.
Business Development & Organic Growth
ResponsestothisquestionprovideinsightsintothebestwaysforB2B
companiestoorganicallygrowtheircustomerbase:
• Thebestwaytogrowcustomerbaseisthroughretention,with50%
ofrespondents indicatingtheyuseavendorwithwhomtheyhave
workedinthepast.
• Referrals(14%)ratedasthesecond-bestmethodoforganicgrowth.
• Onlineresearch(13%),includingonlineadvertising(2%),arecritical
growthareas.
• Salescalls(8%)aremoreimportantthantradeshows(4%)andprint
mediaadvertising(3%).
Business Development & Organic Growth
5.8%
14.2%
12.8%
50.3%
8.2%
4.1%
2.0%
2.6%
Other
Referral (WOM)
Online Research
Supplier Has Done Work in the Past
Sales Call
Trade Show/Event
Advertising (online)
Advertising (print media, brochure, etc.)
0% 10% 20% 30% 40% 50% 60%
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Strategic Planning & Execution: A Guide for B2B Executives
Rather than relying on subjective hunches, CEOs can improve their
firm’sperformanceusingacustomer-basedapproachbyansweringfive
questions.C-CUBES™answersthesequestions:
1. What is the precise link between customer satisfaction and financial
metrics?
As the 2017 B2B Benchmark survey results show, the customer
satisfactionhasastrong,robust,andvalid linkwithsales,margins,
andEBITDA.Specifically,
– Salesshowapatternofincreasingmarginalreturns.
– EBITDAshowsapatternofdiminishingmarginalreturns.
– Marginsshowapatternofdecreasingmarginalreturns
C-CUBES™cancalculatethepreciselinkforapartnerB2Bfirmbased
onthebenchmarkingresults.
2.What one, two, or three strategic priorities should be a firm’s focus
to meet customer needs?
The top-three strategic areas contribute 68% to overall customer
satisfaction.Theyinclude:ongoingserviceandsupport(34%weight),
product/servicequality(17%weight)andcommunication(15%weight).
C-CUBES™candeterminetheweightsofstrategicareasforapartner
B2Bfirm.
3.What are the execution levers in the prioritized strategic priorities
that will achieve specific outcomes?
Withineachstrategicarea,firmemployeesatthedirectorlevelcan
identify the execution levers for implementing strategic initiatives.
As an example, 81% of the execution-potency for ongoing service
andsupportcomesfromfiveexecutionlevers:
– Providingfastandaccurateresolutionofproblems(22%weight).
– Timelyupgrades(22%weight).
– Solvingproblemsinoneshot(15%weight).
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– Accessibilityofservice/supportdepartment(12%weight).
– Ongoingtrainingandsupport(10%weight).
C-CUBES™providesexecutionleversforeachoftheeightstrategic
areastoitspartnerfirms.Thisprovidesahighleveloftransparency
andvisibilitytotheexecutionofspecific initiatives.Executivescan
alsousetheC-CUBES™resultstotrackperformanceovertime.
4.How is the firm performing relative to competitors and over time?
C-CUBES™providesperformancemetricsrelativetopreviousperiods,
competitors,andbest-in-classfirms.Seniorexecutivescanusethese
comparisonstoidentifyspecificareasofweaknessesandstrengths,
forcompensationplanning,andbudget-projections.
5.Does the firm have a customer-driven strategic process that goes
beyond budget updating?
C-CUBES™ provides a systematic way to “bring customers in the
boardroom.”Thecustomer’svoice,linkedtostrategicinitiativesand
financialmetricsprovidesaninsightfulandactionableprocessthat
goesbeyondbudgetupdating.
The C-CUBES™ has shared this 2017-benchmark report for B2B
executivestoprovideapathwayfor improvedstrategicplanningand
execution.Wehopetheinsightsfromthisreportwillmotivatemoreand
more executives to use a customer-based approach to strategy and
execution.
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C-CUBES™ B2B Benchmark: Respondent Profile
Thenationallyrepresentativesampleforthestudycomprisesadiverse
groupofindividualsandcompanies.Thedemographicandfirmograph-
iccompositionofthe2017sampleisdescribedhere.
