Blurring the lines: Is there a difference between B2B and B2C marketing?

Video Transcript

VERONIKA: Hello Everybody, today we are going to talk about an academic article that has a profound implication for B2B companies.

This article, by University of Pennsylvania professor Yoram Wind, is called – Blurring the lines: is there a need to rethink industrial marketing?

So, what is the key message of this article? Well, the key message is that our established thinking about business markets as being radically different from consumer markets is flawed.

The environment has changed so dramatically that this separation is not valid anymore. In other words, the separation of B2B and B2C markets exists only in our heads as the established way of thinking. In practice, the lines between B2B and B2C markets have blurred. And we need to rethink our mental models.

Let’s look at the main arguments in the article and compare them with real-life industry examples. I’m joined by my partner in the course, Sean Duffy, who will lend a practitioner’s perspective.

SEAN: Thanks, Veronika. I agree that the line is blurred. I also agree that the internet integrates audiences that have traditionally been siloed. And, I too join the author in celebrating the demise of the B2B / B2C distinction in marketing because I believe this distinction has been holding many B2B companies back and it makes them increasingly vulnerable to competition.

However, I believe that many of the changes mentioned in Wind’s paper started well before the internet. In fact, I’d argue that although the silos he writes about have a real effect on B2B companies, they are largely academic in nature. That is, the limitations of the B2B marketing mentality are, and have been, completely self-imposed and not causally related to the internet.

I mean, the blurring of lines that Wind speaks about went mainstream 40 years ago, in 1978, when FedEx launched a consumer-style campaign in the US for its B2B overnight delivery service. Intel is another good example when, in 1989, they adopted strategic marketing and began to invest in their brand with an appeal to the general public for a product only OEMs could buy.

While digital connectivity has certainly helped blur the lines, I think that the real driver is not the arrival of the internet but rather the adoption of strategic marketing principles and practices by B2B companies like FedEx or Intel.

The internet has simply made it easier and less expensive for more business-to-business brands today to experiment with strategic marketing. Look at BlendTech, a B2B producer of industrial blenders that in 2006 was able to increase sales 500% in 3 years based solely on a set of B2B videos that cost less than 20 dollars each to make and inadvertently became popular with the public. That popularity allowed them to hop into the consumer market at an extremely high price point.

The basic principles of sound strategic marketing have rarely applied in the business-to-business environment not because we did not have the internet, but rather because there has been a disproportional reliance on sales at the expense on strategic marketing.

For me, that is the core insight: Internet or no internet, companies that sell to other companies have always been able to benefit from a more disciplined application of strategic marketing principles, but few have tried. And a lot of the reason for why they don’t try is precisely because of the artificial barrier they create by labeling themselves as B2B.

VERONIKA: OK, Sean, I see your point, but Wind, in his article, means that it was the development of the internet that brought the B2B and B2C markets closer together.

When we speak about digital revolution, we usually mean two things, the emergence and proliferation of digital channels and the evolution of customers. And here we already see the first sign of the convergence between B2B and B2C.

How do I, as a B2B company manager, know whether my customer is a business customer or an end consumer? Both business people and consumers use the same internet platforms, and their expectations are shaped by their contact networks.

Pharmaceutical companies are very aware of this blurring of lines between business and consumer markets. And they have for decades focused on professional audiences like physicians, hospitals, and clinics. But in recent years they have started talking directly to consumers.

So why this shift? Well, because people have become much more proactive in deciding which medication, vitamin, or treatment that fits them. And this happens because the internet allows us to search for alternative treatments of minor problems like a headache and big problems like cancer. Consumers have also become increasingly health conscious, both when it comes to food and medicine, they want to know what they are putting into their mouth. For example, in Sweden the broad advertising of mild painkillers was criticized by consumers on different digital media, forcing the manufacturer to cut down on TV advertising. In this way, end consumers are influencing business decisions.

SEAN: Yes, but the rise of pharmaceutical direct to consumer advertising in the US pre-dates the internet going mainstream. It was triggered by legislation passed in 1997 that allowed pharma companies to advertise to patients. Brazil and New Zealand are the only other two countries that permit advertising pharmaceuticals to consumers.

