Overcome the B-to-B E-Commerce Challenge by Thinking B-to-C
Most analysts agree that business-to-business commerce is a golden opportunity for companies serving the global online marketplace. Even as early as 2009, research by BMWI pegged B-to-B internet purchases at 90 percent of global online spend. Goldman Sachs forecasts that by 2013 nearly $1 trillion will be spent in direct-to-buyer e-transactions.
If such rich opportunity awaits, why then has the commerce model for the B-to-B online experience been so slow to evolve? One of the biggest reasons is fear. Many businesses looking to add a direct-to-business buyer channel worry about disrupting or cannibalizing their traditional sales channels. While the impact a direct sales channel can have on a B-to-B business can't be ignored, businesses looking to move to a direct model must consider the needs and expectations of the end customer.
Taking a Page From the B-to-C Playbook
Unlike the well-developed, ubiquitous and fairly standardized shopping experience that online consumers have come to expect — and demand — buyers in the B-to-B space have struggled with a hodgepodge of homegrown sites or systems that have languished in legacy technology. In many cases, manufacturers offer buyers no online purchasing option at all, avoiding conflict with other sales channels altogether.
However, organizational buyers are increasingly demanding the same caliber of experience and sophistication they enjoy as consumers. Recent studies suggest nearly 60 percent prefer to buy direct from the manufacturer instead of through the channel. They demand a richer online purchasing environment and the flexibility to make purchases across multiple platforms and sessions. And they expect to be able to place, adjust and cancel orders in real time, as well as access technical data and comparison information with dynamic, up-to-the-minute visibility of inventory, shipping status, payment status and more. Most importantly, they expect to be able to use these features with ease while sitting at their office PC, on their tablet at home or on their smartphone while on vacation.
Achieving Channel Harmony
Direct-to-buyer models aren't only more efficient for the seller — they eliminate a large portion of the expense, maintenance and grooming of traditional sales channels — but also are important for the customer. There's a common misperception that one of the biggest roadblocks to a successful direct-to-buyer implementation is the technology that delivers the system. In reality, it's the people. Managing the relationships between direct and channel sales can be a challenge. However, it's possible to achieve channel harmony and still capture the benefits of the direct model.
Creating channel harmony requires a balancing act, built upon consensus and trust among participants in a fully transparent environment that allows them to understand the complete channel ecosystem and their role within it. It also requires a clear understanding of customer segments and how the company's offerings align with those segments. With trust and consensus throughout, a number of workable channel approaches can yield bona fide B-to-B e-commerce success. Some of these approaches include the following:
- Segmentation: When designed to complement a company's channel objectives while reflecting meaningful differentiations within the customer base, product segmentation can be a useful tool in maintaining channel harmony, even amid the transparency and information flow made possible by the internet. Are there certain segments of customers, for example, who value customized versions of a software product? Do some value the attention of a dedicated support team? Some customers may want the flexibility of a "no obligation" contract while others are comfortable locking into a five-year agreement in exchange for a lower initial purchase price.
- Meaningful incentive programs: Commissions, bonuses and other performance incentives should be structured to motivate traditional channels without undercutting the direct online channel. Some companies, for example, offer their third-party channel partners attractive commissions for renewals, even if the customer was first acquired through the direct sales avenue. This alleviates the high cost of initial customer acquisition for the channel partner, while benefiting the company through a higher renewal rate than could be achieved through the direct channel alone.
- Education and training: Educating and training distributors, value-added resellers and inside sales groups on how the direct and indirect channels can co-exist can help participants in indirect channels better understand the functions and features of the direct channel and how it can help them in their jobs. In fact, many indirect channel participants come to view the direct channel as an asset in terms of information and research with this approach.
- Stakeholder engagement: Engage the appropriate stakeholders from your organization early and often in conversations about the benefits of channel harmony. This proactive and open approach can make a huge difference in acceptance and evangelism regarding direct channels. Once a sales professional or reseller understands how an e-commerce site can help them close more sales and earn higher commissions, passive resistance can flip to active and enthusiastic support.
There's little doubt that even though B-to-B e-commerce has so far lagged behind the evolution of its B-to-C counterpart, it will inevitably and rapidly penetrate most industries and business models. Faced with internal and external pressures to better serve their customers, control costs and improve margins, companies will look fervently to adapt many of the techniques, technologies and tools that have made purchasing B-to-C products and services online a rich and seamless experience.
In fact, companies may have little choice. Business buyers are increasingly looking to their suppliers for a more consumer-like procurement system. Those that can deliver will succeed in meeting their customers’ expectations; those that fail to evolve may find fewer and fewer customers willing to waste valuable time on antiquated, legacy procurement practices.
Michael Chuma is director, global product management, B-to-B at Digital River. Michael can be reached at mchuma@digitalriver.com.
- People:
- Goldman Sachs