What should business-to-business marketers anticipate in the future? According to a panel of observers, they will face increasingly complex channel options, heightened price competition, declining response rates, a shrinking U.S.-based manufacturing sector and the encroachment of traditionally consumer-focused firms into the B-to-B space, according to for industry prognosticators.
It’s enough to make one get out of the business. But there are some trends that will offset this, such as the heightened role women play in the B-to-B sales process, a rise in analytics use and attention paid to high-value targets.
A panel at the Direct to Business conference identified eight trends B-to-B marketers should heed. For instance, the ever-widening variety of channel options available to marketers – which also necessitates that each channel be recognized and used, lest customers be lost.
“Direct marketing was easier 20 years ago, said Terence Jukes, CEO of B2B DMI Inc. “The phone rank you took the order and the stuff went out.” But the channel explosion of the last few years has made it difficult for companies with revenue under around $25 million to track, fulfill and analyze all of its communication options.
And companies that are tracking them aren’t necessarily doing a good job. Jukes listed commonly used marketing options – including catalogs, solo mail, field sales, print advertising, e-mail and live chat – and suggested that most marketers aren’t doing a good job of analyzing how companies’ revenue mixes have changed in the last few years. As a result, their expenditures within various media may be out of line with their return. Analyzing the total sales mix isn’t enough, either: Firms should further get a handle on how their new customers are reaching them. If new buyers are generated through search engine optimization, landing sites or viral marketing, for example, these options should weigh more heavily in future media mix than their current revenue contributions might indicate. Even so, marketers should brace for either lower revenue or higher expenditures as response rates continue to decline, said Tracey Carpentier, vice president and general manager of Seton identification. Response rates have been slipping during the past four or five years, although this could partly be due to channel dilution as targets contacted through one medium respond through another.
But that’s only part of the answer, Carpentier said. Overall response rates, even with some orders not being directly linked to campaigns, have been falling. For this reason retention marketing, especially efforts focusing on high-value customers, will become increasingly important. Carpentier recommended determining loyalty drivers – which can include flawless service, easy transactions, knowledgeable and friendly employees, having the right product mix and relying on telesales for customers with unrealized potential.
She also suggested spending time with customers, and the employees who work with them every day. Surveying lost customers can offer insight into business failings. “We say it’s because of the product mix, but it is usually due to a bad experience,” said Carpentier. Knowing what caused their defection can also alert B-to-B marketers to behavior among current customers that indicates defection – and allows marketers to put retention efforts into place.
Doug Hershey, executive vice president of New Pig, an industrial leak and spill firm, noted that clients have been consolidating the vendors they do business with. For high-end boutique B-to-B suppliers, this may mean being dropped from list of preferred vendors as firms look for companies with wider spectrums of offerings.
To counter this, firms should first understand what drives such behavior. Usually clients will consolidate their vendors to realize cost savings, by cutting down on the number of firms submitting invoices to their accounts payable department, or paying an employee to track five preferred vendors as opposed to 40. New Pig, which has yet to meet a porcine pun it didn’t like, sends all of its customers a “repork” card that details the orders it has fulfilled on time, the service opportunities the client took advantage of, the new products New Pig introduced and the money clients saved by working with New Pig.
“It’s a reminder that we do take care of our customers,” Hershey said.
Hershey noted that the vendor consolidation trend went hand-in-hand with competitive pricing pressure. The Web has brought about a boom in comparison shopping, and reverse auctions, in which a company puts out a list of needs and allows a few vendors to make live bids that undercut each other, have taken root.
“Those things are killers,” Hershey said, adding that New Pig no longer participates in them. “It’s not the way we do business. To sit there watching our price drop is painful.”
Instead, New Pig touts the quality of its industrial supplies, and if a client presses for cost savings will steer it toward either less expensive merchandise, provided it meets the clients’ needs.
As it happens, industrial suppliers are chasing fewer buyers as the domestic manufacturing industry has lost jobs and plants during the past three years. In response, New Pig is fighting to increase the share of supplies it offers to existing customers – on-site visits help recognize products a company is using, yet not purchasing from New Pig – aggressively cutting costs, such as catalog size.
It has also made a commitment to finding new markets. Some of its products are appropriate for sporting and outdoors enthusiasts, and New Pig has been working with Cabelas sporting goods to put its products on Cabelas’ shelves.
For all this defensive posturing, there are still some new opportunities. Women are increasingly represented among B-to-B supply purchasers, a trend noted by pundits as diverse as Tom Peters (“This ‘women’s thing’ is unmistakably in my opinion economic opportunity number one”) and Martha Barletta (“Women are the world’s most powerful consumers. They are the big spenders, whether you are talking about households, corporate purchasing or small businesses.”)
According to Keith Grabow, vice president of marketing at NEBS, the total number of women-owned businesses is 10.1 million. Between 1997 and 2002 their revenue increased by 40%, compared with 7% for the entire business world, and their staff levels jumped by 30%, compared with 8% overall.
Most strikingly, within all corporations, women hold 53% of all purchasing manager or agent positions.
The trick, therefore, is knowing how to approach them. Grabow characterized the differences in the way they show, saying:
+ Men want facts and figures to be the primary drivers of their purchase decisions, and women ask many people for input
+ Men go into a transaction knowing what they want. They listen to a pitch, and then complete the deal, while women seek more information, investigate more options and take longer to keep the transaction
+ Men are interested in closing a transaction, and women want to establish a relationship
+ Men look for a good solution to their needs, and women peruse the “perfect answer”
NEBS, which Grabow admits has traditionally been very male-oriented, has begun to incorporate these tenets into its marketing.
For instance, the office supplies firm has repositioned its catalog from a reference tool to a sales-oriented tool. It has incorporated copy with more of a marketing pitch into its pages, and labeled products “good,” “better” and “best” for comparative purposes. It has also begun incorporating customer testimonials, and is exploring how it can capitalize on word of mouth advertising, which Grabow feels is powerful for both the small business and female audience.
The next trend Grabow cited was that marketers would increasingly focus on high-value customers.
“The rules are simple: Stop wasting resources on activities and customers that do not add value to your company,” he said.
Grabow called on marketers to use analytics to determine not just current high-value customers, but through long-time value calculation and profit contribution, those that will continue to be important for years to come. At NEBS, top customers are profiled with value calculations that stretch seven years into the future.
The final B-to-B prediction was that consumer firms would increasingly take root in the B-to-B market, primarily through the corporate premiums and incentives field. “Lands’ End, Lillian Vernon and Omaha Steaks: These are larger, more sophisticated business to consumer companies with enhanced databases and modeling talent,” Grabow said. “We will have to compete with them [for corporate dollars].”
But Grabow also noted that these new entrants provided both new sources of lists and additional joint marketing opportunities.
The four panelists presented their views during a session at the DMA’s Direct to Business Conference in Lake Buena Vista, Florida. The conference ended Wednesday.
