Business Customers

Characteristics of Business-Customer Interactions

B2B customer interactions are influenced by what are typically long and complex buying processes and tend to be more relationship-based.

Learning Objectives

Describe how B2B customer transactions differ from B2C customer transactions

Key Takeaways

Key Points

• B2B customer relationships generally feature high brand loyalty due to the amount of time and money invested during the sales cycle.
• During the selling process, B2B sellers may be required to meet with prospects and customers numerous times before the transaction is complete.
• Industry trade shows, exhibitions, conferences, and online communities are common places where B2B companies interact with both customers and prospects.

Key Terms

• webcast: A video and or audio broadcast transmitted via the Internet.
• Request for Proposal: A solicitation made, often through a bidding process, by an agency or company interested in procurement of a commodity or service, to potential suppliers to submit business proposals.
• customer relationship management: A widely implemented model for managing a company's interactions with customers, clients, and sales prospects. It involves using technology to organize, automate, and synchronize business processes - principally sales activities, but also those for marketing, customer service, and technical support. Also known by the acronym "CRM".

Characteristics of Business Customer Interactions

Business-customer interactions occur over a wide range of communication channels, such as phone, email, web, and text. These exchanges also happen outside of organizational control such as conversations on social media. Although business-to-business (B2B) companies use many of the same communication channels as business-to- consumer ( B2C ) companies, certain characteristics of B2B customer interactions differentiate them within the marketplace.

B2B vs. B2C Interactions

Whereas the main interactions between businesses and consumers primarily occur during the transaction stage of the buying process, relationships between organizations and their business customers often move beyond the transactional nature of the interaction. Because the sales cycle can extend much longer than in B2C sales cycles, B2B companies seek long-term relationships with other business brands. Consequently, brand loyalty is much higher than in the consumer goods market due to amount of time invested during the B2B sales cycle. Whether the relationship is between a manufacturer and wholesaler, or wholesaler and retailer, a B2B transaction is perceived as riskier than B2C purchases due to the average value of each transaction. Buying machinery can cost upwards of a million dollars or more. In comparison, a tube of toothpaste may cost a consumer three or four dollars.

The investment amounts in B2B purchases are also much higher than in B2C purchases. Since there are more people involved in the decision-making process and technical details may have to be discussed in length, the decision-making process for B2B products is usually much longer than in B2C interactions. Thus, purchasing the wrong product or service, the wrong quantity, the wrong quality, or agreeing to unfavorable payment terms may put an entire business at risk.

Evaluation and Selection Process

The evaluation and selection process between businesses and customers can last for several weeks, months, or even years depending on the level of cost and complexity of the selling process. Often, B2B sellers must submit a Request for Proposal (RFP) to be considered for projects involving high-priced items such as software systems, financial services, or office equipment. The seller may be required to meet with the buyer numerous times before the transaction is complete. In these meetings, B2B sellers will often send sales representatives and executives to present and demonstrate how their products and services are more competitive than similar brands. During this evaluation period, the buyer may ask for prototypes, samples, and mock-ups of the product. Such detailed assessment serves the purpose of eliminating the risk of buying the wrong product or service.

Post-purchase B2B Interactions

The relationship between a business seller and its business customer does not end after the transaction is finalized. Customer relationship management tactics are used to monitor and encourage repeat business and customer referrals. B2B brands often court customers with ongoing communications including newsletters, webcasts, seminars, and other events that add value to the business-customer relationship. Also, sales representatives responsible for overseeing customer accounts may offer discounts or other promotions to facilitate repeat sales from existing customers.

B2B brands often have specific target markets that can be reached using direct online and offline marketing activities. Industry trade shows, exhibitions, conferences, and online communities are common places where B2B companies interact with both customers and prospects. B2B brands also use these events as opportunities to meet with customers face-to-face, hear concerns, and collect feedback for improving products and services.

Source: Boundless.com, https://courses.lumenlearning.com/boundless-marketing/chapter/business-customers/
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Customer Concerns

B2B companies typically implement client services or customer care processes to address customer concerns and enhance customer satisfaction.

