On this blog, we’ve talked almost exclusively about business-to-consumer marketing so far, also known as B2C marketing. This doesn’t reflect the whole truth, though, because business-to-business (B2B) is a significantly bigger market than B2C. As you’ll soon come to see over the course of this post, marketing to businesses is an entirely different animal than marketing to consumers.
When marketing to consumers, you need to have a very good grasp of the basic concepts behind small business marketing. You also need to understand consumer behavior, decision-making processes, and decision-making styles. From these building blocks, you can determine what kind of products have good product-market fit. This allows you to find a profitable niche.
But what happens when systematically designed business processes curtail the worst excesses of irrational consumer behavior? What happens when committees and requirement meetings thwart your attempts to make an emotional appeal to individual consumers? How do you find a niche then? We’ll be talking about all that and more below.
Here is an outline:
Business-to-Consumer (B2C) Marketing
- Marketing to Consumers – An Overview
- Consumer Behavior
Business-to-Business (B2B) Marketing
- Marketing to Businesses – An Overview
- Consumer Behavior
Business-to-Consumer (B2C) Marketing
Marketing to Consumers – An Overview
On a fundamental level, B2C transactions differ from B2B transactions. When you’re selling directly to consumers, the decision maker will almost always be either the consumer or someone close to the consumer. The decision-making process is not cold and clinical, but rather emotional. A rational need for a certain product is not what drives consumer behavior in B2C transactions.
This is not to imply that people are total fools when it comes to making purchasing decisions. Our minds can be thought of in terms of System 1 and System 2. To simplify greatly, System 2 makes slow, deliberate, careful decisions and System 1 makes quick decisions that are imperfect. A lot of times, people use System 1 to make shopping decisions so they can go about their normal lives and not agonize over every minute detail of a purchasing decision.
The System 1 / System 2 dichotomy that we reference so often on this blog is what drives some of the strange and seemingly irrational consumer behavior that we see. Consumers, after all, take mental shortcuts simply so they can go about their lives. The purchase decision-making process is improvised and not choreographed most of the time.
Even if consumers were to engage in a systematic review of all their purchases before making them, there are two fundamental truths that make my needs different than yours. Value is subjective and often situational. The kind of car I need is different than the kind of car you need because we don’t drive the same commutes.
Because value is subjective, we have different needs for which different products or services must be created. A product only becomes attractive if it meets our needs. For us to make decisions, you have to have product-market fit.
In B2C transactions, decisions are made based on subjective value, yes, but also on two other factors. These factors are: decision-making roles and the search for information.
The decision-making process in B2C transactions is often informal, but a careful observation shows that certain roles are apparent if you’re paying close attention.
- Initiators suggest a brand or product.
- Influencers recommend a brand or product.
- Deciders choose to make the purchase.
- Purchasers actually make the purchase.
- Users use the purchase.
In B2C transactions, people are likely to embody one or more of these roles at once. In B2B transactions, there is usually a division of labor that breaks these roles apart. I choose to buy shampoo entirely out of my own volition – initiating, deciding, purchasing, and using the product. The buying process would be different for something such as, say, complicated software implementation.
Likewise, the information search process in B2C is often pretty simple. You or a small group of people think about brands and maybe do a little bit of light internet research. Unless you’re buying something really big, you won’t come across everything in the graph above.
The one way in which B2C purchases may be vastly more complicated than their B2B counterparts are the number of decision-making styles that people can take. With B2C purchases, image-consciousness, frugality, a desire for novelty, and impulse buying all play a much bigger role than they would in B2B.
The upshot of all of this is that B2C products tend to focus on emotional needs. These emotional needs then, in turn, play a big factor in how information is sought out and how decisions are made. There are no complex processes or internal reviews. B2C sales are made by pleasing one person or a very small group of people. B2C products are deeply personal.
Business-to-Business (B2B) Marketing
Marketing to Businesses – An Overview
Put simply, the difference between B2C marketing and B2B marketing is very simple: the former buy for themselves, the latter buy for companies. The difference in practice, though, is profound. B2B transactions tend to be bigger. They are often approved by meetings across different departments. A lot of personnel can be involved and the transaction can take a much longer time.