Profile: Number of Years Working at Company
Profile: Education & Gender
15.1%
26.6%
40.0%
18.3%
More Than 20 Years
11-20 Years
5-10 Years
Fewer Than 5 Years
Profile: Number of Years Working at Company
0% 10% 20% 30% 40% 50% Profile: Education & Gender
7.3%
35.3%
30.5%
17.8%
9.0%
High School
Undergraduate Degree
Master's Degree
Professional Degree (CPA, JD, MD, etc.)
Ph.D.
0% 10% 20% 30% 40%
Education
62.6%
37.4%
Male
Female
0% 20% 40% 60% 80%
Gender
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Profile: Job Function
Profile: Job Title
Profile: Job Function
2.4%
7.0%
7.6%
7.9%
8.8%
11.1%
14.4%
20.1%
20.7%
Safety/Maintenance
Human Resources
Strategy/Corporate
Procurement/Purchasing
Quality Management/Compliance
Accounting/Finance
Sales/Marketing
Engineering/Operations/Project Management
IT/Digital/Information/Website
0% 5% 10% 15% 20% 25%
Profile: Job Title
6.8%
7.2%
6.8%
23.8%
51.0%
4.3%
President/CEO
Senior/Executive Vice President
Vice President
Director
Manager/Supervisor
Analyst
0% 10% 20% 30% 40% 50% 60%
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Profile: Company Revenue
Profile: Industry Sector/Type of Purchase
Profile: Company Revenue
23.3%
13.0%
16.9%
14.4%
13.4%
7.0%
6.0%
5.0%
1.1%
Over $1 Billion
$501 Million - $1 Billion
$101 Million - $500 Million
$51 Million - $100 Million
$21 Million - $50 Million
$11 Million - $20 Million
$6 Million - $10 Million
$1 Million - $5 Million
Less Than $1 Million
0% 5% 10% 15% 20% 25%
8.3%
19.3%
6.8%
25.4%
40.2%
Other
Non-Manufacturing Services (e.g., IT services, web design services, cleaning services, HR and legal services)
Manufacturing Services (e.g., CAD/CAM design, engineering services, logistics management)
Non-Manufacturing Supplies (e.g., packing, storage materials, office supplies)
Manufacturing Goods (e.g., capital goods, parts, goods for resale)
0% 10% 20% 30% 40% 50%
Profile: Industry Sector/Type of Purchase
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Caterina, AlexandraUndergraduate Student MaysBusinessSchoolTexasA&MUniversity
Chen, YixingDoctoral Student in Marketing MaysBusinessSchoolTexasA&MUniversity
Gibbs, SheaPresidentGibbsCommunications
Han, KyuhongDoctoral Student in Marketing JonesGraduateSchoolofBusiness,RiceUniversity
Im, BiwoongDoctoral Student in Marketing MaysBusinessSchoolTexasA&MUniversity
Lee, Ju-YeonAssistant Professor of Marketing CollegeofBusinessIowaStateUniversity
Mittal, VikasHugh Liedtke Professor of Marketing JonesGraduateSchoolofBusinessRiceUniversity
Sridhar, HariCenter for Executive Development Professor, and Associate Professor of Marketing MaysBusinessSchoolTexasA&MUniversity
Acknowledgements: The C-CUBES Team
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Kim,Hong-bumm,WooGonKim,andJeongA.An.“Theeffectofconsumer-basedbrandequityonfirms’financialperformance.”Journal of Consumer Marketing20,no.4(2003):335-351.
Gupta,Sunil,andValarieZeithaml.“Customermetricsandtheirimpactonfinancialperformance.”Marketing Science25,no.6(2006):718-739.
Schulze,Christian,BerndSkiera,andThorstenWiesel.“Linkingcustomerandfinancialmetrics to shareholder value: The leverage effect in customer-based valuation.”Journal of Marketing76,no.2(2012):17-32.
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Dillman, Don A. Mail and Internet surveys: The tailored design method--2007 Update with new Internet, visual, and mixed-mode guide. Hoboken,N.J.:JohnWiley&Sons,2011.
Chandrashekaran, Murali, Kristin Rotte, Stephen S. Tax, and Rajdeep Grewal.“Satisfaction strength and customer loyalty.” Journal of Marketing Research 44,no.1(2007):153-163.
Sorescu,Alina,andSorinM.Sorescu.“Customersatisfactionandlong-termstockreturns.”Journal of Marketing80,no.5(2016):110-115.
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Kumar,V.“Introduction:iscustomersatisfaction(ir)relevantasametric?”American Marketing Association,2016.
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