Learning Objectives

Give examples of the types of customer concerns faced by B2B companies, and the common methods used to address these concerns

Key Takeaways

Key Points

• Customer concerns may arise due to issues over product quality and functionality or a lack of corporate responsiveness to customer complaints.
• B2B companies may use customer care ticket systems, online blogs, or extranets to better capture customer feedback and respond to customer demands.
• Merging customer feedback with customer service Key Performance Indicators (KPIs) helps guide companies' attention to areas where customer data can make a positive impact.

Key Terms

• stakeholders: A person or organization with a legitimate interest in a given situation, action or enterprise. It can range from employees and investors of a company to the customers purchasing from the company.
• customer relationship management: A widely implemented model for managing a company's interactions with customers, clients, and sales prospects. It involves using technology to organize, automate, and synchronize business processes - principally sales activities, but also those for marketing, customer service, and technical support. Also known by the acronym "CRM".
• extranet: A private computer network that uses Internet protocols and can be accessed by authorized individuals via the Internet.

Concerns of Customers

Nearly every brand must have a client service or customer care process in place to address customer concerns and enhance customer satisfaction. This is especially true for business-to-business (B2B) companies where stakeholders often provide constructive criticism to help marketing, sales, and technical departments adapt product offerings to meet changing customer needs.

Types of Customer Concerns

Customer concerns may arise due to issues over product quality or functionality. Mass product recalls are examples of company efforts to limit liability or avoid costly legal penalties due to corporate negligence. In addition to addressing customer concerns over product quality and functionality, B2B companies such as manufacturing firms must reassure customers they can handle the high cost of incidents at their factories and in their supply chains. These include responding to customer and public concerns over sudden plant shutdowns, employee strikes, explosions, toxic spills, and other unplanned occurrences. Similar to business-to-consumer (B2C) companies, B2B brands must have quality control and crisis management programs in place to respond to events that can result in a loss of customers and revenue.

Corporate responsiveness and sensitivity to customer complaints also impact brand image. Account or sales managers are often a B2B company's first line of defense when it comes to flagging and responding to customer complaints regarding service disruptions or product malfunctions. B2B brands often assign cross-functional teams – sales representatives, developers, product specialists, and call center professionals – to oversee individual client accounts. This is especially true for large business accounts that generate significant revenue for the company. Reassuring customers that their needs and concerns are the company's top priority is reflective of B2B brands that use a customer-driven approach to ascertaining customer demands.

Methods for Addressing Customer Concerns

The Internet era has presented challenges in maintaining and enhancing the personal customer experience, while making use of the efficiencies of online commerce. B2B companies such as software firms may implement online ticket systems, which allow business customers to submit electronic tickets that are automatically routed to customer care professionals. Business customers are then assigned a ticket number that allows the company to track the entire history of the customer problem and determine whether the issue was satisfactorily resolved. It also allows customer care professionals to properly escalate customer issues to appropriate channels such as the sales or research and development team.

B2B brands are increasingly using web and social media channels such as community blogs, online forums, and extranets to capture customer feedback. These communication channels give customers the ability to give detailed explanations of both negative and positive experiences with an organization. Sales methodologies applied to customer relationship management (CRM) systems allow B2B organizations to accurately monitor, track, and measure this information. Merging this data with customer service Key Performance Indicators (KPIs) also helps direct the company's attention to areas where customer feedback can make a positive impact (e.g., cost savings, service improvement) on the overall organization.

Purchase Behavior

Business customers – as compared to consumers – tend to be more rational, are more concerned with quality, and look to make lasting relationships.

Learning Objectives

Identify the unique characteristics of B2B purchase behavior and how it influences B2B marketing tactics

Key Takeaways

Key Points

• Notable differences exist in the purchase behavior of B2B versus consumer marketing due to the length and complexity of B2B transactions.
• Business customers are more cautious and rational in their purchasing decisions than mass market consumers.
• Though challenging due to the complexity of the industrial market, purchase behavior analytics also allow B2B companies to segment target audiences.

Key Terms

• supply side: In a market trade, the side where the supply comes from.
• marketing mix: A business tool used in marketing products; often crucial when determining a product or brand's unique selling point. Often synonymous with the four Ps: price, product, promotion, and place.