One anecdotal example of this was a drug my team helped launch in the mid-1990s before either the mainstream internet or direct to consumer advertising for pharma brands. I was working with a large multi-national advertising agency who was known only for their B2C work. Then, one of our B2C clients went to work for big pharma and called to ask if we would work with her. My first reaction was that she should call a B2B agency because I had no experience in B2B. She said that was exactly why she was calling — because she didn’t want to make trade ads, she wanted to build global brands, just as we had done at her previous B2C company.

So we started out branding a few of their unbranded medical devices. And I was amazed to discover that applying the strategic marketing principles and practices used in B2C could yield amazing results when applied to B2B environment.

Having proven our value on those brands, they gave us a new drug to launch. With this drug, we were entering a category where we had no track record and no sales relationships with doctors. Worse still, the category was dominated by three other huge, well-entrenched brands that doctors loved. A few years after launch we had passed a billion dollars in sales and had 37% of the global market share in our category. Case studies on the launch pointed out the speed at which the drug was able to penetrate markets and attributed a lot of that success to our novel marketing strategies. But the strategies were not novel at all. They were just not often used by B2B companies,

VERONIKA: Yes, this is what is happening in big businesses, but now we see similar trend occurring for small businesses as well. If we take a local B2B startup here in Lund as an example, what do we see?

Let’s take Greinon Engineering as an example: they develop innovative lighting solutions for B2B customers like cities, municipalities, and organizations who want to save energy. Initially, they were only pursuing large customers like cities and large constructions companies, but very soon they realized that in a very competitive marketplace they would become too vulnerable if they just had one type of customer.

So they decided to develop a number of smaller solutions – they created small modules, almost like LEGO blocks that could be used by much smaller customers such as restaurants and parking garages. And now their customer base has grown to include both large and small companies.

So what does the article advises us in this particular case? Basically, it says that the separation between B2B and B2C is artificial. It was useful 20 to 30 years ago, in the pre-internet age. But in practice, B2B is only a part of a broader set of relationships. Simple B2B relationships do not exist. And we need to expand the focus from industrial buyers to multiple stakeholders, like end consumers, distributors, suppliers, and employees. B2B companies need to take into account the impacts on end consumers and other stakeholders.

SEAN: I agree with the author that the distinction between B2B and B2C is artificial. But I wonder if it ever was useful, even in the pre-internet era.

I suspect that the type of siloed thinking the author describes has been holding many business-to-business companies for decades. One way it does this is by reinforcing the rift between sales and marketing that has always characterized many B2B companies. This has made it easier for B2B companies to persist with outdated marketing habits because their narrow focus on strategic selling has, in practice, insulated them from developments in strategic marketing.

Like the author, I think a lot of B2B companies simply assume that there needs to be a line between B2B and B2C. And when they accept this imaginary line, they limit themselves in terms of new thinking and creative problem-solving.

There is a great case in Harvard Business Review called “Even Commodities Have Customers” which outlines one CEO’s attempt to break this B2B siloed thinking inside Lafarge, a large cement company. I could relate when he said “Many companies have a marketing function in name only. It isn’t easy to establish a marketing function in a company that doesn’t think it needs one.”

He describes how the “Marketing Department” in many B2B companies is actually a sales support department. We had one such B2B company hire us. They were global, well-known brand with tens of thousands of employees and for years had dominated their category. But in recent years their products were becoming commoditized so their margins were evaporating and they were rapidly losing market share to new entrants.

They hired us to train their global network of marketing managers. After interviewing all of them, we came to the astounding conclusion: there was no marketing department in the company. None. There was only sales and sales support staff who had job titles borrowed from the world of marketing. It was the illusion of marketing. And as long as all their competitors worked the same way, they were OK. But it left them vulnerable to both commoditization and to new entrants that actually did practice strategic marketing. The combination of those two threats ultimately forced this company off the market.

VERONIKA: Thank you very much, Sean! That’s an interesting example, but let’s move on to the second point from the article – a blurring of traditional roles in companies’ relationships with customers.

B2B companies historically developed very close relationships with customers – business buyers. They also invested in customer education due to the complexity, cost and impact of the industrial products like, for example, Greinon’s smart street lighting solution or Atlas Copco drills. So what has changed in the digital world?

