CX & Design June 22, 2020
The Digital Transformation Imperative for B2B Commerce
B2B commerce is characterized by a traditional way of doing business; sales reps with specialized knowledge travel around the country to forge and maintain customer relationships via face-to-face interactions. But, just like in all other sectors, a digital, data-driven change is taking place in B2B commerce, and not just because of the challenges COVID-19 has posed.
For a while, competition has been coming from different fronts, and customers are getting more demanding due to their own personal experiences with B2C companies that are much further along the digital maturity curve. At the same time, the position in the value chain of many B2B businesses is changing. This poses certain challenges, but also offers opportunities. The trends listed below show the most important developments in B2B commerce and serve as an inspiration to make that all-too-necessary changeover to digital.
1. Increasing competition
Lately, Dept has been receiving frequent requests for help with the design of corporate startups. All of these have been from B2B businesses. They are brands that want to reinvent themselves to catch up with B2C businesses, which are characterized by high quality, short-cycle sales, with larger groups of individual decision-makers/customers. B2B customers also use digital-first services like Uber, Amazon, and Airbnb, and expect a similar user experience from a B2B platform. In fact, there is a huge gap that needs to be closed.
Customers increasingly want to be able to compare and buy online, which is a big shift from traditional sales approaches. Many B2B companies will have customer-facing account managers who have known their customers for twenty years. They get together for coffee, and the account managers give advice. So, at these companies, it’s not just about buying a product or service, but also about advice and customization. A premium service, if you will. At these businesses, a lot of effort goes to the top segment – the major customers who place large orders, often with products tailored to their specific needs. The entire middle segment, which represents a huge turnover, could be offered digital services, including premium ones, to maximize revenue potential.
While B2C businesses are under pressure from platforms like Amazon and Zalando, there is plenty of potential for growth for B2B marketing. On top of that, taking action is imperative, there really is no way around it. Digitally, the B2B market still has a lot of growing up to do. Old business models still exist, and the underlying technology tends to be outdated.
Digital transformation does require investment, but it’s one you can’t afford not to make. Not only because your competition will be doing the same, but because your clients will expect it.
Companies are increasingly using corporate startups as a vehicle for achieving a digital-first approach. Setting up a ”sub-brand” outside of the company’s main structure, such as in this case study of ABN AMRO’s New10, is now a common thing to do. But, depending on how much catching up an organization has to do, it can also be a department within the existing corporate structures. No matter the choice, it should eventually become the core business.
2. Digital transformation of your organization
Digital transformation requires different skills. The ”real” work is (partly) replaced by people who build ”the machine” and have the ability to view business models and customer relationships as concepts. They are the ones who find solutions in UX, data, AR, etc.
Previously, sales representatives had to be trained, and they had to build customer relationships themselves, but these processes are becoming increasingly data-driven. If, as a B2B marketer, you are already able to sort out your data centrally, you will have to re-train all your people to feed this data to the customers. Of course, it is much easier if this is done digitally and automatically.
The market is becoming more and more transparent. It is easy to find out what you can get and what something costs. This means that, as a B2B business, you will have to distinguish yourself in a different way. B2B marketing is characterized by sales reps who give specific advice to clients. And these are exactly the kinds of things you should be offering online. Using data, you can also automate and continually update and optimize this advice, leaving you more time to provide larger customers with excellent service. Ultimately, the knowledge will be stored in a database rather than in just one person.
A good example is the trend that sees static prices turning into dynamic ones, based on factors such as inventory, planning, market prices, parts, season, requirements, and competitors. These are all variables you can put into a dynamic pricing engine. The model is becoming more intelligent by the day. So, the skill shifts from selling to managing the dynamic model.
But if everyone starts implementing this technique, the question will be: are you still distinguishing yourself from the others? Your touchpoints are everything, so design is equivalent to sales. It is essential that anyone in B2B management gets to grips with this as soon as possible. So, if you launch a corporate startup, don’t base it on the traditional business model of the parent company, because then you are just a clone of the corporate parent.
Innovate, keep up and make sure you stay ahead of the game. There are huge opportunities everywhere. Digital transformation is not just about the front end, but also about the numerous background processes. It’s all about the human-process-technology switch. You need to get a move on and learn – as fast as you can!
A company that sells components for lifts has a team of installers to periodically inspect them. Nowadays, the status of the lifts can also be checked using sensors. That information is then linked to the product catalog, and the sensor indicates what part needs replacement. In the old days, the lift would have been out of service for repairs for a week, but now, thanks to the link between the systems, there has been a huge increase in efficiency.
This is an example of the omni-channel trend in the B2B sector, which shows an increase in the data flows between the customer and supplier, meaning inventory management can be automated and making it possible to supply products that meet extremely specific requirements. It also reinforces the bond between the supplier and the customer. An added bonus is that you are actually creating more than just a digital version of the old business, and you can use your own sales and customer data to improve the advice you give to your clients. You are adding value in entirely new ways.
B2B2C & Direct-to-Consumer Models
Florensis grows flowers, which they then sell to horticulturists. The horticulturists then grow them into larger plants. They then sell the plants to retailers who, in turn, sell them to the consumer. Florensis has now started concentrating more on the deal with the retailer.
At the same time, you get retail startups like Bloomon, which go straight to the horticulturist and the breeder. So, the competition comes at you from two sides: from new, consumer-facing companies, and companies that actually have the source on the other. As a result, B2B business quickly touches B2C, which is a rising trend in many sectors.
You’ll notice that clubs like Uber and Lyft have a solid grip on both the B2B and the B2C side – all through the use of a single, solid app that communicates with both sides. It is a kind of ”meta” competition that affects the business model. That means not only doing things smarter and faster, or that the UX should be solid, but that you, as a B2B marketer, must decide what your position is, which service you should work on, and perfect which kind of business you need to let go.
At the same time, we are seeing a movement in the other direction—for example, JustEat. You used to go and get fish and chips around the corner; now, there is a one-stop-shop for all your takeaway needs. So, as a party, you want a strong connection with your end customer, but you also want to have a say in the basic product, so you can get as much as possible from the value chain and influence it wherever you can.
You tend to see fewer players in the same value chain: it’s a dog-eat-dog world out there.
In short, digital transformation is essential. It is important to work with all the ingredients required for a digital business (data, innovation, UX, etc.). In addition, B2B businesses need to look at their strategic position in the value chain and check what this means for the business model. What will you be emphasizing? Which partnerships will you be entering into? Which ones will you avoid? One thing is clear, you must seriously get started on B2B Commerce as soon as you can.