Many reports illustrate the growth rate of business-to-business marketing, especially in the direct marketing sector. The Direct Marketing Association predicts that in the near future, direct marketing sales and marketing expenditures for BTB will overtake the sales and expenditures of the business-to-consumer market segment. Consider that this growth has burgeoned during the past five years.
From 1980 to 1995, a core set of BTB direct marketers, such as New England Business Service, Viking, Quill, CareerTrack, Pitney Bowes, National Seminars and BTB trade publishers, have actively sold their goods, services and publications to other businesses through direct response marketing channels. But in the past five years a continuing stream of new products and services has entered the marketplace, through several new companies, directed at small, midsize and Fortune 1,000 businesses. For new entrants to the BTB marketplace, their business plans have called for the accumulation of market share, while the mandate for old-line BTB direct marketers has been to maintain and even increase their market share through the introduction of new products and services to their customer bases.
Just how important is the direct BTB model in today’s economy? Consider how relatively young retail BTB giants Office Depot, OfficeMax and Staples are. Adding to the importance of the growth of BTB direct marketing channels are their acquisitions of traditional BTB catalog companies (Office Depot purchased Viking, Staples purchased Quill and Boise Cascade purchased Reliable Corp.). Also, consider that in the recent growth explosion, the business models for many companies now in the BTB market sector have evolved into what they are today.
For example, many technology direct marketers, whether they were manufacturers or resellers, started with BTC models. They then realized their profit margins were razor-thin. By adopting a BTB model, the ability to increase profit margins, realize higher sales revenue per order and consistent repeat business became apparent. Dell Computer is an example.
Additionally, traditional business direct marketers such as NEBS sought to increase their product offerings through organic business development and acquisition. The goal was to position themselves as a business resource to their customer bases.
What do these shifts in business models tell us? It is possible to increase revenues from a smaller, yet more consistent, customer universe – one that provides for the hands-on application of customer relationship management to help fuel growth, but only to the degree that these organizations realize the expressed need and value of such a program.
The core of BTB direct marketing today is the need to use information and technology effectively to meet business and organizational goals. With a growing number of marketing channels, including the Internet, this core need brings to the forefront the ability to continually develop, maintain and functionally use a comprehensive customer database, or data warehouse, that will allow marketers to maintain and use data elements associated with a broad range of products and services, across a core brand or multiple brands.
Out of this database, BTB direct marketers enhance their ability to focus on customer retention, customer acquisition, cross-selling products and services and developing new products and services. This is an imperative mandate, given that the customer universe for BTB marketers pales in comparison with the universe available for BTC marketers.
BTB direct marketers have been at the forefront of developing new database techniques to assist in customer retention. The ability to capture and manipulate customer data has become a necessity. For example, in the past BTB marketers’ customer records simply captured the name of the company and perhaps the products purchased. Today these marketers have realized that while they are selling their goods and services to businesses, they have to personalize the process and capture additional information.
Capturing a contact name is of high importance, as are other data elements such as SIC Code, the number of employees, products purchased and, specifically, ordering schedules of their customers. By building a comprehensive customer database BTB marketers can now develop an in-depth customer model, something they have been previously unable to do. From the model comes the ability to ascertain and use valuable data to assist them in their customer retention and acquisition efforts. “Lifetime customer value” then emerges as a basic marketing principle.
New customer acquisition efforts also have taken on a new look. In the past few years we have seen the continued introduction and development of private prospecting databases as well as cooperative databases. These new customer acquisition database programs, which are usually built on a quarterly basis, enable BTB marketers to mail more efficiently – most notably on a net-net basis – and with a higher degree of precision, based on the selection criteria built into the database. Marketers then are able to reach business professionals able to make purchasing decisions for the products and services they have to offer. But perhaps most important is the ability for BTB marketers to reach their prospect audience in a cost-efficient and precise manner.
With the continued growth of the Internet, many BTB direct marketers have increased their sales with the effective use of a well-developed e-business model through this new marketing channel. But it also has brought many new start-ups
to the marketplace. Most prominent have been BTB portals such as Onvia.com and BizBuyer.com that function as online marketplaces offering a broad range of business products and services through a growing network of vendors. This has brought a new channel through which established BTB marketers can incrementally increase their revenues and reach new customers. The success and longevity of the marketplaces have yet to be determined as they fight for their existence and try to develop brand equity in an ever-changing marketplace.
Just as new marketing channels have developed and evolved in the marketplace, the number of marketing services and advertising firms catering to the unique needs of BTB marketers has consistently risen. With high-dollar sales at stake, a smaller customer universe and the need to precisely target new customer acquisition efforts, these marketing and advertising firms have seen their revenues grow as well.
• Herb Torgersen is vice president of management services at Response Media Products Inc., Atlanta.