B2B Marketing: How it is Special

Currently in school we've been learning about marketing strategies. The business that my team is profiling this quarter is a produce distributor, OGC. Since OGC is in the business of selling to other business I've wondered if there is any significant difference in marketing to businesses versus directly to consumers. I found a white paper called “Why is Business to Business Marketing Special?” by M. Harrison, P. Hague, and N. Hauge of B2B International. I found it informative on some of the differences between marketing to consumers versus Businesses. I've summarized the 10 differences the white paper identified here.

1) B2B Markets Have a More Complex Decision Making Unit
The decision making unit in a business to business (B2B) model can be made up of one person acting on behalf of an organization, but it can also be made up of several individuals on a committee or is a decision that will need to be vetted through several layers of an organization that usually involves several different experts i.e. finance specialist, operations specialist. As a result of this complex decision making process a business to business marketer needs to demonstrate a high level of expertise to adaquetly address the multifaceted business decision making unit. B2B marketers also need to be diligent and patient as decisions often take longer to vet. Not every decision a business makes must be vetted through multiple levels of a company. The Risk-Value Purchasing Decision Matrix below represents relative risk and value decisions a business must make. Marketers in the high value & high risk quadrant must often be the most knowledgeable and diligent.

low-risk, low value: Decisions in this quadrant are made often by one person, possibly more junior in the organization. Relatively little thought goes into the decision as there is low risk if the decision is wrong.
low risk, high value: Often this quadrant is raw materials and involve a mixture of technical and purchasing personnel. A low price without impacting quality is important.
low-value, high risk: This quadrant includes items such as office insurance. Purchase decisions are usually made by specialists and purchases. Purchasers in this quadrant are required to have the expertise, such as a lawyer, to assess risk in each unique transaction. Price is not the driving factor in this quadrant.
high-value, high risk: Plant equipment or other high priced infrastructure would fall in this quadrant. Company leadership would be involved in this type of decision making including possibility a CFO, R&D director, Production Director, Purchasing Director, Head of Legal, CEO, etc.

2) B2B Buyers are More ‘Rational'
Business to Business buyers are more rational and less whimsical about purchasing decisions. Business purchasing units are less susceptible to whims and indulgences and more critical about price, quality, and return on investment. While emotions are still relevant for a business to business buyer a B2B marketer is best served focusing on trust and security.

3)B2B Products are Often More Complex
Business to Business products are often customized and need to be integrated into the business systems. As a result B2B marketers need to be fully informed about their product or services. B2B sales, while not always, rely heavily on the technical sale. B2B sales staff should strive to be extremely experienced and knowledgeable.

4) Limited Number of Buying Units in B2B Markets
It is not unusual for even the largest B2B companies to have 100 or fewer customers. This concentration of key accounts means that B2B marketing is very relationship based. Today many business purchasers are looking to create partnerships with their suppliers. B2B are well served to align themselves with businesses that share similar values.

5) B2B Markets Have Fewer Behavioral and Need-Based Segments
While the consumer products to have 10-12 market segments, it is not uncommon for the average business to business market study to produce only three or four. Typical segments include: (1) Price-focused segment - These are often business with low margins and service/product of low importance. “Extras” are not often important. (2) Quality and brand-focused segment - These business purchases are made on best product available information. Often these businesses have high margins and are usually medium-sized or large. They regard product/service of high strategic importance. (3) Service-focused segment - Businesses in this segments require product quality and range. These businesses are often in time critical industries, small to large with high volumes. (4) Partnership-focused segment - Business in this segment seek trust and reliability and regard the supplier as a strategic partner. They are often large, operate on relatively high margins, product/service is of strategically important.

6) B2B Personal Relationships are More Important to B2B
Personal relationships are very important in the B2B markets. It is not uncommon for B2B suppliers to have loyal customers. As a result B2B will spend a large amount of their marketing budgets on developing these personal relationships and retaining knowledgeable technical staff. The B2B sales person is focused on a limited number of quality-driven relationships often focused on face to face contact.

7) B2B Buyers are Longer-Term Buyers
Business are often making expensive and long-term purchases including capital expenditures and technology upgrades. These purchases are both of high value but often require routine follow-up. B2B marketers are also motivated to ensure lasting relationships as there are fewer business accounts about. Again, relationship building with a technically focused sales team is the focus of a B2B marketing.

8) B2B Markets Drive Innovation Less Than Consumer Markets
Business to business companies are much more responsive to trends rather than seeking to predict (unlike the consumer markets). This is because their customers are more clearly defined and trends easily identified. B2B customers have accessible data from upstream that allows them to carefully assess their options before making decisions. This does not imply there is no innovation rather it is driven by upstream data and complete market intelligence.

