raises the risk of producing new products or services that will not succeed in the marketplace, as well as the loss of key accounts to competitive threats.
On the other side of the equation, if B2B companies do not engage their executive customers, how will these decision makers get the message about the business value the company provides? How will they learn about you as a business partner? How will they come to trust you? This level of understanding does not come through osmosis, nor is it communicated simply by delivering on your contracts. No, you have to do more.
But will they listen to you? Absolutely. There is a common misguided belief that executive customers are hard to reach and uninterested in talking to B2B solution sellers. We have always found, however, that executives are genuinely mystified by the lack of effort their key suppliers and other sellers make in reaching out to them. “When I became CEO, I was surprised I didn’t get calls from most of our key suppliers,” recalls Joe Morgan, CEO of $688 million Standard Register. This is even more surprising given the fact that Morgan was hired to grow the company after a period of restructuring. Therefore, understanding his expectations and aspirations for the company would have been critical to any B2B company that wanted to earn its business.
When companies neglect executive customers, the initial symptoms usually appear as sales woes. They include:
Poor market reception of newly launched products and services or an unwillingness among customers to pay extra for new features and functionality
Overwhelming price pressure and being treated like a commodity supplier
The loss of key accounts or reductions in their volume
Increased competition in profitable segments
Sales engagements which are reactive and focused on today versus proactive and focused on the long-term
These are reliable indicators that the voice of the executive customer isn’t being heard clearly. Often it means a company is listening only to the voice of end users and thus R&D, marketing, and sales are either not including or not fully communicating the business value essential to the executive decision maker.
Just as commonly, companies tend to listen to only the voice of their sales organization. Feedback from the sales team is very important, but it does have limitations. Most salespeople meet with users and purchasing agents, who tend to discuss lower-level issues, such as features and functionality. Salespeople are also very focused on overcoming objections and matching competitors’ offerings. They extrapolate market needs from these interactions and bring that feedback to their employers as the voice of customer.
One major consequence of mistaking the voice of other players with the voice of the executive customer in B2B sales is very evident in studies of success rates of new products. IBM, AcuPoll, and other organizations have consistently found that newly launched products suffer from failure rates of 60-70 percent. Many of these failures result from neglecting executive customers. When the needs and concerns of executive customers are not built into market offerings, companies find themselves investing valuable resources in projects that add only incremental value or worse, actually diminish a company’s ability to differentiate itself in the marketplace. This is why it’s so important that innovation is relevant …meaning that there is at least one point of differentiation in new offerings for which decision makers are willing to pay.
Reality #3: B2B Companies Rely Upon the Knowledge and Acumen of Customers
Consumers can provide input and feedback on a product, but it is usually limited to what they like and don’t like and, perhaps, what else they might want. But in the B2C world, customers can’t typically tell a company how to design a better product or help engineer it. They don’t have that kind of expertise.
In fact, consumers are rarely experts regarding the products and services they buy. In a blind taste test, for example, 90 percent of consumers couldn’t tell a $10 bottle of wine from a $100 bottle. Nor could they tell the difference between tap water and a $5 bottle of Fiji water. That’s why sophisticated and highly emotional marketing and branding programs can yield premium results in the B2C world—they are the main basis for product differentiation among consumers.
By contrast, B2B decision makers have knowledge extremely valuable to the companies selling to them. Consider GE Aviation, the world’s leading provider of jet engines. Its customers, which include major airlines and the military, can provide expert guidance on all aspects of the jet engines they buy. They know how the design of an engine impacts thrust, range, payload, maintenance needs, FAA compliance, financial cost/payback, and so on. In the B2B world, your customers may not be familiar with your offerings per se, but they usually know their industries better than those who supply it, and they know how to evaluate your solutions in light of their needs. They aren’t going to be swayed by marketing collateral; they will scrutinize, compare, benchmark, and test your offerings. And they will also seek out expert advice from peers and third parties for references and validation.
This goes double or triple for executive customers. Think about the domain knowledge of a CIO who has worked in the financial services sector his entire career. He is an expert in IT and his industry. He has networked and attended countless trade shows and educational events. The CIO has an unparalleled ability to cut through the sales jargon and understand the true value of solutions offered to his company. In most situations, the CIO also knows more about how to effectively deploy technology within his firm and industry than virtually all the companies seeking to sell him products and services. And when he doesn’t know something, he can simply phone a trusted peer.
To successfully serve this executive customer, a B2B company must understand his needs, priorities, requirements, and operating environment almost as well as he does. There is too much at risk in his world—asset security, the customer’s experience, privacy, government compliance, and the CIO’s reputation and career—for him to work with a company that doesn’t understand. The same holds true in every B2B industry, whether it’s oil and gas, high pressure valves, medical equipment, scientific journals, procurement services, jet engine manufacturing, media distribution services, business process outsourcing, etc.
The Impact of the B2B Realities on Margin
The reputation of a company and its brands are primary determinants of its margins. Reputation is how a company is viewed in the marketplace—what it is known for, how its culture is viewed, and, most importantly, what the market believes about the value of its offerings. These are all external perceptions, but in both B2C and B2B, they add up to a sort of capital that accrues as customers willingly pay a premium price for a company’s offerings. Only then will margins expand predictably over a sustained period of time.
What differs in B2C and B2B companies is how corporate and brand reputation is created. In the B2C world, reputation is defined by elements such as advertising, package design, and the experience of using the product. B2C companies invest millions to understand the demographic and geographical nuances of customers in order to position and manage their corporate and brand reputations in the mass markets of the consumer sector. Retailers, such as Starbucks and Target, add the look of the store and the behavior of employees to the mix.
In the B2B world, corporate and brand reputation is composed of the same elements, but in very different configurations. The priority and weighting of the elements are altered by the three realities discussed above.
As we’ve seen, the people you are selling to within your customer companies are usually industry veterans with high levels of domain expertise. Simply put, they’re living what you’re selling. These customers aren’t going to pay a premium for your offerings because you’ve got a cool logo, a catchy tagline, or a slick PowerPoint presentation. What do they respond to? Business value. And how do they determine that value exists in an offering? In addition to their own knowledge, they rely on their peers. For example, surveys of CIOs consistently find they rate peer input as the most credible and trusted source of information about products and services.
Thus, the path to a premium reputation in the B2B realm is through your current customers. It is how they perceive and describe your offerings and what they think and say about working with your