Do
you really understand how your business customers buy?
B2B
purchasing decisions increasingly trace complex journeys, challenging the
long-standing practices of many sales organizations.
The CEO of a major
supplier to the telecom
industry was frustrated. An initiative to increase sales volumes and shift the
company’s product mix to higher-value components was stalling, and not for lack
of effort. With support from a marketing campaign that emphasized a slew of new
product features, frontline sales managers had stepped up calls to their
purchasing contacts at OEM customers. Yet they reported that buyers weren’t
buying. Impediments appeared to include tough new requirements from chief
purchasing officers, negative chatter on social media about postsales support,
and skeptical questions on a product-rating site about an offering’s fully
loaded costs.
Welcome to the new dynamics of B2B sales.
Decision-making authority for purchases is slipping away from individuals in
familiar roles—often those with whom B2B sales teams have long-standing
relationships. Just as the digital revolution has transformed once-predictable
consumer purchasing paths into a more circular pattern of touch points, so too
business-to-business selling has become less linear as customers research,
evaluate, select, and share experiences about products. More people within
(and, thanks to digital engagement, even outside) the organization are playing
pivotal roles in sizing up offerings, so the path to closing sales has become
more complicated.
·
Pop out
The best response is to embrace the new
environment. Sellers who are ready to meet customers at different points on
their journeys will exploit digital tools more fully, allocate sales and
marketing resources more successfully, and stimulate collaboration between
these two functions, thereby helping to win over reluctant buyers. Our
experience with upward of 100 B2B sales organizations suggests that while the
change required is significant, so are the benefits: an up to 20 percent
increase in customer leads, 10 percent growth in first-time customers, and a
speedup of as much as 20 percent in the time that elapses between qualifying a
lead and closing a deal.
The consumerization of business buying
Marketers have long
drawn a bright line between consumer shoppers and business purchasers.
Consumers, after all, care deeply about brands and are more readily influenced
by advertising, media messages, special deals, and coupons. In addition, they
often turn to friends and family for advice on what they are buying, are
susceptible to impulse shopping, and can switch from one brand to the next with
little cost.1 Business purchasers, by contrast, do a
lot of research, look carefully at specifications, follow a formal buying or
procurement process, can experience high switching costs, and usually worry
most about functionality.
Yet an explosion of communication vehicles and
interaction channels has ratcheted up the expectations of business purchasers.
Many more influencers and decision makers are now involved in the purchasing
process, and business buyers too have been shaped by their consumer shopping
experience. As a result, their behavior has become more consumer-like. There is
no longer such a thing as a simple cold call: customers expect a sales rep to
be extremely knowledgeable about their business and perhaps even their own
individual profile—at least if the purchaser is a millennial who has grown up
sharing his or her life online. In other respects, as well, the purchasing
process is becoming more fluid.
More social. Business customers are exposed to the
same dynamics of peer-to-peer networks and opinions that influence individual
consumers. The equivalent of Facebook’s “like” button also applies to B2B
sales. Many of the one-to-one relationships with key decision makers that sales
executives historically relied on to close sales are shifting to one-to-many
relationships. Moreover, the actions of important influencers (including senior
executives) in the purchasing process are often less visible to suppliers.
Customers may be “liking” or “not liking” a prospective offer long before the
sales rep has even presented it. For example, an expert blogger with a wide
following among, say, electrical engineers can shift perceptions of which
supplier has the best next-generation networking equipment. Or a speaker at a trade
show—her message amplified by her listeners through digital channels—may have
an outsized impact on a CEO’s perceptions of market trends and their
implications for different B2B suppliers.
More real-time. Flows of digital information have
further democratized business procurement. Our research indicates nearly 50
percent of all B2B purchases will be made on digital platforms by the end of
2015, and expenditures for B2B digital advertising are expected to double by
2018. Empowered purchasers increasingly demand real-time digital interactions
supported by tools such as product configurators and price calculators. And
they are doing all this while texting, e-mailing, and talking regularly with
on-the-ground sales teams, distributors, behind-the-scenes inside sales groups,
customer-service call centers, and technical reps. Our research shows that, on
average, a B2B customer will regularly use six different interaction channels
throughout the decision journey, and almost 65 percent will come away from it
frustrated by inconsistent experiences.
More modular. The game also is changing for closing
deals with requests for proposals (RFPs). At one company, operations executives
were looking to improve process efficiencies and assure better after-sales
service. To increase their options, they overrode the purchasing department by
requiring six rather than three bids for a product. They also demanded modular
RFPs, so cross-functional teams could examine an offer’s details, such as
service and financing. With so many gateways of influence, our research not
surprisingly shows, two-thirds of B2B deals are lost before a formal RFP
process even begins.
Beyond the sales funnel
These dynamics are undermining the traditional
sales approach of pushing products to customers along a linear funnel
comprising lead generation, lead qualification, proposal, negotiation, and
close. In that world, funnel metrics kept track of what the sales force was up
to and tallied daily win rates. The problem is that many of today’s customers
no longer buy this way. Nor does the tracking approach shed much light on what
drives purchases or cements loyalty.