Purchase Behavior

Business-to-business or B2B marketing targets markets where the end users or customers are the purchasers of goods and services. These customers are individuals, companies, organizations or governments, and consume industrial rather than mass market goods. Business customers also purchase a wide variety of different services, depending on their business needs.

Notable differences exist in the purchase behavior of B2B versus consumer marketing due to the length and complexity of B2B transactions. However, like consumer markets, business marketers monitor and analyze customer purchase behavior to develop segmentation strategies and customer intelligence.

Characteristics of B2B Purchase Behavior

Because B2B sales cycles can extend over months and even a few years, the business customers are more cautious and rational in their purchasing decisions than day-to-day consumers. Construction materials, office equipment or accounting services can cost organizations tens or even hundreds of thousands of dollars. Commitment times are also longer, as B2B buyer-seller relationships can extend over the lifetime of the product or service delivery period. For example, a company that purchases software products may also buy installation and training services to facilitate to help employees adopt the technology. The entire customer experience can extend from the close of the transaction to the expiration date of the service contract.

Some of the behavior characteristics unique to B2B purchase behavior:

• A trend towards more rational, rather than "impulse” buying behavior
• Greater value attributed to product or service features such as quality and cost-effectiveness
• Preference for partnering with reliable, cooperative and reputable organizations

B2B Customer Segmentation

Predicting customer purchase behavior also allows B2B companies to segment industrial markets. Companies and organizations face challenges in business market segmentation since B2B markets face greater complexity in buying processes, buying criteria and actual products and services. Additionally, measuring strategic data relevant to the buyer's target audience and overall marketing strategy is challenging due to the long and complicated progress of doing B2B transactions.

Nevertheless, companies that segment groups of potential customers with similar wants and demands are able to customize a marketing mix that works for different audiences. B2B companies also potentially work with different suppliers. The goal for every industrial market segmentation scheme is to identify the most significant differences among current and potential customers and/or suppliers that will influence their purchase decisions or buying behavior, while keeping the segmentation approach as simple as possible. Thus, segmenting the supply side of an organization can also prove value to companies.

Purchase Influences

Purchase influences of B2B customers differ from those of the consumer market due to the high time and cost investments of B2B transactions.

Learning Objectives

Differentiate between business-to-business customer influences versus consumer market purchase influences

Key Takeaways

Key Points

• Customer retention, customer relationship management, personalization, customization, and one-to-one marketing programs are instrumental in encouraging new and repeat purchases in B2B companies.
• Unlike consumer buyer markets, business customers are less emotional and more task-oriented during the buying and decision-making process.
• Quality, price, and delivery mechanisms heavily influence B2B buyer decisions.

Key Terms

• lead: Potential opportunity for a sale or transaction, a potential customer.

Purchase Influences

Similar to consumers, B2B purchase influences encompass different variables that affect business customers' buying behavior. The purchase influences of business-to-business (B2B) customers differ from those of the consumer market due to the high time and cost investments of B2B transactions. Customer behavior study, which is based on consumer behavior, is helpful in analyzing how B2B sales and marketing activities reinforce the purchasing behavior of B2B customers.

Influential Assets in B2B Purchase Behavior

Customer retention, customer relationship management, personalization, customization, and one-to-one marketing programs are instrumental in encouraging new and repeat purchases in B2B companies. For example, sales and marketing professionals may implement promotional initiatives such as appreciation events, product discounts, and free upgrades to prompt word-of-mouth referrals. Depending on the industry, customer referrals can generate significant leads for B2B businesses.

Personalized customer service and marketing programs are also influential during the B2B evaluation and selection process. Brands can incorporate personalization features with communication tools including product brochures, email newsletters, and social media to help prospects and existing customers evaluate product offerings.

The option of a straight "re-buy” can help to encourage customer retention. A straight "re-buy” occurs when a customer buys the same product, in the same quantity, from the same vendor.

Unlike consumer buyer markets, business customers are less emotional and more task-oriented during the buying and decision-making process. The potential risks that can result from a poorly executed B2B transaction often produce lengthy and complex sales cycles. To facilitate the evaluation and selection process, B2B customers specifically look for product attributes such as economy in cost and use, productivity, and functionality. Often, these variables are assessed during face-to-face, online meetings, or demonstrations with sales professionals.

