Do You Really Understand How Your Customers Buy?
The CEO of a major supplier to a telecom industry was in a fix.
An initiative to expand sales volumes and shift the company’s product mix to higher-value components was dithering. That being said, this wasn’t due to lack of effort. With backing from a marketing campaign that emphasised a slew of new product features, frontline sales managers had propped up calls to their purchasing contacts at OEM customers.
Despite this, they reported that they weren’t meeting their sales targets. Barriers included tough new requirements from chief purchasing officers, negative chatter on social media about post-sales support, and skeptical questions on a product-rating site about an offering’s fully loaded costs.
This is the new dynamics of B2B sales. Decision-making authority for purchases is increasingly slipping away from individuals in familiar roles – often those who B2B sales teams have long-standing relationships with. Just as the digital revolution has transformed once-predictable consumer purchasing journeys into a more circular pattern of touchpoints – the same way B2b selling has become even less linear as customers research, evaluate, select, and share experiences about products.
More people inside of the organisation are playing crucial roles in considering offerings. So, the path to closing such sales has become increasingly complicated. But there’s hope. The best reaction is to embrace the new environment. Sellers who are very well ready to meet customers at different points on their journeys will exploit digital tools more deeply, allocate sales and marketing resources more successfully.
Ultimately, they will stimulate collaboration between these two functions, thereby helping to win over buyers on the fence.
Our experience with B2B sales organisations suggests that while the change required is significant, so also are the benefits. An up to 20% increase in customer leads, 10% growth in first-time customers, and a speedup of as much as 20% in the time that passes between qualifying a lead and closing a deal.
The Consumerization of Business Buying
Marketers have for a long time drawn a bright line between consumer shoppers and business purchasers. Consumers typically care deeply about brands and are more readily influenced by advertising, special deals, media messages, and coupons. They often turn to friends and family for advice on what they are buying. Also, they are prone to impulse shopping, and can switch from one brand to the next with minimal cost.
Business purchasers, by contrast, however, do a ton of research, look carefully at specifications, follow a formal buying or procurement process. They can experience high switching costs, and tend to worry most about functionality.
Yet an explosion of communication vehicles and interaction channels has intensified the expectations of business purchasers. A lot more influencers and decision-makers are now directly involved in the purchasing process. Including their consumer shopping experience which has shaped business buyers. This has in-turn shaped their behaviour to become more consumer-like.
There is no longer such a thing as a simple cold call: customers expect a sales rep to be highly 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, likewise, the purchasing process is becoming more fluid.
Business customers are exposed to the same dynamics of peer-to-peer networks and opinions that guide 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 instance, an expert blogger with a massive 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 via digital channels, may have an outsized impact on a CEO’s perceptions of market trends and their implications for various B2B suppliers.
Flows of digital information have further democratised business purchasing. Empowered purchasers increasingly demand real-time digital interactions supported by tools such as product configurators and price calculators.
All these 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 centres, and technical reps. A research shows that, on average, a B2B customer will repeatedly use six different interaction channels throughout the decision journey, and almost 65% will come away from it frustrated by inconsistent experiences.
The game is also dynamic for closing deals with requests for proposals (RFPs). At one particular company, operations executives were looking to improve process efficiencies and assure better after-sales service. To maximise 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 properly examine an offer’s details, like service and financing. With so many gateways of influence, the research not surprisingly shows, that two-thirds of B2B deals are lost before a formal RFP process even commences.
Beyond the sales funnel
These dynamics are undermining the traditional sales approach of pushing products to customers along a linear funnel that comprises 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 a lot of customers today no longer buy in this fashion. Neither does the tracking approach shed much light on what drives purchases or bolsters loyalty.
The proliferation of decision influencers, along with the growing amount of data about them and their behaviour, reverses the funnel logic.
It’s now possible to follow the lead of customers rather than force them to follow the sales organisation. Armed with state-of-the-art information, suppliers often find new buying patterns that defy well-trod linear paths.
Despite the challenge, this world of 24/7 multichannel customer experiences creates additional opportunities to influence purchases. More complex interactions reflect strands of customer behaviour which was previously hidden that companies can evaluate using big data and analytics. Those proprietary insights, in turn, can form the basis of a much more targeted sales actions.
B2B companies across industries are moving toward journey-based sales strategies. We’ve seen success among organisations as diverse as software firms, industrial-equipment manufacturers, professional services firms, telecom providers, and basic-materials companies.