9) Consumer Market Rely Far More on Packaging
Simply put, packaging is functional and for the consumer. B2B companies resources are better spent on developing relationships and expertise.

10) Sub-Brands are Less Effective in B2B Markets
It is thought that B2B branding has increased over the years. A while a strong brand is important, sub brands and multiple brands can be confusing and even insulting to business purchasers. Values transmitted. B2B marketers branding should ensure its business values and recognize that less is more, and it is better to have a coherent brand that all can relate to rather than sub-brands.

The "Why is Business to Business Marketing Special?" reports highlights the importance of relationships in business to business marketing. Much of the other reading we are doing this quarter about operations and supply chains also highlights the importance of the relationships. When we relate this back to OGC we discover that OGC continues to foster long term relationships with customers. OGC is not a flashy consumer brand but rather has a dedicated sales staff that provides customers with one on one customer service, reliable information and a trustworthy product.

OGC has recently started a ‘brand' of produce called Ladybug that is exclusively grown in Oregon, Washington, and Idaho. The Ladybug brand is often joint marketeted with OGC's retail clients. Currently the joing branding includes in store displays that highlight the farmers. This presents a unique opportunity for OGC to add value to its products. While this type of joint marketing does not neatly fit into the 10 highlights of a B2B company above, produce (and food in general) has a unique opportunity for this type of innovative partnership. It is a marketing strategy that highlights the whole supply chain creating transparency, trust, and reliability not only for the business purchasing the produce, but for the consumer who will eventually eat the produce.  






M. Harrison, P Hague, & N. Hague. 2013. Why is Business to Business Marketing Special? retrieved from: http://www.b2binternational.com/publications/white-papers/b2b-marketing/

A day with the Organic Elders....

Last Thursday I attended the Next Generation all day intensive at Organicology. It was a star studded event of the organic movement. I enjoyed getting the opportunity to listen and talk with folks who have been in the organic trade movement for thirty plus years. I was continuously struck by the passion and dedication that these folks have for the organic movement. Many organic leaders spent the first part of their career making little or no money and being told they were hippie activists with no real cause. Now many of them are the experts in their field continuing the fight for organics as business owners, policy advisors, and farmers. Here is the list of the organized leader (there were also many other leaders in the room besides these folks):

Anne Schwartz, Owner, Blue Heron Farm & Executive Committee of Washington Tilth;
Bob Scowcroft, Founder & former Executive Director of the Organic Farming Research Foundation*;
Bu Nygrens, co-owner, Founder & Director of Purchasing, Veritable Vegetable;
Lynn Coody, Founder & Principal of Organic Agsystems Consulting;
Mark Lipson, Organic & Sustainable Agriculture Policy Advisor, USDA, Office of the Secretary*;
Dag Falck, Organic Program Manager, Nature's Path
Michael Funk, Chair & Co-Founder of United Natural Foods Inc*;
Roger Blobaum, Organic Research Coordinator, The Ceres Trust;
Theresa Marquez, Mission Executive, Organic Valley/CROPP Cooperative*;
Zea Sonnabend, Policy Specialist, CCOF & Organic Farmer, Fruitilicious Farm*
*Recipient of Organic Trade Association's Leadership Award - the highest honor given annually to an individual who has shown leadership and vision in furthering goals of the organic movement.

I found it interesting that at the beginning of the day I wasn't as passionate about organic as the leaders in the room. Organic, in my opinion, is a step in the right direction but are not to be confused with sustainable agriculture. What I learned after listening to the leaders (or Elders) was how the association I have with organics is only a fraction of what these Elders believe organics stand for, as well as what they believe the should stand for. We had some inspiring conversation about the values of organics. We all share the same values for our food system: health, social equity, environment, and community. But the USDA certified ‘organic' is currently only addressing the farming practices that pertain to chemicals. This is great, but as I mentioned it is NOT sustainable farming. USDA Organic doesn't address fuel in tractors, how the produce is packaged, living wages for farm workers and the water used. Organics are also not creating equity in the food system. It could even be argued that because organics are sold at a premium they create less equity. One of my big take-aways from this all day intensive was that as part of the next generation of champions we need to continue the fight for both sustainability and equity in our food system. Maybe it will be new certifications, maybe it will be new government regulation, maybe it will be new social services, or new innovative business (and maybe, or rather hopefully, it will be all of these things). We need to accomplish something as and possibly more meaningful than the USDA organic standard in the next thirty years.

