collaborative for cubes 2017 b2b benchmark report · b2b managers. the study began in november...

COLLABORATIVE FOR CUBES™ 2017 B2B Benchmark Report

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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.

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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)



Verydissatisfied


Extremelysatisfied

Verysatisfied

Somewhatsatisfied


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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)



Verydissatisfied


Extremelysatisfied

Verysatisfied

Somewhatsatisfied


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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


Communication18%


Pricing & Billing - 10%

Sustainability & Social Responsibility – 8%

Project Management – 8%



Key Drivers - Manufacturing Services


Project Management19%

Sustainability & Social Responsibility 17%

Communication17%

Product/Service Quality - 11%

SafetySales & Bidding / Pricing & Billing

SafetyCCUBES Customer Score

Key Drivers - Non-Manufacturing Supplies



Communication13%

Pricing & Billing12%

Sustainability & Social Responsibility

Project Management



Key Drivers - Non-Manufacturing Services


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


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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






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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References & EndnotesMittal, Vikas, E.W. Anderson, A. Sayrak, and P. Tadikamalla. “Dual emphasis andthelong-termfinancialimpactofcustomersatisfaction.”Marketing Science,24(4)(2005):544-555.

Vorhies, Douglas W., Linda M. Orr, and Victoria D. Bush. “Improving customer-focused marketing capabilities and firm financial performance via marketingexploration and exploitation.” Journal of the Academy of Marketing Science 39,no.5(2011):736-756.

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.

Mittal,Vikas,andC.Frennea.“Customersatisfaction:astrategicreviewandguidelinesformanagers.”(2010).

Mittal,Vikas,“Thevoiceofthecustomer:auser’sguidetocustomersurveys.”(Feb-ruary 1, 2017). Available at SSRN: https://ssrn.com/abstract=2909989 or http://dx.doi.org/10.2139/ssrn.2909989.

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.

Anderson, Eugene W., Claes Fornell, and Sanal K. Mazvancheryl. “Customersatisfactionandshareholdervalue.”Journal of Marketing68,no.4(2004):172-185.

Aksoy, Lerzan, Bruce Cooil, Christopher Groening, Timothy L. Keiningham, andYalcin Atakan. “The long-term stock market valuation of customer satisfaction.”Journal of Marketing72,no.4(2008):105-122.

Kumar,V.“Introduction:iscustomersatisfaction(ir)relevantasametric?”American Marketing Association,2016.

“TheEBITDAConundrum.”http://www.ccubes.net/insights/briefs/

McElroy,William.“Implementingstrategicchangethroughprojects.” International Journal of Project Management14,no.6(1996):325-329.

Cater, Tomaž, and Barbara Cater. “Product and relationship quality influence oncustomercommitmentandloyalty inB2Bmanufacturingrelationships.” Industrial Marketing Management39,no.8(2010):1321-1333.

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