consumer and business market

10 Most Important Differences Between Consumer and Business Market

When B2B International began in the 1990s, one of our biggest challenges was convincing potential clients that our skills as B2B market researchers and marketers were unique.

The idea that B2B marketing – and thus the techniques used to explore these markets – were meaningfully distinct from consumer marketing was frequently dismissed.

In the last two decades, B2B marketing has become a distinct discipline, highlighting marketing practice differences. We believe it is important to emphasize the many differences between the two disciplines, especially when implementing a business-to-business marketing strategy.

B2B Marketing:

As always, definitions must be precise. What are B2B markets and B2B marketing? Assume that the value chain begins with consumer demand and ends with dozens of business products or services. Consider the simple shirts we buy. They don’t just happen in the shops. For example, a garment is machined into a fabric and then packed and distributed through various levels until it is finally picked up from the shelf. The demand for the product pulls everything to the left of the shirt through the chain of derived demand. Textile mills sell cotton to merchants, who sell it to spinners, who sell it to weavers, etc. No business buys products for pleasure. They buy them to add value to the products and move them down the supply chain to us, the public.

10 Reasons Why Consumer and Business Market are different.

We believe there are ten key differences between consumer and business markets. They are as follows:

1. B2B Decision-Making Units Are More Complex

Even the most complex decisions are usually made by one person in a small family unit. In business-to-business markets, the decision-making unit (DMU) is complex or has the potential to be.

Ordering low-value, low-risk products (like the ubiquitous paper clip) may fall to the office junior. However, purchasing a new business-critical plant may require a large team to deliberate over a long period. Individuals leave the company or change jobs far more frequently than they leave the family unit.

This dynamism has implications for B2B markets. B2B target audiences are amorphous, consisting of individuals with varying interests and motivations. Buyers want a good deal. They want high output. Executives want low risk. And those are just their basic needs. Each party to the DMU brings psychological and cultural baggage to the decision, which can lead to interesting product and supplier variations.

·       Business-to-business purchases are classified into four categories based on their financial value and business risk. Each of these categories has distinct buying habits and complexities.

·       Low-risk, low-value purchases are the most consumer-like. In many cases, only one person is involved. The decision has little financial or business risk, so it is made quickly.

·       For low-risk, high-value items like raw materials, a mix of technical and purchasing personnel, often board members, is required. This complexity is required to reduce costs without compromising quality. Purchasing personnel would normally make transaction-by-transaction decisions, thanks to more technical employees who would periodically review suppliers.

·       Low-value, high-risk items like office insurance would also have specialists and buyers. In this case, an expert (perhaps an in-house legal expert) would be the key decision-maker because the ‘risk’ is in the product rather than the price.

·       High-value, high-risk purchases require a large number of senior decision-makers to evaluate a wide range of purchase criteria. An example of an upper-management department head involved in plant equipment is the CFO.

What does this mean for B2B marketers?

Faced with a complex and knowledgeable buyer, it is critical that the B2B marketer exhibits high levels of expertise in all interactions. This includes product knowledge as well as technical and other support provided by the seller after the sale.

Marketers must also be diligent and patient when negotiating with decision-makers in finance, production, technology, and other areas.

2. Business-to-Business Buyers are More Rational

We believe that business-to-business buyers are more rational than consumer buyers. We don’t leave our emotions at home when we go to work, but we try to keep them hidden from our coworkers.

Would a person who pays 3,000 for a leather jacket that is less warm and durable than a 200 jacket make the same choice at work? For example, would the same person choose to buy an infuriating computer or an asbestos-laced roof over a computer that infuriates them every Saturday?

Consumers are often less informed, less accountable to others, and more susceptible to whims, indulgences, recklessness, and self-promotion than workers. We thus tend to make purchases that a rational observer (a business-to-business buyer who must make a monthly profit) would consider absurd. Consumers rarely inquire about a product’s return on investment (return on investment). We buy wants, not needs.

What does this mean for B2B marketers?

The fact that B2B buyers are rational makes our job as B2B marketers easier – we just need to design and manufacture good products and deliver them prompt and on budget.

No way. It would be naïve to assume B2B buyers are rational. Because most B2B buyers are held accountable, trust and security are critical. The life or reputation of a B2B buyer is at stake. Trust and security are crucial emotional issues. This emphasizes brand, reputation, case studies, and other factors that convey reliability and consistency over the life of the purchased product or service.

3. B2B Products are Frequently More Complicated

B2B products are often as complex as the decision-making unit in B2B markets.

Whereas a consumer product purchase requires little expertise (perhaps even a whim), an industrial product purchase frequently requires a qualified expert. Industrial products, unlike consumer products, are often bespeaking and require high levels of fine-tuning. Even complex consumer goods are often chosen based on simple criteria. A car may be chosen for its speed and appearance, and a stereo may be purchased for its volume.

Simple industrial products, on the other hand, are frequently integrated into larger systems, necessitating scrutiny and expert modification. The idea of a turbine manufacturer or commercial website design buyer looking at three or four products and picking one just because it looks nice is absurd. The choice of the turbine will be based on technical, productivity, and safety issues, whereas the choice of the website may be based on its integration into a larger B2B marketing campaign, user interaction, and search engine visibility.

