revenues. “Coming from a Procter & Gamble background, it was a complete mind-shift for me and other members of the leadership team.”
What if your B2B company lost two of its top 10 accounts in the coming months? What would the impact be on the top line, bottom line, economies of scale, and the headcount and morale of your company? Would your company be able to recover from the loss, let alone fund growth and meet the expectations of its owners?
Reality #2: The Fate of a B2B Company Rests in the Hands of Just a Few People
If you are starting to feel a little claustrophobic, prepare to have your world shrink even further. In the B2B world purchasing decisions are made by just a few people. That’s right, unlike in the B2C world, it’s just a few people in a small number of customer companies that control a B2B company’s destiny. Do you know who these people are in your customer companies? If so, how well is your company connected to them?
B2B Sales Involve Multiple Players
When I buy a song on iTunes, I play multiple roles:
I’m the end user: I listen to songs I download to my iPod.
I’m an influencer: I like the music of Dave Matthews and tell myself I’d enjoy hearing his band’s latest release whenever I want.
I’m my own purchasing agent: I decide that I’m willing to pay 99 cents for a new song, but not $1.49.
And I’m the decision maker: I click the buy button.
Because I play all these roles as a consumer, it’s not very hard for B2C companies to figure out how to market to me and others with a similar demographic, preference, buying habit, etc.
For B2B companies, on the other hand, these same four roles—end user, influencer, purchasing agent, and decision maker—are usually played by many different people. This creates complexity and confusion as companies try to focus their sales and marketing efforts. Exhibit 2-3 illustrates the number of people involved in an average purchase from four companies: Oracle; Crown Partners; restaurant equipment manufacturer Henny Penny; and information services provider Lexis-Nexis. For instance, the average customer for LexisNexis’s legal research service is a mid-size law firm. Thus, there are 300 end users of the service, seven influencers (usually librarians and members of the technology or executive committee of the firm), one purchasing agent, and one decision maker (usually the firm’s senior partner).
Exhibit 2-3: Four Roles, Multiple Players in Each Customer
All these players are not equal in importance to a B2B seller, and, as I describe in the following pages, each provides a different level of input to the buying decision (see Exhibit 2-4).
Exhibit 2-4: Levels of Customer Input
The end users of your software, medical diagnostic equipment, or jet engines are important, of course, but they are not as important as conventional wisdom suggests. There may be thousands of them or more, but they can’t renew the sales contract, upgrade to a more expensive solution, or decide to switch to a competitor. Neither can purchasing agents, unless you are selling a commodity, or you find yourself competing solely on price (and if that’s the case, you probably need to add value to your offerings, and change your sales approach). Purchasing agents set standards and practices for purchasing and manage the procurement process, but they are not ultimately responsible for the decision to buy.
Influencers are involved in the buying decision by evaluating which solutions will best fulfill their companies’ needs. Influencers also evaluate providers. They seek to discover if a B2B seller can do what it claims and whether it can work effectively with the customer company. Sometimes this process of evaluation and selection is straightforward. Typically, however, as the complexity of the solutions increases and they cut across organizational boundaries within the customer’s company, so does the number of influencers involved in the sale. In fact, there may be dozens of these folks at any single customer firm and a B2B company needs to satisfy all of them.
Finally and ultimately, there are the decision makers. Usually residing near or at the top of the organizational hierarchy, these are the people who have the final vote; they decide to do the deal. They hear the recommendations of purchasing agents and influencers, and ask themselves questions designed to instill confidence in their final decisions, such as, “Will I enjoy working with this seller? Will it deliver what it is promising? Will it resolve any issues? Can I trust its people?”
At Celestica, there are less than 20 decision makers among the 10 customer companies that make up 90 percent of the company’s annual revenues. Sometimes there is just one decision maker in a customer company, sometimes it is a two- or three-person executive committee that makes the final decision to buy. Regardless, in the B2B world, while a large number of people may be involved in a sale, very few of them control your fate.
To Whose Voice Do You Listen? Whose Voice Do You Hear?
Most B2B companies are already focused on engaging end users and influencers, and they can’t avoid purchasing agents. But a surprisingly large number of them are either not paying enough attention to executive decision makers or are ignoring them altogether.
Like most B2B companies in the IT sector, Oracle is very focused on its end users. It’s easy to see why Oracle would invest millions to connect to them. Events like Oracle OpenWorld, an annual conference that drew more than 40,000 people from the Oracle user community in 2010 and includes top entertainment (Sting and Tom Petty and the Heartbreakers are on the schedule for 2011), are critical to building and maintaining the loyalty of end users, and gaining insight into what they want and need in IT products and services.
But how does Oracle address the one or two executive customers in each of its major accounts who actually decide to buy its offerings? In 2004, Oracle’s leaders asked themselves this question and quickly realized that most of their executive customers didn’t have the time to attend multiday trade shows, no matter how interesting and enjoyable they were. So, Oracle’s senior vice president and chief customer officer, Jeb Dasteel, was assigned the task of designing, launching, and overseeing an ongoing executive customer program. “End user relationships and input are critical to Oracle’s success, but end users provide only one view of the market,” explains Dasteel. “We realized how important additional input and relationships with other parts of the decision chain would be for our future. Without the perspective and insight of decision makers, we would be lacking a whole category of customer input today.”
Oracle understands and taps into the power of executive customers, and that is a major reason why its performance has outpaced its competitors. Most B2B companies, however, are not as aware of executive customers as Oracle, and they devote their customer outreach efforts almost exclusively to the other levels of the customer hierarchy. In fact, our research has found that the average B2B company spends 75 percent of its time and money marketing and selling to end users and purchasing agents, the two groups of customers who have the least say in purchase decisions. Influencers, who do play an important role in deciding purchases, receive substantially less attention. And decision makers, the executive customers who actually make the purchase, receive the least investment of all. This is far from optimal. (See Exhibit 2-5.)
Exhibit 2-5: Allocation of B2B Marketing and Sales Resources by Customer Level
When B2B companies do not actively and systemically engage their executive customers, there is a tremendous vacuum of critical information on both sides of the buying equation. On one, the B2B seller misses insight to the key business problems, challenges, aspirations, and priorities