What makes a great B2B product
Successful B2B marketing: an independent discipline or just an appendage?
What is B2B Marketing? What are business-to-business markets?
While a few years ago people were still talking about capital goods and consumer goods marketing, the terms business-to-business (B2B or B-to-B) and business-to-consumer (B2C or B-to-C ) established next to it. Basically, B2B is about the relationship between companies, while B2C is the relationship between companies and end users. Communication to the end consumer is present on all sides - we are constantly confronted with it on TV, on the radio, in the print media or on billboards - but one should not underestimate the size and importance of B2B marketing: In terms of sales, the B2B market is about three times the size of the B2C market.
Specifically, the B2B market deals with the trade in plants, systems, products, intermediate products, services and intangible objects between companies.
What exactly is the difference between B2B marketing and B2C marketing?
1. B2B products are often more complex
Products and services in B2B are often many times more complex than end-user products. It is not uncommon for them to be individually adapted developments for a special customer or purpose, such as a refinery system or merchandise management software. Understanding the entire value chain is important for those involved in the market. While consumer goods are always at the end of this chain, B2B products can be located at very different levels of that chain: B2B products can be raw materials or tools or ingredients or semi-finished products or, of course, professional services.
The B2B decision maker always has to keep an eye on the context and the need for integration into larger systems. When deciding on a specific drive for production, for example an industrial steam turbine, safety, productivity and technical aspects must be taken into account, which were completely different when choosing an electric drive.
The B2B marketeer as well as the B2B researcher must know and take into account this complexity and the various levels of integration.
2. More complex decision-making structures prevail in B2B markets
Although we also know what are known as planned purchases in the consumer goods market, the planning phases are manageable in terms of effort and time. In B2B, on the other hand, it often takes several months or even years to prepare a large deal and very large amounts of data are used to make decisions. Impulse purchases, as they are often made by consumers, cannot be completely ruled out in B2B, but they do not play a major role overall.
This is related to another difference between the two markets: the number and composition of decision-makers. When buying a car, an end user may involve his partner, but the circle of decision-makers is usually limited to a few people. In contrast, in B2B a larger number of decision-makers - often a team or a Decision Making Unit (DMU) - deal with the acquisitions. This is where the knowledge and motives of several experts come together, who together ensure the best selection. Purchasing decisions in B2B can be enough:
- of low risk / low value (routine shopping, here related to B2C)
- via low risk / high value (e.g. raw materials, often externally financed)
- low value / high risk (so-called "bottleneck items", for example a certain valve in a chemical plant)
- up to high value / high risk (mostly strategic investments, e.g. an entire industrial plant)
The Risk-Value Purchasing Decision Matrix in B2B
B2B marketing should know the allocation of products from the buyer's point of view and take this into account when designing communication.
3. The “rational” buyer
A “myth” has to be debunked here: the myth that B2B buyers always act and make rational decisions.
In consumer research, the realization that the so-called “homo oeconomicus” does not exist, but that unconscious processes and emotions always have a large share in all decisions. It is different in b2b: on the basis of the company's specifications (e.g. budget) or structured processes (e.g. tender) and the distribution of the decision among several participants (DMU), the process should be organized and thus rationalized as much as possible become. But there are also influences by third parties here, too, arithmetic tasks are not always solved with a high degree of accuracy, and here too there are habitualized behaviors. That means: behavioral economics also applies in B2B and decision-makers do not act exclusively rationally.
This indicates the importance of branding for B2B brands. A brand that evokes emotions will be more successful in the long term than a brand that communicates solely through rational factors such as functionality, price, adherence to deadlines or longevity.
The B2B marketer must understand his brand in this emotional dimension and manage it accordingly. The B2B market researcher, like the B2C colleague, should master the qualitative tools to explore the worlds of emotions.
4. Demand structure and customer relationship
In contrast to B2C, the number of potential customers in B2B markets is usually manageable and can also be identified with appropriate secondary research. While the consumer mostly remains anonymous for the brand manufacturer, in B2B the names of the customers and often even those of the decision-makers are well known. Accordingly, the personal customer relationship is of a different, greater importance than in B2C.
The reward for personal sales work is often long-term customer relationships (customer loyalty). In addition, the proportion of so-called after-markets is much higher, which of course stabilizes the customer relationship (it should not go unmentioned, however, that these models are also found in business with consumers, coffee capsule machines are mentioned as an example).
In almost all business-to-business markets, customer distribution follows the Pareto or 80:20 principle.
