What B2B Can Learn From B2C
Strategy. You've got to have it.
As I discussed last month in “What B2B Marketers Can Teach Their B2C Counterparts” our company uses an automated analytic engine that delivers a series of charts showing customer behavior and company performance. In particular, the charts for B2B companies are very different than those from B2C companies.
When we first saw the different marketing patterns our analytic engine revealed, we realized that each type of business had strengths the other could use. Last month's column described the B2B strengths B2C firms could adopt. This month we look at areas where B2B business could improve their marketing results by adopting practices common in B2C companies.
A company's revenue comes from two different populations: existing customers and new customers. The balance between these two sources reveals a lot about how a company uses its marketing resources. Figure 1 below, shows the distribution for a highly seasonal B2C e-commerce company; Figure 2 shows the revenue split for a B2B supplies distributor.
Click on the chart below to enlarge
| Figure 1. B2C e-commerce company
|| Figure 2. B2B Distributor
In each chart, the blue line tracks total revenue, the red line shows revenue from existing customers, and the green line indicates revenue from newly acquired customers. The e-commerce company gets most of its revenue from new customers while the distributor relies on its existing customers for repeat sales.
The e-commerce company chart shown in Figure 1 is unfortunately all too common—many one time buyers, fewer repeat purchases. The Internet is a fierce commoditizer driving purchase on price, and unless companies like this continue to aggressively add new customers, they will fail. We describe such companies as “addicted to acquisition”; they're like sharks that must keep swimming to survive.
The distributor, by contrast, is much more stable, but struggles with a different problem. Sales are almost entirely driven by revenue from existing customers; revenue from newly acquired customers (green line) is small and steady. The blue line is increasing because the red line is increasing. This is a company that can learn from B2C practices.
Our observation is that B2C companies have more aggressive acquisition campaigns. Maybe that's because they feel it's needed. Maybe they feel more pressure to compete for the consumer's trade. Whatever the motivation, here are some practices for B2B to emulate:
- More outreach. Too often, B2B companies wait for the customer to come to them.
- Message like you mean it. Just because it's business communications doesn't mean it has to be dull. Creative communications work better.
- Improve the onboarding experience. A purchaser isn't really a customer until they make a second purchase. Since a larger initial sale is a good predictor of a repeat purchase, use your product affinities table to offer other products to add to that first order. (A product affinities table shows which products drive sales of other products.)
B2C companies work harder at cross-sell. However theB2B cross-sell opportunity is usually large and largely under-exploited, especially for companies with large numbers of products. B2B companies know who their customers are (the customers are less likely to plunk cash on a counter and walk away) and they have a rich trove of transaction data.
Despite this wealth of data, not many B2B companies build a product affinities table to see what products drive sales of other products. They don't spend time arranging displays of products that go together, and they don't run cross-sell campaigns based on that transaction data. Their mode of operating is to wait for the customer to come in and place and order. A more cross-sell oriented B2C retailer would advocate these tactics:
- Build your product affinities table using all that good data, then use it to find the cross-sell patterns among your customers.
- Use customer-level analytics to make customer-specific cross-sell offers to your existing customers. Cross-sell requires intimate knowledge of a customer's purchase propensities and the ability to make individualized, relevant offers; spray-and-pray campaigns, where every customer receives the same communication, won't work.
B2C companies are much more likely to have a bigger customer-centric component to their marketing mix, using customer demographics and purchasing patterns. Demographics are not important to B2B companies; their customers are businesses, not people and they tend to treat all their customers alike, focusing more on the products they sell than the customers who buy the products.
But not all customers are alike, and recognizing those differences is just as important for B2B businesses. A good B2C marketer relies on segmentation for different messaging, different discounts, and different communication cadences. Their lesson for B2B counterparts would likely include these tactics:
- Create segments based on your customers' transactional behavior
- Use segments for differentiated messages; don't leave money on the table by offering loyal customers the same enticements given to customers you're trying to win back into the active population
- Track customer migration patterns between segments and use triggered marketing programs to catch a customer with a growing probability of defection
- Implement a one-time buyer program to get a second sale from one-time customers. Even though B2B businesses typically have many fewer of this type of customer, they are still a substantial drain on profits when acquisition costs exceed the gross margin on the first purchase.
Different types of customers, different market pressures, and in some cases different kinds of product sets have all contributed to the differences between B2B and B2C companies. But at the end of the day, marketing is still marketing and each can learn from the good practices of their counterparts.