Consumers aren’t interested in the technical details of the products they buy. The vast majority of car buyers are more concerned with the car’s top speed than its acceleration. Similarly, a chocolate bar buyer is more likely to be interested in the product’s taste and functionality than the technology and ingredients that make it possible. As a result, many consumer products are marketed superficially or even vapidly.

Car manufacturers frequently ignore not only how well a car performs, but also whether it performs at all, in favor of applying non-physical attributes like sex appeal to their goods. Business-to-business campaigns, on the other hand, seek to educate their target audience. Unlikely for a salesperson to buy a car based on its color or sexual appeal. As a result, promotional material for business-to-business campaigns may need to go as far as offering product specifications.

What does this mean for B2B marketers?

The B2B marketer must be well-versed in the product or service being sold. For example, after-sales service, problem resolution, client management team, etc. must all be understood. As a result, B2B salespeople are often highly experienced and come from a technical background. A small team of salespeople can make or break an entire business-to-business product line.

4. B2B Markets Have Fewer Buying Units

Almost all B2B markets follow the Pareto Principle or 80:20 rule. A few clients dominate the sales ledger. Neither do we mean thousands or millions. Even the largest business-to-business companies have 100 or fewer customers that really matter to sales. Each person’s purchase and use of a product is limited in consumer markets. There are heavy users of all consumer products, but the difference between the two is minor compared to the scale of differences in B2B markets. Most consumers fit into a “typical monthly spend” category, with a few outliers. The difference in spending between the largest and smallest buyers in business-to-business markets are likely to be much larger than consumer markets. In contrast to consumer markets, business-to-business markets have small numbers of customers of varying sizes and a few key accounts.

How does this affect B2B marketers?

Because small numbers of customers dominate businesses, database management is critical in B2B marketing. Customer relationship management systems now allow databases to be updated with DMU members’ personal information, transactions, and contacts.

The B2B marketer must also be adept at key account management, with all the responsibilities that entail. Key accounts expect not only product delivery prompt and amount, but also services like quick problem resolution and technical advice. Indeed, key B2B accounts increasingly seek partners who will hold stock on their behalf, provide technical advice, calculate product efficiency and added value, and provide long-term on-site support.

Above all, the small number of buying units in B2B markets, and the concentration of expenditure among a few of those buying units, create an opportunity and an expectation that the biggest spenders get special treatment and value-added services. Someone else will if you don’t!

5. Fewer Behavioral and Needs-Based Segments in B2B Markets

Our over 2,000 B2B studies show that B2B markets have far fewer behavioral or needs-based segments than consumer markets. While an FMCG market can have 10, 12, or even more segments, the average B2B study only has 3 or 4.

This is partly due to the smaller target audience in B2B markets. One can easily distinguish between 10 or 12 distinct segments in a consumer market with tens of thousands of potential customers, even if the differences are minor. This is not the case when targeting a few hundred business buyers.

There are fewer segments because business audiences behave and need differently than (less rational) consumer audiences. Insecurities, whims, and indulgences are far less likely to come up when buying for a workplace than for oneself or a close family member. A B2B buying decision involves many colleagues and workplace norms established over time filter out many of the extremes of behavior that might otherwise manifest if the decision was left to one person with no accountability.

The behavioral and needs-based segments that emerge in B2B markets are frequently similar across industries. Needs-based segments in a typical B2B market include:

  • A price-focused segment that is transactional and does not seek ‘extras’. Companies in this segment are often small, have low margins, and consider the product/service in question to be unimportant.
  • A segment that values quality and is willing to pay for it. Companies in this segment typically have high margins, are medium-sized or larger, and value the product/service highly.
  • A service-oriented segment with high expectations for product quality, range, after-sales, delivery, etc. It can be a small, medium, or large company. They usually buy in bulk.
  • A partnership-focused segment made up of key accounts that seeks trust and reliability from suppliers. Large companies with high margins that view the product or service as strategically important.

What does this mean for B2B marketers?

The fact that B2B markets have few segments makes the job of B2B marketers easier. However, knowing which customers fit which segments and how to appeal to each isn’t easy to come by. Creating a behavioral or needs-based segmentation is difficult because:

  • Once a segmentation has been achieved, identifying which companies are in which segment is extremely difficult. Behavioral and needs-based segments often transcend ‘firmographic’ segments, meaning there are no obvious indicators (like country, industry sector) of a company’s segment.
  • Sales, marketing, customer service, and other departments must adjust their approach to often intangible criteria. This requires massive horizontal and vertical investment within a business.
  • Many marketers find it easiest to categories B2B target audiences by size and geography, giving accounts the attention they ‘deserve’ based on their strategic value to the supplier.

6. Personal Connections Matter More in B2B Markets

Personal relationships are vital in business-to-business markets. It’s easy to talk to a small group of regular customers. Sales and technical reps visit clients. On first-name terms. Personal connections and trust grow. It’s not uncommon for a business-to-business supplier to have long-term customers.