A Typical Pareto Distribution
Not infrequently - even in very large companies - 100 or even fewer customers decide on the annual result.
There is no question that the B2B marketer has to develop a special feel for the target group (s) and act in close coordination with the key account management.
5. Customer segmentation in B2B markets is usually less complex
Our experience from more than 2,000 business-to-business studies shows that B2B markets usually have a smaller number of behavior-based and needs-oriented segments than is the case in B2C markets. If you think of the number of possible constitutions of a consumer in the course of a day, as well as the totality of his needs on that very day and multiply this by the number of consumers in a market, it becomes clear why in some product groups up to 10, 12 or even more needs-oriented segments can be found (examples are confectionery or tea).
The behavior of a B2B buyer is more targeted and determined by his task and less by a current personal need. Correspondingly, fewer segments emerge in a B2B study. Usually we find 3 or 4 clusters that indicate different needs. Examples are:
- a price-oriented segment
- a segment oriented towards quality and brand
- a service-focused segment
- a segment geared towards partnership
A needs-based segmentation helps those responsible for marketing when designing communication. But sales can also benefit from this and address customers more efficiently.
6. Sub-brands are less effective in B2B marketing
Time and again we notice that there is an underestimated and underutilized opportunity in B2B marketing in brand building. In a world in which differentiation is becoming more and more difficult, it is all the more important to position the brand in such a way that it stands out from the competition.
The importance of the brand as a criterion in the B2B purchasing decision is said to have grown in the last 10 years (one speaks of 5% in B2B, while the brand has an importance of 30-40% depending on the category in the consumer decision).
With the desire to establish a brand strategy, B2B companies have also started to create brand families and offer numerous sub-brands under one umbrella brand. In consumer marketing, this strategy is designed in order to be able to serve different target groups with different needs and wishes under a uniform brand umbrella.
In B2B, however, the target groups are less complex, they are also smaller and - in addition to the influence of the brand - can also be addressed by cultivating relationships. Since they are also usually better informed, confusing product families with numerous sub-brands are often perceived as pointless, confusing, if not even annoying.
The B2B marketeer should ensure that the branding strategy has been carefully reviewed with regard to its effect on the target group. “Less is more” fits here as a guiding principle: it is better to have a strong, coherent brand with which customers, stakeholders and employees can identify, than a confusing breakdown into sub-brands.
Market research in B2B markets
In B2B as well as in consumer business, the following applies: only those who know and understand their customers and their needs exactly (and develop products that meet these needs) will have truly sustainable success. B2B market research has therefore established itself as a constant in international marketing in recent years. The questions are often similar to those in consumer research:
- What customer needs are there (needs assessment)?
- What does the decision tree look like?
- How satisfied are my customers (customer satisfaction studies)? How loyal are you (customer loyalty studies)?
- How can I achieve more customer satisfaction (customer journey mapping, touch point analysis)?
- How is my brand perceived (branding studies) and where should I develop it (proposition development)?
- How is my brand perceived compared to competitive brands?
- What price are customers willing to pay (pricing research)?
- What unused potential is still lying dormant in the market (market assessment)?
- What content and messages should be communicated in order to achieve the greatest possible impact (advertising research, advertising effectiveness)?
The difference to consumer market research lies more in the range of methods.
- Secondary research (desk research) plays a much larger role.
- The target group is sometimes difficult to define (and should by no means only be defined on the basis of the job title)
- Even if it is clearly outlined, in many cases it is more difficult to access (it is not uncommon to overcome a gatekeeper first)
These significant differences between B2C and B2B market research make it clear that companies should choose institutes that specialize in B2B research as partners. Experience in addressing difficult target groups, B2B-experienced, motivated and fluent interviewers as well as state-of-the-art know-how in relation to desk research are three important credentials that a B2B research institute must have. Since many B2B projects have a strategic orientation, a B2B specialist should not only have a perfect command of the research side, but also be well versed in strategic consulting. The mastery and application of strategic frameworks, such as For example, the Porter's Five Forces Analysis, the Directional Policy Matrix or the PESTLE Analysis should belong to the tools of the institute and its employees.
The B2B buyer, this generalization may be permitted, is more demanding than a consumer when it comes to shop-to-order. He is responsible for the correctness of his purchasing decisions vis-à-vis the company and therefore seeks the greatest possible information and security in his decisions.
The advantage for the B2B marketer is that the purchasing behavior of his customers is more predictable than is the case with consumers.
This "prediction" or assessment is made on the basis of business intelligence gained from primary and secondary research. The better these are researched, the better customer needs can be met.
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