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.
A Typical Pareto Distribution For A Business-to-business Company
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.
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on Thursday, June 22nd, 2006 at 9:33 am and is filed under Articles, Industry News, Market Research, White Papers.
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