Toward Healthier B2B Relationships

A new way to reduce customer churn and even expand the connection

by

and

Vijay Mehrotra

by

and

Vijay Mehrotra

From the Magazine (July–August 2024) · Long read

Rose Wong

Summary.

Today’s software makes it easier to track patterns, trends, and even granular details of how customers use products. This data is collected in systems that support marketing, sales, finance, and operations. But many companies aren’t sure how they can best support employees who are overseeing hundreds of unique relationships. They’re grappling with how to manage and use all their data to improve customer retention. And they’re wondering how they can assess the health of their customer relationships before it’s too late.

One solution is the use of customer‑health scores. In this article the authors introduce a model that any B2B company can use to measure and improve customer health. They identify three dimensions of customer health—customer-relationship quality, product usage, and value realization—and offer advice on how to measure and weigh relevant metrics.

The authors then take an in-depth look at how BigCommerce, an e-commerce platform, developed and refined its customer-health model. They share five lessons the company learned through the process, including how to identify the relationship between health and churn, and that a flywheel effect occurs as health scoring matures.

Idea in Brief

The Problem

For B2B companies, low customer-retention rates can quickly lead to poor financial performance and negative word of mouth.

The Reason

Because up-front investment costs are low for customers, those who fail to capture the benefits promised to them during the sales process find it easy to terminate their relationship with sellers.

The Solution

By integrating a wide range of data sources, firms can develop a comprehensive view of the health of their customer relationships. Using customer-health scoring leads to better predictions of customer action, be it churn or expansion.

The costs associated with developing B2B products and acquiring customers are substantial. In fact, they are often significantly higher than the first year’s revenue produced by selling the product. But it’s relatively easy for customers, whose up-front investment costs are low, to terminate a relationship with the seller if they don’t quickly capture the benefits promised to them during the sales process. Low customer-retention rates can soon lead to poor financial performance and negative word of mouth. That’s why it’s important for companies to understand—and care for—the health of their customer relationships.

A version of this article appeared in the July–August 2024 issue of Harvard Business Review.

BH

Bryan Hochstein is an associate professor of marketing at the University of Alabama.
CV

Clay Voorhees is a professor and the Morris Mayer Endowed Chair of Teaching Excellence in Marketing at the University of Alabama.
RJ

Ross Johnson is an assistant professor of marketing at the University of North Texas.
NM

Neal McCoy is the vice president of customer success and professional services at BigCommerce.
VM

Vijay Mehrotra is a professor of business analytics at the University of San Francisco.

New!

HBR Learning

Customer Focus Course

Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Customer Focus. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.

Learn how to keep your customers—and their most important needs—front and center.

Start Course

Learn More & See All Courses

Toward Healthier B2B Relationships

Idea in Brief

The Problem

The Reason

The Solution

Partner Center

Explore HBR

HBR Store

About HBR

Manage My Account

Follow HBR