These three priorities are for reshaping sales:
Outlining 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 organisational structures to ramp up collaboration between marketing and sales.
As B2B executives in marketing and sales organisations 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.
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 such as mining, shipping, or the public sector, there’s no substitute for actually meeting them to analyse how they really make decisions (as opposed to how they say they make them).
Large companies with thousands of customers for instance may need data-driven market research to obtain deeper insights. These findings may then be paired with knowledge gleaned internally from sales, logistics, product marketing. As well as other functions to develop a hypothesis on how different variables like price, delivery times, or product features may affect purchase decisions. In this manner, many suppliers have identified previously submerged customer segments.
Disciplined mapping more often than not turns up counterintuitive insights. For example, one industrial company discovered that its most profitable customers were the “no luxuries, 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 then chart a course of action, as done by one energy company.
This company had long given customers about three or four standard offers of pricing and service. Sales reps typically deliver or mail brochures and other materials and follow up to gain leads.
Only after deregulation, when new entrants began siphoning off customers, did the company realise it required a new approach. Senior executives, therefore, asked the marketing team to lead a research initiative combining direct interviews with data on energy use from customer billings. It showed three clusters of customers, each with different sets of influencers:
The companies in one segment, typically large ones in energy-intensive industries, such as chemicals, were “high touch, high value.” They wanted a supplier that could not only handle multifaceted RFPs covering contingencies for downtime but also provide advice on maximising energy use.
Interviews showed that manufacturing and not purchasing executives were the major influencers. Marketing and sales subsequently worked together to redesign the company’s RFPs to include a library of contracts it could willingly customise. Also, 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 collaboration with technical specialists.
Another group of customers had particular goals for their emissions footprints and wanted regular consumption data and benchmark comparisons. They set up programs to meet such requirements, and the supplier boosted these customers’ loyalty.
The third division consisted of mom-and-pop businesses, like dry cleaners and convenience stores. These price-sensitive customers were most probable to jump ship or switch loyalties. 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. Realising that the company was losing share in highly competitive markets, it began scrutinising 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 major influencers. They paid special attention to how RFPs spelt 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.
As a response, the manufacturer revamped its RFPs for large companies to increase 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.
All the while, 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 course of technologies and socialise with R&D executives.
Reallocate sales and marketing resources
When companies plot customer journeys in the ways just described, they usually turn up evidence of how traditional sales practices misallocate resources. But as described elsewhere, shifting spending to align it with new realities often meets with strong internal resistance, requiring cultural changes that transcend the sales organisation.
Beyond the golf outing. After mapping five customer segments, one industrial OEM found that nearly 70% of its marketing dollars and sales efforts across them were not directed at what mattered most to customers.
For instance, the company had invested heavily in customised demonstrations to roll out next-generation equipment. The demos were available to all customers. However, only those in two of the segments; product enthusiasts and R&D innovators actually 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 boost repurchases at the end of product cycles, every 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 difficult that was for most of its sales teams to accept.
In a major reconsideration, 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. Plus, in ways that would step up customer engagement throughout decision journeys.
Another instance involved a large, struggling materials company that reconsidered the sales approach for one of its big vertical segments; government. After tracking decision journeys, it discovered that the public-works executives targeted most often could rarely make spending decisions on their own. Rather they relied heavily on local distributors for advice on product costs, innovations, and warranties.
Equipped 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 a lot 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 mindsets to focus on maximising influence and then assembling stakeholders around new directions can often take more time and energy than mapping new journeys. A company addressed this drawback 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 organisations to help bring objective rigour to discussions about what a new allocation of resources would mean for its performance and strategy. The exercise may have seemed 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.
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 organisations to think more like their customers. Often, we see marketing units do customer research without seeking frontline input. Sales organisations 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 touchpoints. Those techniques might include search engine optimisation to help build customer awareness, a 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.
At a B2B seller, evidence from marketing analytics showed that leads for small and midsize companies were converted into product sales. This happens 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.
Better 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 coworkers. They quickly delved 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 fulfilment speed, faster credit checks. Including automated reminders for customers whose inventories were estimated to be low that delivered extra value for this segment. Such moves allowed the company to sidestep a possible price war.
The ground is moving in B2B buying behaviour as customer-directed journeys replace the traditional funnel. This is novel and promising territory for organizations that embrace data, reallocate budgets, and do the hard work of fostering collaboration to sales and marketing. Knowing what truly makes customers tick may be the cure for the sluggish growth many suppliers have experienced throughout the tepid global economic recovery.