The Direct Continuum
- 1. 1 The Direct Continuum: Defining The B2B2C Spectrum July 21, 2015 Kevin Cherry, Strategic Marketing President, Luminose Company When we refer to the customer direct effect, what do we mean by it, what does it look like, and what is it good for? First, it’s helpful to consider a few emerging trends for context. Customer Trends Customers are increasingly empowered. Today, 79% of customers spend at least 50% of their total shopping time researching products online. 53% of customers will abandon an in-store purchase due to online sentiment. And 59% are willing to try a new brand to get better customer service. 85% would be willing to pay more for a superior customer experience. And companies that lead in the customer experience are rewarded in 5-year stock averages that outperform the laggards +26% to -54%.1 1 Forrester Research
- 2. 2 B2B Trends A recent Forrester study2 found that 52% of B2B buyers expect to make more than ½ of their purchases on-line within 3 years. 67% expect omni-channel capability. Over 80% of the B2B companies surveyed are investing in their ecommerce platform to support omni-channel initiatives - which they indicated were crucial to their long-term success. They also indicated that these initiatives were primarily to meet customer expectations and satisfaction. Significantly, Forrester found that B2B buyers’ expectations for online commerce mirror consumer preferences3 - or what we like to call “the consumerization of B2B”. 2 Base 930 B2B buyers and 526 B2B organizations in Canada, US, UK, France and Germany. A commissioned study conducted by Forrester Consulting on behalf of Accenture and hubris, August 2014. 3 *Base: 930 B2B buyers in Canada, US, UK, France and Germany. Source: Forrester Consulting August 2014 **Base: 1,503 multichannel shoppers with purchase in last 3 months. Source: Forrester Consulting November 2013 72% 77% 78% Convenient services Inventory visibility Fulfillment capabilities B2B Buyers* Who answered important or very important 64% 71% 83% Convenient services Inventory visibility Fulfillment capabilities Consumers** Who answered important or very important
- 3. 3 When you think about it, this is probably not too surprising. Buyers are also consumers in other areas of their lives. It’s reasonable for them to expect the same search and navigation, merchandising, recommendations, click to call, ratings and reviews, build and quote and mobile app features that they encounter in other aspects of ecommerce. The Direct Effect Continuum Given these trends of increasingly digitally empowered customers and the consumerization of B2B, we have begun to see a blurring of the lines between B2B and B2C. Upstream participants are now able to reach across stages of the value chain to end customers and vice-versa. This connectivity however can take a variety of forms – from branding only, all the way to direct commerce, with a variety of forms in between, as shown in the continuum below. Branding At the branding only end of the continuum, up stream participants in the value chain endeavor to create awareness and preference for their brand in the downstream segments. Examples of this would include the “Powered By _____” monikers, digital videos, ad words, banners, pop-up ads, etc. Typically these are one-way communication flows, at least initially. DIRECT MARKETING DIRECT SALES B randing Insights Experience Testing H ybrid D edicated C hannel
- 4. 4 Insights At this point of the continuum, suppliers attempt to collect information from a variety of sources and participants in the eco-system. This could include structured and unstructured data from retailers, end-customer buying patters, social media sites, associations, syndicated data providers, real time traffic or weather data, etc. The objective is to identify new occasions or to discover new potential end customer segments that if fully leveraged could grow sales for all of the partners in the eco- system. Experience At this stage in the continuum, we see the emergence of two-way communications and signaling. This could take the form of interactive blogs, interactive applications and workshops to improve performance, loyalty programs, etc. The objective here is to increase brand loyalty, repeat purchases, and referrals. For example, both Coca-Cola and Kroger offer me loyalty programs, Coca-Cola with its under-the-cap product codes, and Kroger with its fuel points. Product Development and Testing Some companies are leveraging the Internet now to give customers an opportunity to design and configure new offerings. For example, Pepsi has created numerous extensions of its Mountain Dew brand based on direct customer input. Other companies are leveraging ecommerce to test new brands before they roll them out more broadly. The Coca-Cola Company, for example, tested the viability of energy drinks before rolling them out more broadly to supermarkets. Severe Weather Bundle NASCAR™ Promotion
- 5. 5 Hybrid Models Hybrid models offer a specific experience with dedicated product expertise and assistance with a category of branded products inside an existing physical or on-line shopping environment. Examples would include brand specific micro-sites accessible from an existing distributor or retailer portal or the store within a store concept that Samsung deployed in conjunction with Best Buy. Dedicated Channel At the furthest end of the Direct Continuum, dedicated channels offer an opportunity for customers to purchase product directly and have it delivered to an end destination, to a local store for pickup, or to a preferred distributor for final delivery. Examples would include the often-cited Nespresso, Apple.com and the Apple Store.
- 6. 6 What Is It Good For? Moving more direct to the customer is not for the faint of heart – it will likely require a change in mind set, processes and technologies and could feel threatening to existing business partners. However, it will also likely provide an improvement in the control over your brand, additional opportunities to increase conversions and an improved ability to grow and retain existing customers. Companies are pursuing more direct paths to customers for two reasons: 1) Because they can – trends in technology and digital commerce now permit and enable them to, 2) Other players in the value chain upstream and down stream are or will be doing it. They realize that those who move first will likely enjoy greater long-term competitive advantage and an improved ability to shape their destiny. Kevin Cherry is President of Strategic Marketing at Luminose Company. He has held leadership roles at General Electric, The Coca-Cola Company, Zyman Marketing Group, and Deloitte Consulting.