The proliferation of decision
influencers—along with the growing amount of data about them and their
behavior—reverses the funnel logic. It’s now possible to follow the lead of
customers rather than force them to follow the sales organization. Armed with
state-of-the-art information, suppliers often find new buying patterns that
defy well-trod linear paths.
Although challenging, this world of 24/7 multichannel
customer experiences creates additional opportunities to influence purchases.
More complex interactions reflect strands of customer behavior—previously
hidden—that companies can evaluate using big data and analytics. Those
proprietary insights, in turn, can form the basis of much more targeted sales
actions.
Three priorities for reshaping the sales
organization
B2B companies across industries are moving
toward journey-based sales strategies. We’ve seen success among organizations
as varied as industrial-equipment manufacturers, software firms,
professional-services firms, telecom providers, and basic-materials companies.
Three actions are decisive:
·
charting decision
journeys by customer segment and drilling down on customer expectations and needs
at each stage of the journey
·
tackling the difficult
process of reallocating sales and marketing resources to the activities most
likely to influence decisions
·
changing
organizational structures to ramp up collaboration between marketing and sales
As B2B executives in
marketing and sales organizations push ahead with these moves, they will also
need to reach across the enterprise and sharpen the customer focus in every
business unit and function.2
1. Map journeys and
influencers by customer segment
Charting decision
journeys by customer segment requires soliciting input from multiple sources
and understanding the industry context. For example, in sectors with a handful
of big customers (like mining, shipping, or the public sector), there’s no
substitute for actually meeting them to analyze how they really make decisions
(as opposed to how they say they make them). Large companies
with thousands of customers may need data-driven market research (by mining
social media, for example) to gain deeper insights. These findings can be
paired with knowledge gleaned internally from sales, logistics, product marketing,
and other functions to develop a hypothesis on how different variables—such as
price, delivery times, or product features—affect purchase decisions. In this
way, many suppliers have identified previously submerged customer segments.
Disciplined mapping often turns up
counterintuitive insights. For example, one industrial company found that its
most profitable customers were the “no frills, no hassle, lowest price” buyers
who just wanted to fly through their journeys quickly, with minimal fuss and interaction.
Once marketers and analysts have similarly drilled down on understanding
segment preferences, they can chart a course of action, as one energy company
did.
This company had long given customers three or
four standard offers of pricing and service. Sales reps typically delivered or
mailed brochures and other materials and followed up to qualify leads. Only
after deregulation, when new entrants began siphoning off customers, did the
company realize it needed a new approach. Senior executives therefore asked
marketing to lead a research initiative combining direct interviews with data
on energy use from customer billings. It turned up three clusters of customers,
each with different sets of influencers:
·
The companies in one
segment, typically large ones in energy-intensive industries, like chemicals,
were “high touch, high value.” They wanted a supplier that could not only
handle complex RFPs covering contingencies for downtime but also provide advice
on optimizing energy use. Interviews showed that manufacturing—not
purchasing—executives were the key influencers. Marketing and sales
subsequently worked together to redesign the company’s RFPs to include a
library of contracts it could readily customize. In addition, they assigned
executive sponsors to work with manufacturing managers on-site when problems
arose. The company also increased the skills of sales agents, so they could act
as advisers on energy usage, sometimes in concert with technical specialists.
·
Another cluster of
customers had specific goals for their emissions footprints and wanted regular
consumption data and benchmark comparisons. By setting up programs to meet such
requirements, the supplier increased these customers’ loyalty.
·
The third segment
consisted of mom-and-pop businesses, such as dry cleaners and convenience
stores. These price-sensitive customers were most likely to jump ship.
Interviews showed that they sought to make apples-to-apples comparisons of
standard offers for rates and billing-cycle options. The decision maker was typically
the business owner, who was more concerned with price than after-sales service
quality. In response, the energy company built a web-based rate-comparison tool
to assure these customers that they were getting the best deal.
Consider as well the experience of a large
manufacturer of technology equipment. Realizing that the company was losing
share in highly competitive markets, it began scrutinizing what was happening
in different customer segments and found stark differences among them. At large
customers, cost-conscious teams caring little for the technical specifications
of products and typically led by a finance chief were the key influencers. They
paid special attention to how RFPs spelled out the total cost of ownership,
particularly maintenance expenditures. By contrast, smaller operators, often
owned and managed by technology experts, were active and engaged researchers on
the company’s products and coming innovations.
In response, the manufacturer revamped its
RFPs for large companies to expand the number of financing options. It
overhauled its website materials to highlight cost efficiency and built a
sophisticated price calculator with what-if scenarios to help finance
executives justify their purchases with the CEO. Meanwhile, the company invited
business-owner purchasers to beta-test new versions of its products and to
attend events where they could preview its thinking about the direction of
technologies and mingle with R&D executives.
