« Business To Business Marketing – Part 2 of 3 White Paper on Forecasting and Scenario Planning – Podcast Audio Version »Business To Business Marketing – Part 3 of 3 THE LIMITED NUMBER OF BUYING UNITS Almost all business-to-business markets exhibit a customer distribution that confirms the Pareto Principle or 80:20 rule. A small number of customers dominate the sales ledger. Nor are we talking thousands and millions of customers. It is not unusual, even in the largest business-to-business companies, to have 100 or less customers that really make a difference to sales.
Because such small numbers of customers dominate the lives of businesses, database management is a crucial part of business-to-business marketing. Customer relationship management systems (CRM) now allow databases to be kept up-to-date with personal details of members of the DMU together with every transactional and contact record. There is also a matter of scale. In consumer markets there are reasonable limits to the amount that a single person can buy and use of any product. Certainly there are heavy users of all consumer products but the difference between the light user and the heavy user is a matter of small degree compared with the scale of differences in business-to-business markets. You can fit most buyers of consumer products into a “typical spend per month� with a few heavy spenders and a few light spenders at the extremes. The range of spend between the largest and smallest buyer in a business-to-business universe is likely to be much much larger than the range of spend between the largest and smallest buyers in consumer markets. Small numbers of customers of widely different sizes is a major distinguishing feature of business-to-business markets and this requires a completely different marketing approach to that required for consumer markets. THE IMPORTANCE OF PERSONAL RELATIONSHIPS The fourth distinguishing feature of business-to-business markets is the importance of the personal relationship. A small customer base that buys regularly from the business-to-business supplier is relatively easy to talk to. Sales and technical representatives visit the customers. People are on first name terms. Personal relationships and trust develops. It is not unusual for a business-to-business supplier to have customers that have been loyal and committed for many years. The consequences of this for marketing budgets are a relatively high spend on people (sales and technical support) and a more modest expenditure on other forms of promotion. Advertising budgets for business marketers are usually measured in thousands of euros and not millions. THERE IS A DIFFERENCE The differences between business-to-business markets and consumer markets that have been outlined in this paper are clearly considerable. So, what does this mean to the business-to-business marketer? Small customer numbers, complex decision making units and complex products and applications throw the emphasis on close targeting and personal relationships. Consumer marketers face the challenge of communicating with a much wider customer base and ensuring that their products or services are in perfect condition at the point of sale.
The common challenge for both business-to-business and consumer marketers is to truly understand their customer needs and to be able to communicate that their products or services really are special in being able to satisfy them. There is usually substantial room for improvement in both respects. However, the most neglected marketing opportunity in the business-to-business arena is the building of a strong brand. In a world where it is becoming increasingly difficult to distinguish one product from another, it is even more important to have the support of a powerful brand. It is difficult to measure the precise contribution of a company’s brand to the buying decision. However, those who have made estimates suggest that in industrial and business-to-business markets, the brand plays less than a 5% role in influencing the buying decision compared with a 30%+ role for consumer products. The opportunities for business-to-business companies to develop their brands to play a more important role in supporting their products and services are the subject of another white paper from B2B International Ltd. This entry was posted on Monday, February 13th, 2006 at 9:31 am and is filed under Articles, Market Research, White Papers. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed. Leave a Reply |
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