With such a profound difference in buying behavior, you might find it odd that we spent a good deal of time reviewing how B2C transactions work before talking about B2B transactions. However, it’s necessary to start there. All B2B buyers started out as B2C buyers. Every individual involved in the B2B purchasing process, which is a team effort, has modeled their understanding of buyer-seller relationships on B2C transactions.
I will even take this a step further and say there are only two factors that truly separate B2C purchases from B2B purchases. First is the number of people involved. Second is the amount of time it takes. The former discourages personal biases from entering into the decision-making process (unless you’re the one in charge). The latter tempers impulse purchases, which is one of the intended goals of well-designed bureaucracy.
Value remains subjective even in B2B transactions, but it’s not as often based on emotional needs. More frequently, B2B transactions are based on performing a very specific service for the company. That could range from the hiring of an employee to manage social media to the implementation of CRM software to help with sales. It could be anything in between.
Often value is so subjective in B2B transactions that it becomes difficult for people inside the company to describe why the purchase is valuable to anyone outside the company! Because value remains subjective, product-market fit remains essential. That often includes the ability to answer really industry-specific questions and appear professional.
Consumers may take mental shortcuts when acting alone in small groups via B2C transactions. This isn’t as prevalent in B2B transactions. Try to make an impulse purchase when you have to go through meetings to justify it!
This is not to say that businesses always act rationally, though. Anyone who has ever had a job in any kind of company knows this is not the case. Even the best-designed decision-making process can fall prey to groupthink. Sometimes a business buys the wrong product or service because no one wishes to speak up about its flaws. This could be because of reasons like fear or insecurity, but also the aggregate result of individual employees – very rationally – not wanting to make the boss mad.
In a B2B transaction, the same decision-making roles are still relevant. Initiators suggest brands, products, or services. Influencers sway the decision one way or another. Deciders actually make the go-no go decision. Purchasers allocate financial resources to make it happen. Ultimately, users are the ones affected by the purchase.
In B2B transactions, the process moves a lot slower. As we said earlier, this has the effect of tempering the unconscious factors that motivate individual buying decisions, making them more carefully considered. Done well, B2B transactions are a lot more rational than their B2C counterparts. Done poorly, you may see a large disconnect between decision-makers and users.
Additionally, the information search is often more thorough than in B2C transactions, which leads to more informed decisions (in the ideal world). There are meetings to identify the problem. They often entail gathering requirements and estimating the scope of implementing a product. The process of seeking information can involve multiple decision-makers watching demos or research analysts working full-time to find data. There is a good deal of conversation around evaluating alternatives and lot of different parties get involved. Leaders make decisions, sometimes unilaterally and sometimes by committee. Then there is often a process in place to formally review how well the product or service has worked out. Even if there isn’t, people will disclose their opinion.
The steps in this process are complex and often spelled out to various degrees depending on the product. This nudges B2B transactions toward one of three decision-making styles:
- The Perfectionist – “We considered all the options, and yours is the best.”
- The Loyal – “We already go with you and it’s not worth it to switch.”
- The Confused – “Just…keep it simple. We don’t have time for this.”
Compare that to B2C transactions and you can see a world of difference.
Because of the complexities of the B2B decision-making process, only a handful of decision-making styles ultimately prevail. It’s harder to make an organizational change than it is to make personal change. Therefore, successful niches tend to revolve around providing one of three things:
- Operational efficiency
- Return on investment
Let’s focus on each of these three categories of niches:
Operational efficiency can involve a product or service that makes it easier to do day-to-day functions. It can also involve convincing a company to outsource part of their processes so they can focus on what they do well. Either one ultimately hinges on the idea of specialization and trade being good for companies – cornerstone beliefs of traditional economics.
Alternatively, you can appeal to return on investment. You may not be able to complete a task more efficiently, but you might be able to do it better. This is essentially a promise to make a business more money instead of saving them money.
Finally, businesses do not necessarily always make decisions based on expedient economic decisions. Sometimes, it’s better to have someone take care of you not to save money or to make more money, but to free up time and streamline processes. While not as tangible, the promise of simplifying business is often attractive to leaders who make B2B purchasing decisions.
Marketing to businesses is different than marketing to consumers. The reasons for this are myriad, but ultimately come down to two things: the number of decision-makers and the time spent making the decision. The impacts of this are profound. You must understand how these minor differences cause rippling effects in consumer behavior, decision-making processes, and viable niches. Once you do, selling B2B will be as natural as selling B2C 🙂