Ultimately, B2B customers seek to partner with reliable, fair, consistent, responsive, and cooperative businesses. Quality, price, and delivery mechanisms, rather than emotional motives, tend to dominate the purchase decisions of B2B buyers. Customer testimonials, trade reviews, and industry analyst firms are all resources B2B buyers use to determine whether these factors are in line with the reputation and performance of B2B sellers.

Negotiating

B2B buyers and sellers use negotiating tactics to agree upon terms and pricing that benefit both the customer and the seller.

Learning Objectives

Discuss the primary purpose of negotiation in B2B organizations

Key Takeaways

Key Points

• Typically, many departments and roles are involved in the decision-making process for business purchases.
• Client concerns and modification requests are often addressed during the contract stage to help guide the buyer-seller relationship throughout the life of the contract.
• Due to globalization and evolving business trends, more companies are adopting negotiation teams in order to take advantage of cross-departmental and cross-functional knowledge during the negotiation process.

Key Terms

• B2B: Acronym for commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.
• information silos: A management system incapable of reciprocal operation with other, related information systems.

Negotiating

Negotiation is a dialogue between two or more parties, intended to reach an understanding, resolve differences, or gain advantages. It is also used to agree upon courses of action, bargain for individual or collective advantages, and satisfy the various interests of people or parties involved in the negotiation"Negotiation" originates from the Latin expression negotiatus, the past participle of negotiare, which means "to carry on business".

Relevance of Negotiation in B2B Organizations

The negotiation process is an important step during the business-to-business (B2B) buying process. Both buyers and sellers use negotiating tactics to agree upon terms and pricing that will benefit both the customer and service provider. Typically, many departments and roles are involved in the decision-making process for business purchases. This is particularly true at the contract stage, where client concerns and modification requests are addressed to help guide the buyer-seller relationship throughout the life of the contract. Buyers may be interested in modifying their purchase via enhanced product features, price adjustments, or other customer benefits. Management, sales, marketing, quality control, and legal personnel may all play a part in negotiating buyer-seller contracts and agreements.

Evolution of Negotiation Tactics

Due to globalization and evolving business trends, more companies are now using negotiation teams. Teams can effectively collaborate, pool resources, and brainstorm solutions to break down and manage complex negotiations. More knowledge and wisdom can be harnessed in cross-departmental and cross-functional teams than with individuals operating in information silos. Writing and noting customer specifications, listening to buyer concerns, and communicating specific actions are roles team members must satisfy during the negotiation process. The capacity base of a negotiation team can also reduce errors and strengthen the long-term buyer-seller relationship because of the improved accuracy and wider range of knowledge that can be brought to the negotiation.

Leasing

In B2B transactions, leasing serves as an alternative financing method for customers looking to use high-priced products and services.

Learning Objectives

Discuss the advantages and disadvantages of leasing in business-to-business transactions

Key Takeaways

Key Points

• One of the major benefits of business leasing is the ability for organizations to quickly take advantage of new products available on the market.
• Leasing can also help organizations manage their annual budgets, avoid dealing with depreciated and unusable equipment, and take advantage of the latest technologies available on the market.
• Some of the major disadvantages to leasing products include loss of control over the product, limited flexibility in contract modifications, and hidden fees and penalties for damaged products.

Key Terms

• depreciation: The measurement of the decline in value of assets. Not to be confused with impairment, which is the measurement of the unplanned, extraordinary decline in value of assets.
• lessee: An individual or a corporation who has the right of use of something of value, gained through a lease agreement with the real owner of the property.

Leasing

Leasing is a process by which a firm can obtain the use of certain fixed assets for which it must pay a series of contractual, periodic, or tax deductible payments. In business-to-business ( B2B ) transactions, leasing serves as an alternative method for customers looking to use high-priced products and services. For example, customers often lease software products. The process works similar to leasing a car, where customers pay a fee over time to use the technology without owning the equipment. At the end of the lease, the hardware is returned or purchased at a fair market price.

Benefits Of Leasing

One of the major benefits of leasing is the ability for organizations to quickly take advantage of new products available on the market. Organizations such as schools and universities, which often rely on bonds to fund new hardware and software purchases, frequently take advantage of leasing programs. This keeps the hardware in schools current, and ensures that students are using the latest technology.

