Selling to Both Businesses and Consumers
by Alan Weber
Business-to-business marketing and business-to-consumer marketing are very different. Communications are different, databases are different and sales methods are different. Most companies consider themselves to be one or the other. But the division between the two markets isn't absolute.
Many consumer marketers also sell to businesses, whether they recognize it or not. It is not uncommon to begin a marketing database analysis comparing consumers based on demographic data, and find the biggest customers aren't private consumers at all.
In most cases where a company sells to both, the database, communication efforts and selling efforts are geared toward consumers. This often means the best, most profitable customers (businesses) are being treated like consumers—and sales are likely to be lost.
Where Unexpected Business Customers Come From
Businesses buy food, clothing, art, gifts and all kinds of items consumers buy. Businesses are not limited to buying office supplies, industrial equipment and business travel. Consumers have jobs, and if they see a good offer for their employer, they can take it to work.
It isn't uncommon to find businesses buying for the first time through consumer-oriented direct mail, space advertising and general media advertising. If businesses can be enticed to buy through efforts not geared toward them, imagine what could be done with the right offer!
Acquisition Cost and Lifetime Value
One of the reasons business-to-consumer marketers shy away from selling to businesses is that prospecting is more difficult. When advertising cost is compared to sales by individual prospecting effort, it usually costs less to acquire consumers than businesses. As a result, many marketers don't try to acquire businesses at all.
Minimizing acquisition cost of business customers requires making offers that appeal to business clients and having the right business audience. Finding the right audience can be a challenge if all previous efforts were directed at consumers. Profiling existing business customers is a good way to find the best places to begin testing business-to-business prospecting efforts.
When lifetime value is considered, the acquisition picture changes dramatically. Once they become customers, businesses tend to be more loyal and spend much more. Businesses often make a small order to test a product or service, and then return with a much larger order. As a rule of thumb, businesses generally spend about 10 times as much as consumers after their first purchase.
It is important to consider repeat sales to businesses when investing in prospecting efforts. It can take less time to earn back the higher cost of prospecting to businesses than it does to earn back the lower cost of prospecting to consumers.
Differences in Data Capture
When a business-to-consumer database is set up, there is at minimum a place for the name and two address lines. However, there may be no place to put company name or title. When there is a company field, the customer service rep may type other information like "OK to leave on porch" or "Enjoy the gift" in that field if there's no other place to include a note.
"A place for everthing and everything in its place," the saying goes, and it applies to databases as well as orderly households. If a company sells to both businesses and consumers, capturing business data well enough to reach buyers properly is crucial. It is hard to clean up information that was improperly entered, and even harder to get information that was not entered at all. For example, fax numbers and e-mail are crucial in business-to-business marketing and must be gathered from the client.
For companies with many business clients, it will be necessary to make a distinction in companies and the contacts at those companies. With most databases geared toward consumers, this is not possible. A database that allows for designations of buyers, influencers and users at a single client company is a very different design than a database of consumers that are viewed as a single household.
Title is important when selling to businesses, because it tells the marketer what the contact person's job and authority is likely to be. Knowing a contact is in purchasing, receiving or management can help greatly in directing future contacts.
Method and Timing of Contact
For business clients, it often makes sense to have outbound telesales and/or salesperson contact to support the relationship. For accounts spending hundreds or thousands of dollars on a regular basis, additional sales from more personalized contact can more than pay for the added selling cost. It is not uncommon to have a completely different selling approach for businesses than for consumers.
Businesses make decisions further in advance than consumers. They need more time to allocate budgets, make selections and get approval. As a result, seasonal offers need to be made much earlier to businesses than consumers. By the time consumers are ready to respond, businesses have long since made their decisions.
Whom to Contact
Consumers are generally treated as a household, and the most recent contact person is the one who will receive the next contact. The most recent contact person is considered the decision-maker.
When a data capture system geared toward consumers is used with business customers, the best contact(s) may not be in the database at all. The contact may be accounts payable, or the contact address could be a shipping address.
In business-to-consumer marketing, when a household has made a recent purchase, they are considered an active buyer. A business customer, on the other hand, could make several purchases, and not be considered a buyer at all. For example, Jane Smith, head of marketing, may buy corporate gifts each year for clients. If the data show only accounts payable as the client, Jane is not considered a customer. She could be dropped from future contacts.
For many business clients, the only way to know who the contacts are is to periodically call and/or visit them. If each account's purchasing volume is high enough, this is well worth the extra expense. This is particularly true when business clients have more than one worthwhile contact. It is important to reach the one who specifies the purchase, the one who approves the purchase, and the one who actually makes the purchase.
Differences in Message
The reason to buy and the tone of the selling message may be quite different for businesses and consumers. The motivations are different from one business contact to another, and as a result smart marketers send different messages to different types of contacts.
The business end user of a product, such as a computer or a printer, is primarily concerned with features, benefits and functionality. The department head may be more concerned with whether the product is compatible with other products already in the office, and whether or not it will fit in the budget. The purchasing agent may be more interested in finding the best place to buy the product. Each business contact has a very different perspective from an at-home consumer.
Finding New Business Customers
It is much more difficult to reach businesses through rental of response lists than it is consumers. There are far fewer response lists to choose from. However, there are several other ways to reach businesses that are not available or not particularly effective for reaching consumers. For example, compiled lists using SIC, sales volume, region and credit variables may be effective. Magazine lists, usually from vertical industry publications, may have excellent contact lists for specialized products.
Before deciding which type of businesses to pursue, remember the 80/20 rule. That is, 80 percent of sales come from 20 percent of the customers. Look not only at how many of each type of business are in the database, but also at how much each type spends. Usually, certain kinds of businesses spend significantly more than others. First, go after the ones that spend the most.
Be careful when reviewing the business customers already in the database. Many marketers assume that bigger is better. They assume that if they target larger companies, each sale will be larger. However, it is not uncommon to find 70 percent to 80 percent of a company's business client revenue coming from companies with 15 or fewer employees. Small business can be the best customers, are often much easier to deal with, and often allow higher profit margins. Don't be surprised if small businesses are your best customers.
How Many Business Customers Are There?
If businesses have been treated like consumers, it may be difficult to tell if a customer is a business or a consumer. This is especially true when there is no specific place to store a company name in the database, or notes about a customer are occasionally put where a company name should be.
To get an idea of how many customers are businesses, start by having a database specialist look through the name and address fields for words like Inc., LLC, The, Suite and Corp. A next step is to overlay the data with business demographics. Those that match are businesses. A little more work should make the distinction between consumer and business addresses fairly accurate.
Making Use of the Knowledge
Once you establish how much sales come from businesses versus how from consumers, you can determine how profitable different customer types are.
If this type of analysis has not been done recently, it will likely result in a major shift in both prospecting and repeat-customer marketing. In most situations, business are targeted more as prospects, and reached differently as customers. How this is accomplished varies greatly from company to company.
Look into your database, and see if you can tell how profitability of consumers and businesses compares. You may be surprised.
Alan Weber is CEO of DataPlus Millennium LLC, a provider of database consulting and analytical services. Past president of the Kansas City Direct Marketing Assn. and co-author of "Desktop Database Marketing," he can be reached at (913) 341-5366 or firstname.lastname@example.org.