BTB Requires New Models, StrategiesWhile much of the Internet hype during the past 10 years has been on the business-to-consumer side, times are changing. Now business-to-business is all the rage, and many BTC players are ill-equipped to deal with and account for the specific challenges presented by the BTB process.
Business-to-business requires new models, methods and measurements from the BTC segment. Certain online players already recognize this reality, and many dot-com investors have swung clearly from the business-to-consumer camp to business-to-business start-ups prepared to fill the need.
What's driving the shift? According to new research from Gartner Group Inc., Stamford, CT, BTB e-commerce will continue its rapid pace of growth, generating $7.3 trillion in sales transactions worldwide in 2004, and that means big marketing and advertising bucks.
While many differences exist between the BTB and BTC categories, three factors within the buying process accentuate the variations. These differences should justify new BTB models and online marketing strategies, and reveal that BTC models just won't work as effectively.
Purchase collaboration. Unlike the consumer buying process in which one or two people are involved, the BTB purchasing process is usually done by committee, typically through interdepartmental buying teams.
Research from Penton Research Services, Cleveland, has determined these teams are usually comprised of four or five people at the professional or managerial level. As a result, marketing to a purchasing manager alone in many cases is not a productive strategy because the broader cast of corporate decision makers will not be reached.
Marketing and advertising to the BTB sector must penetrate more than the corporate level to be effective, ranging from CEO to purchasing manager to product engineer. Once marketers define and reach appropriate levels within a company, the work has only just begun. Messages must then speak to the individuals occupying those positions based on specific organizational self-interests.
In most cases, the BTC process is far less complicated. The fact that four or five people from various segments of a firm collaborate on a BTB purchasing decision requires a different mind-set and different methods for developing and initiating a marketing or advertising strategy.
Purchase time. The amount of time spent on a purchase within the BTB category tends to be much longer than that of the BTC buying process.
A study conducted by the Center for Advanced Purchasing Studies, Tempe, AZ, which looked at purchasing in the industrial, institutional, governmental and retail sectors, showed that the purchasing pattern within a BTB environment generally consists of several steps.
The report indicated that qualified sources are located and asked to make proposals, the "best" source is chosen, and terms and conditions of a contract are negotiated, and performance of the chosen supplier is monitored for conformance to the contract. In all sectors, supplier evaluations have been developed to aid in this process.
With this knowledge, BTB marketers and advertisers must consider that company executives move through different stages of a purchasing life cycle, which can last from a few weeks to a few months. The reaction to messages and information presented during separate stages of the life cycle also will vary.
In a BTC buying scenario, the life cycle is much shorter, and thus a direct marketing approach may work well. On the BTB side, a branding approach must also be considered in concert with the direct marketing method to account for the increased time spent on a purchase.
Purchase scale.Whereas BTC purchases are typically smaller in terms of dollar value, the stakes are much higher for BTB purchases.
According to a 1999 report by Activmedia Inc., Peterborough, NH, the value of BTB transactions is substantially higher than BTC transactions. An estimated 60 percent of BTC transactions were for $500 or less, with a third of consumer transactions worth less than $100.
In contrast, almost 50 percent of BTB transactions were worth at least $1,000, with a third worth between $500 and $100. Just one in 10 BTB transactions generated less than $100.
Additionally, the cost incurred by the purchasing process in the BTB market is also considered. The buyer in the BTC process, on the other hand, rarely considers this element as intensely.
A Lehigh University study that looked at reducing the transaction costs of purchasing found the average costs to process a complete purchase transaction for a material or service was $76.57 for low-value goods and services and $118.30 for high-value goods and services. Most organizations participating in the study (75 percent) defined low dollar purchases as some value of $1,000 or less.
Business-to-consumer models and metrics don't take the purchasing scale element into account and, as a result, can't accurately address the specific challenges presented by the BTB environment.
Business-to-business is just beginning to evolve on the Internet and so are the methods and metrics associated with the category. But while the BTB models are still being studied and enhanced, one thing is certain: It will take a new set of parameters and not a spinoff from the BTC models to effectively market to BTB customers.