Personal relationships are vital in emerging markets like China and Russia, where there is a lack of free information, a history of poor quality from local suppliers, and little other than trust in the salesperson to judge the provenance of the product or service.

What does this mean for B2B marketers?

This emphasis on relationships means marketing budgets spend more on people (sales and technical support) and less on other forms of promotion. Business marketers’ advertising budgets are usually measured in thousands of pounds (or Euros or dollars). Unlike consumer salespeople, B2B salespeople focus on listening and building relationships rather than the more transactional and quantity-driven approach seen in consumer markets. Face-to-face contact is emphasized, and the salesperson must have a thorough technical understanding of the product being sold.

7. B2B Buyers Buy Longer Term

Long-term purchases like houses and cars are rare. Long-term purchases, or purchases expected to be repeated over time, are more common in business-to-business markets, where capital equipment, components, and consumables are common.

Moreover, long-term products and services for businesses often require more supplier support than products and services for consumers. If a computer network or a fleet of vehicles is purchased, the after-sales service is typically far more extensive than on an individual vehicle. Repeat business purchases (machine parts, office supplies, etc.) will necessitate ongoing expertise and services (delivery, implementation/installation advice, etc.) not likely to be requested by consumers.

Finally, business customers are regarded as more loyal than consumers simply because there are fewer of them and those that do exist are worth more! Lessening the benefits of retaining a B2B customer can have serious consequences.

What does this mean for B2B marketers?

With a longer-term outlook in mind, B2B marketers should remember two key points: first, the value of building relationships, especially with key customers, and second, the value of a technically focused sales team.

8. Consumers Drive Innovation More Than B2B Markets

The consumer markets drive most innovation. B2B companies that innovate usually do so responding to an earlier innovation. B2C businesses are less risk averse because they must predict and respond to consumer whims and irrational behavior rather than business decision-making. B2B companies can respond to trends rather than try to predict or even drive them.

That doesn’t mean B2B companies aren’t innovators. B2B innovation is often more carefully planned and commercialized, with more defined audiences and trends.

What does this mean for B2B marketers?

Business-to-business marketers have the time and the data upstream to carefully weigh their options. Given that competitors are in a similar position, gathering quality intelligence is critical. B2B marketers should conduct thorough market research and combine it with upstream data to build a comprehensive market intelligence picture.

9. Consumers Rely on Packaging More

Consumer product packaging has grown dramatically in recent years, as marketers seek to not only protect and preserve their products but also to convey aspirations and desires to their customers. Because consumers are less rational than business-to-business buyers, this approach has worked extremely well.

In B2B markets, where the product is judged primarily on technical criteria and the extended offer is built around relationships rather than dreams, aspirations, or appearances, adding value through packaging is far more difficult.

What does this mean for B2B marketers?

Packaging, like the product, is primarily functional, which has clear implications for B2B marketers. Relationships and expertise are far more valuable than resources.

10. Sub-Brands Fail in B2B Markets

We’ve said before that building a strong brand is the most overlooked B2B marketing opportunity. A strong brand’s support is vital in a world where it’s hard to tell one product from another.

The influence of the brand on B2B buying decisions has risen in the last decade (from 5% to 30-40%), and there is room for B2B companies to differentiate themselves through effective branding strategies.

However, B2B companies are far less adept at developing and implementing branding strategies than B2C companies. B2B companies often fail to recognize that branding should encompass all customer touchpoints and aspects of the business – an unskilled technical sales team can easily undo a branding communications campaign.

Many B2B companies have overcompensated by creating hundreds of sub-brands for every aspect of their product range. This strategy works well in consumer markets, where diversified companies like Unilever recognize the need to connect with multiple target audiences. In business-to-business markets, however, target audiences are smaller and value relationships over brand when making purchases. Most importantly, B2B buyers are more informed than consumers and find multiple brands and sub-brands confusing, if not insulting.

What does this mean for B2B marketers?

The key takeaway for B2B marketers is to thoroughly research and meticulously implement their branding strategies. It should cover all customer touchpoints within and outside the company, acting as a framework for communicating the company’s values. Above all, B2B marketers should recognize that a single cohesive brand that customers, stakeholders, and employees can all relate to is preferable to a confusing slew of sub-brands that hinder rather than promote meaningful choice and are little more than product identifiers.

The final distinguishing factor of B2B buyers is that they are more demanding. They must make wise purchases for their companies. They take fewer risks and thus demand the highest quality. They know how to spot a bad deal. So they get what they want. They often pay more than a consumer would and expect more in return. They are more likely to see themselves as active participants in the product or service delivery than passive recipients.

What does this mean for B2B marketers?

The ramifications for B2B marketers are clear. We must raise our game to ensure that our products, services, and intangibles meet and exceed customer expectations.

The fact that B2B buyers are more predictable than consumer buyers works in our favor. Quality market intelligence and close attention to our target markets’ needs position us well to meet market needs.

Read about the B2B Content Marketing in our Blogs: https://sabpaisa.in/b2b-content-marketing/

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Posts