What B2B Marketers Can Teach Their B2C Counterparts
What B2B Marketers Can Teach Their B2C Counterparts
In The American President, starring Michael Douglas and Annette Benning, Douglas plays a widowed American President wooing a lobbyist played by Benning. He unsuccessfully keeps trying to buy her flowers, but is continually tripped up by the trappings of power, until he finally shows up with a bouquet of roses. “Where did you get these?” she asks. “I remembered I have a rose garden,” he answers.
When I was preparing this column I was thinking about using sometimes overlooked resources (like the rose garden) and remembered that I have an automated analytic engine, or at least my company does. In the output from this engine is 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. The differences expose characteristics of each type of business and those characteristics offer lessons on how to improve business performance. This month's column is about two of those lessons, specifically on what B2B can teach B2C. Next month I'll address the flip side: what B2C can teach B2B.
Lesson 1. Solve the one-time buyer problem
One of the most striking differences between B2B and B2C companies is the size of their one-time buyer populations. Our data show that for all types of companies, on average, 45% of active customers are one-time buyers. Since the gross margin on the first purchase is rarely enough to cover the cost of acquisition, having so many one-time buyers can be a huge drain on profits.
This is a tough problem to solve because the data associated with a single purchase can be insufficient to allow statistics to make an accurate prediction of likely next purchase, and thus insufficient to make an attractive offer to get the crucial second sale.
The B2B problem is smaller for three reasons. First, B2B companies almost always know who their customer is and can more easily reconnect. Second, a B2B purchase is less likely to be frivolous or random so product affinities count. The type of the first purchase is a better predictor of the type of the next purchase, leading to more effective second sale offers.
Finally, B2B businesses are more aware of customers' business and purchase cycles. They are better able to determine when to send their offer for the next sale. Thus B2B companies know who to pitch, what to offer, and when to reach out.
However, the B2C situation is far from hopeless, and B2C companies can learn much from B2B practice. Here are our top recommendations:
- Make an extra effort to connect with the customer on the first sale.
Use inducements if necessary to capture customer information. Use discounts to get other products into the shopping cart; breadth of purchase on the initial sale not only captures more data, it invariably is a driver of repeat purchases.
- Use product affinities.
It's rare that we encounter a B2C company that has actually built a product affinities table and that knows, quantitatively, which products drive sales of other products. Knowing what to offer to each customer is crucial to winning the second sale.
- Determine the best time to make your best offer.
Too often, right after customers makes their first purchase they are bombarded with a deluge of follow-on pitches. Yes, have a well-designed on-boarding process, and yes, treat them as active, valued customers. But use data from customers who make multiple purchases to know the time window in which to make a powerful offer to recapture their business.
Adopting these practices can enable a B2C company to substantially reduce their one-time buyer population and convert those customers into repeat buyers.
Lesson 2. Raise customer retention to B2B levels
Retention rates for B2B companies are usually in the 70 to 80% range, significantly higher than the 30 to 50% typical of B2C companies. The oft-cited reason for the low B2C rates is the Internet, where price competition has turned most products into commodities and competitors are everywhere.
There are some good reasons why B2B retention is greater. First, there is more likely to be a relationship built between the customer and the B2B sales and support organizations, and B2B customers often value that relationship as much as the product itself. B2B salespeople are more likely to know their customers and know when their buying pattern is off or when they have product needs. B2B customers tend to gravitate to dependable suppliers.
Another reason for better retention rates is that there is often a continuing need for the products purchased, especially in industry niches like distribution. Also, purchases are driven more by business needs than by personal whim. They are less frivolous.
Here are some ways B2C companies can emulate B2B practices to improve retention:
- Build and value the customer relationship.
It's more than making the sale. Service, support, staff attitudes, and staff training all count.
- Discover your customers' product needs.
Use customer analytics to uncover which products a customer has been buying and will likely buy again, and which products from your set they've never purchased but have some propensity to buy. This knowledge needs to be at the individual account level if it is to fuel your direct marketing.
- Run specific reactivation/winback and retention campaigns—they are different—that market to and address the individual needs of targeted customers in those categories. Attractive offers are usually necessary, but these campaigns increase retention.
B2C is different than B2B, but that shouldn't stop B2C companies from emulating B2B practices that can improve their business performance.