Business products also tend to depreciate quickly and have little value at the end of its life. Leasing allows organizations to avoid dealing with the depreciation of outdated products. When a piece of technology has reached the end of its life, the equipment is usually sent back to the vendor for disposal, saving the customer time and money. Organizations with smaller cash flows can also obtain technology at lower costs by leasing products rather than purchasing them.

Leasing can also help organizations manage their annual budgets. Depending on the organization, lease agreements are easier to administer and approve than purchasing agreements, since the cost of the equipment is spread out over the course of the lease. In contrast, organizational purchases require the availability of large sums of money within a single fiscal year. Leasing business products not only significantly reduces the length of the approval process for obtaining products, but makes it easier for organizations to balance their annual budget.

Additional advantages of B2B leasing agreements include flexible lease-to-own programs. A lease can be structured to allow the purchase of equipment at the end of the lease for fair market value of the hardware. Furthermore, lease agreements can be structured to include maintenance, installation, software, and other professional services. This can save the district time and money in the long run.

Potential Disadvantages Of Leasing

Without owning a product, organizations also lack full control over what can be done with the equipment. Whereas customers who purchase equipment wield influence over future product updates and modifications, leasing customers may have limited say in how products evolve for future releases.

Lease agreements are also set for a definite period of time, which locks organizations with certain vendors and equipment. If the needs of the lessee suddenly change, it might be difficult to modify the terms of the lease. However, some leases will allow product upgrades before the end of the lease.

In addition, lessees might not be able to return damaged products depending on the leasing conditions. Leasing terms sometimes include hidden fees and penalties at the conclusion of the lease, all of which can cost the organization extra money. Accounting and purchasing departments must be aware of both the pros and cons of the lease to avoid larger problems over the lifetime of the leasing contract.

Promotional Methods

B2B marketers use industry or trade publications, trade shows, private events, and social media to generate awareness about their products and services.

Learning Objectives

Differentiate between the promotional methods and tools used in B2B versus B2C marketing

Key Takeaways

Key Points

• Business marketers generally avoid mass market broadcasts, preferring instead communication channels aimed at specific industries and business audiences.
• B2B marketing promotional methods differ from B2C brands due to the specific needs and variables comprising the industrial business market.
• Social media is fast becoming a promotional tool used to position B2B brands in the digital sphere.

Key Terms

• white paper: A factual write-up of something, specifically devoid of the appearance of marketing.

Promotional Methods

Promotional methods in business-to-business (B2B) marketing differ from those of business-to- consumer (B2C) brands due to the specific needs and variables comprising the industrial business market. Since B2B customers are other companies and organizations, B2B brands avoid mass market broadcasts. Likewise, they generally use communication channels aimed at specific industries and business audiences. B2B companies also ensure their brands are represented at industry events where potential customers meet B2B sellers. Extensive research and budget analysis are conducted to determine if specific promotional elements will achieve short-term or long-term marketing goals and contribute to the financial performance of the organization.

Promotional Tools Used in the B2B Marketing Mix

B2B businesses use promotional methods unique to the industrial business market. For instance, marketers and sales professionals use white papers and product brochures to educate prospects and customers about products or services. These publications are also placed in industry and trade media to produce favorable publicity. If done strategically, media placement enforces messaging behind specific marketing activities across multiple communication channels.

In addition to trade shows and public conferences, seminars and workshops may also be held for potential and existing customers. Relationship building is a key aspect in B2B marketing, as brand loyalty and commitment tend to be higher among business customers compared to consumers. Hosting these seminars creates an aura of exclusivity and presents an intimate forum where individuals from B2B organizations can voice concerns, submit feedback, and view product demonstrations.

Social media is fast becoming a promotional tool used to position B2B brands in the digital sphere. Although B2B organizations tend to be more cautious than B2C brands in using social media, more and more B2B companies are using sites such as Facebook and LinkedIn to connect to customers. Moreover, B2B organizations also use social media for internal communications to increase collaboration and productivity among workers. Internal and external communications via social media can also work concurrently, as employees often share information on events, product releases, and industry developments with other colleagues