Well, what has happened is that business customers have become very influential and active when it comes to both product choices and business choices. Peer-to-peer networks are growing in many areas. Let’s take the travel industry as an example, where business travelers rely on other customers’ reviews in sites like Booking.com and Trivago when booking their trips. Is this B2B or B2C? Greinon, for example, invites customers into the discussion on how the product should look like and function before going further. And very often these customer insights drive the innovations.

So, if we put these insights into the academic terms, there are no buyers and sellers anymore! Instead, we see different types of co-producers of the final offering. The customer is not a passive recipient anymore, but an active collaborator. And many companies have recognized this long ago. Just look at Dell, they allow consumers and industrial customers to customize the products. Instead of CRM, we need to talk about CMR – where customers actively manage their relationships with the firm – they are now in the driver’s seat!

SEAN: I love the idea of co-creation, but again this wasn’t invented with the internet. Good marketers have always invested considerably in gauging the needs of buyers, observing them, interviewing them, testing them. In essence co-creating with them. Look at P&G. They were doing this in the 1930s. In his famous memo from 1931, Neil McElroy introduced the seeds of strategic marketing.

Granted the internet makes co-creation easier and less expensive because it provides us with much greater and cheaper access to our buyers in ways that we unimaginable two decades ago. But I don’t see the lines being blurred between buyers and sellers. It just that some sellers have a far greater understanding of their buyers than others do and they tend to succeed more. Same as it ever was.

VERONIKA: Well, nothing is new under the sun, but you can’t deny that the internet is accelerating this process.

Let’s move on to the last point, the blurring of products, services, and experience. This is a critical factor! The whole nature of the market offering has changed! The B2B products used to be a complex mix of products and services, but now we are moving towards a world where the customer experience is in the center.

So companies are bundling together products, services, and financial solutions and concentrating on shaping the total customer experience – from pre-purchase to purchase to post-purchase. Like Greinon, they have realized that everything they sell is a service and innovative solutions, not just a piece of electronics. What a customer is actually buying is a smart solution, and there is no limit to how much value that can be added!

A city, for example, is not first and foremost interested in owning street lamps, they are interested in well-lit streets. They don’t want to have to procure, install, maintain and update to the newest technology. What they want are satisfied citizens and low electricity bills! So instead of buying lamps, they now buy light as a service.

SEAN: This is an area where I agree that the internet is creating new business possibilities that never existed before. For instance, Atlas Copco’s SMARTLINK in the Compressor Technique division allows data to be gathered from the compressors and sent to Atlas Copco over the internet. This opens the door for a variety of value-add services, forming a more complete solution offer to customers.

We can see this in the B2C world as well. The concept of networked business platforms has been used by digital native brands like Airbnb and Uber. But this platform mindset is also being embraced by older brands like Nike. Through its Nike-Plus digital platform, Nike has transformed itself from a seller of running shoes to a provider of a complete running experience, including motivation, coaching, feedback, and competition — all digitally enabled. This is like SmartLink on steroids, for runners. Books like Platform Revolution explain this concept in detail and allow marketers to assess for themselves. But this approach is already disrupting categories left and right and I believe, is highly applicable to companies like Atlas Copco.

VERONIKA: So far we have covered three important aspects of the blurring of lines between B2B and B2C companies. And in the article Winds article also covers two other aspects – blurring of value chains and blurring of the functions within the firms.

To conclude our discussion, I will use Wind’s argument about the need to change our way of thinking about industrial marketing. He argues that our old mental model that separates B2B and B2C has become an obstacle for our thinking – a kind of straightjacket that does not allow us to broaden our view. Any breakthrough in business requires a breakthrough in thinking. At some point in time, no one believed that it was possible to deliver goods overnight or buy clothes online but this is happening, and we are not surprised anymore. We need to expand our mental models to embrace the inclusive nature of marketing, consumers, and customers.

ABOUT THE SPEAKERS

Veronika Tarnovskaya is an Associate Professor and Senior Lecturer in the Department of Business Administration at Lund University. Her research areas include market orientation, market-driving and market-driven strategies, corporate branding, online branding, and B2B branding.

Sean Duffy is the founder and CEO of Duffy Agency. As a brand strategist and international marketing expert, Sean’s focus is on helping companies build strong brands across borders.