2. Reallocate sales
and marketing resources
When companies map
customer journeys in the ways just described, they often turn up evidence of
how traditional sales practices misallocate resources. But as our colleagues
have described elsewhere,3 shifting spending to align it with new
realities often meets with stiff internal resistance, requiring cultural
changes that transcend the sales organization.
Beyond the golf
outing. After mapping
five customer segments, one industrial OEM found that nearly 70 percent of its
marketing dollars and sales efforts across them were not directed at what
mattered most to customers. For example, the company had invested heavily in
customized demonstrations to roll out next-generation equipment. The demos were
available to all customers, but only those in two of the segments—product
enthusiasts and R&D innovators—really cared about participating in them.
The rest, comprising over half of the customer base, were happy to visit a
plant only occasionally, receive information remotely, or wait their turn for a
technical specialist to visit with a standard demo kit.
Similarly, to encourage repurchases at the end
of product cycles, each sales rep had the same per-user travel and
entertainment budget. Yet many buyers didn’t enjoy or get much value from the
golf outings historically lavished on the company’s largest customers—however
hard that was for most of its sales teams to accept.
In a major rethink, the company began focusing
its efforts more sharply on the activities that the most profitable segments
liked best. The point wasn’t so much to cut the budget as to make it work
better in these segments, and in ways that would step up customer engagement
across decision journeys.
Another example involved a large, struggling
materials company that reconsidered the sales approach for one of its big
vertical segments: government. After tracking decision journeys, it found that
the public-works executives targeted most often could rarely make spending
decisions on their own. Instead they relied heavily on local distributors for
advice on product costs, innovations, and warranties. Armed with this insight,
the materials company worked to strengthen relationships with these independent
dealers and pulled back on its largest marketing expense—trade shows geared to
government buyers. The on-site distributor demos developed with the funds saved
proved an effective way to get products into consideration for final purchase.
Changing the culture. For many of the B2B companies we know,
the biggest hurdle to reallocating budgets isn’t identifying the new
opportunities; it’s having the courage to test them. Seasoned executives and
sales leaders often struggle to accept the reality that long-standing “truths”
about how to best serve customers no longer apply. Shifting mind-sets to focus
on maximizing influence and then rallying stakeholders around new directions
can often take more time and energy than mapping new journeys. One company
addressed this problem by holding debates among its marketing and sales teams
to discuss findings from its decision-journey research. It then called in
functional leaders from the finance, customer-service, supply-chain, and technology
organizations to help bring objective rigor to discussions about what a new
allocation of resources would mean for its performance and strategy. The
exercise might have looked like a time sink when viewed from the outside, yet
it proved crucial in creating the collective will to take the risk of trying
new ways of serving customers.
3. Forge a partnership
between marketing and sales at each stage of the customer decision journey
Moving from a sales-forward funnel to a
customer-back journey requires the marketing and sales organizations to think
more like their customers. We often see marketing units do customer research
without seeking frontline input. Sales organizations often say that they
understand the importance of better data but complain that proliferating
information isn’t helping them navigate the situations they face on the ground.
At advanced companies, marketing and sales are
both involved in deciding on the right ways to attack touch points. Those
techniques might include search-engine optimization to help build customer
awareness, white-glove treatment that makes the RFP process more customer
friendly, or loyalty programs that automatically replenish supplies and track
customer satisfaction. Better collaboration can have the following advantages:
·
Clearer
priorities. One
medical-device company developed an iPad app powered by its marketing research.
When sales reps enter updates, the app reorganizes companies by customer
segment and indicates specific items to cross-sell, pricing parameters, and
service options.
·
Quick
wins. At a B2B seller,
evidence from marketing analytics showed that leads for small and midsize
companies were converted into product sales at higher rates when telephone
calls or direct mail preceded e-mail interactions. The
customer-relationship-management system was subsequently adjusted to provide
such reminders.
·
Improved
response times. Seeing signs of
aggressive new competition in one product area, and fearing a new round of
discounting, a global industrial company’s sales team alerted its marketing
colleagues. They quickly dug into customer data and identified purchasers that
often bundled multiple products with their orders and were therefore most
likely to demand discounts. Working with finance and supply-chain colleagues,
marketing and sales devised new ways to improve ease of ordering and fulfillment
speed—faster credit checks, for example, and automated reminders for customers
whose inventories were estimated to be low—which delivered extra value for this
segment. Such moves allowed the company to sidestep a possible price war.
The ground is shifting in B2B buying behavior
as customer-directed journeys replace the traditional funnel. This is new and
promising territory for organizations that embrace data, reallocate budgets,
and do the hard work of bringing more collaboration to sales and marketing.
Knowing what really makes customers tick may be the cure for the slow growth
many suppliers have experienced during the tepid global economic recovery.
About the authors
Oskar Lingqvist is a principal in McKinsey’s Stockholm
office; Candace Lun Plotkin is a master expert in the Boston
office, where Jennifer Stanley is an associate principal.
http://www.mckinsey.com/Insights/Marketing_Sales/Do_you_really_understand_how_your_business_customers_buy?cid=mckgrowth-eml-alt-mkq-mck-oth-1502
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