One thing that came up often as well was the idea of Organic as a transparent movement. I think our entire food system needs some serious transparency. If transparency is the future, then how do we get folks to take the first step? Who is going to be brave enough to admit their weakness, and the areas that need improvement and risk their competitors taking advantage of their weakness. The business world is historically cut-throat after all.

The Intensive structure allowed folks who have been in their professional careers in the organic food industry for 30 plus years to talk about not only the organic movement but talk about leadership. Questions we got to ask included: (1) what were the characteristics they thought were assets to their career, (2) what where some of their biggest mistakes, (3) what were some words of wisdom they had to pass on, and (3) what they thought they could learn from the next generation. Dag Falk's words of advice stuck with me; to be fearlessly transparent as the biggest asset to his career and the biggest suggestion he has for the next generation. He talked about a current challenge in the industry that is in need of some fearlessly transparent champions. It was around this idea that we need to make sure consumers understand that the USDA organic standard is a practice standard (as in the fruit isn't tested rather farms are inspected). He believes that if this isn't clarified to consumers there could be a backlash and hurt the movement. He also talked about why he was part of the Non-GMO project. It is a project that tests produce and products to insure there are no GMO's contamination. Some of his peers in the Organic movement thought it best to not address the issue of Organic products being contaminated with GMOs. He didn't agree. He thought it was best to be transparent and then provide another tool. The non-GMO project provides customers a verified scientific quantified certification that the product is below a certain GMO contamination. It is actually a consumer tool that pairs nicely with the USDA Organic certificate if you ask me.


Fearlessly transparent. I like it. 

Organic. Humane. Local.

Organic. Humane.  Local.  These are words that are finally seeping into our collective consciousness.  Our food systems problems are becoming a dinner table conversation, a topic over a beer, and conversations with our kids. Big business hasn't let this go unnoticed.  Safeway is requiring all the organic eggs it sells to be ‘certified human.’ In Brooke’s blog last week she posted the about Marriot’s commitment to eliminate the use of gestation crates in its pork supply by 2020(http://bgi-blog-brookebutcher.blogspot.com/2013/01/week-3.html). McDonalds former CEO is creating a new chain of fast food restaurants focused on healthy local food.  Chipotle continues to increase its commitment to locally sourced food.  And these are just a few examples of some of the trends in the 2012 big business restaurant food industry.  While I find it frustrating  that it will take Marriott 7 years to change its suppliers practice or that Safeway isn’t requiring ALL the eggs they sells to be humanly certified I have to step back and remind myself that all work is good work.

A locally supported regional food system will likely depend on these big name convenience and fast food restaurants getting on board with regional. Much of our American diet is based on this idea of convenience (which is another cause I hope someone takes up, Americans need to SLOW down).  In a report done by Andreyeva in 2010 “Food away from home” demand was the most elastic (.81). Meaning a small increase in restaurant/fast food meals and we are likely to just eat at home.  This makes sense when you think about the price wars between major fast food retailers; who can have the biggest $1 menu. But then again, I’m reminded of Burgerville, a Portland fast food chain, with the motto “Fresh. Local. Sustainable.”  It’s a little bit more expensive than choosing the Burger King but I would pick it every time.  I don’t think I’m the only one.  It’s not my ideal food situation. It’s still fast so we miss out on the culture part of food. It’s still delivered to you in one time use compostable containers.  Not everything is locally sourced.  BUT when I used to travel for work and found myself in Portland I loved their bean burger served up with greasy fries and a side of Dr. Pepper!  How do we convince other fast food chains that the price elasticity numbers they see historically are only that, history. Americans are changing their eating habits and providing the cheapest food to ensure you sell the most and make the most money is not the trend of the future.

So while my passion is and will continue to be finding ways to connect people with food I need to be open to ways that the current system can help support and grow the system of regional food that I’m so passionate about. The leaders of the food movement before me helped make local, humane, and organic conversations in McDonald’s board room.  I’m committed to picking up that torch and finding ways that our entire food system is sustainable. It will take combinations of approaches; a multiple of micro solution; and a dedicated bunch of future foodie leaders.


References
Tatiana Andreyeva, PhD,  Michael W. Long, MPH, and Kelly D. Brownell, PhD. The Impact of Food Prices on Consumption: A Systematic Review of Research on the Price Elasticity of Demand for Food. retrieved from: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2804646/

Wong, Venessa. September 2012. Bloomberg BusinessWeek. Former McDonald's Executive Serves Up Healthy Fast Food
http://www.businessweek.com/articles/2012-09-14/former-mcdonalds-executive-serves-up-healthy-fast-food

Salazar, Dennis. 2012. Capitalism Is Alive and Well in the Green Community. Environmental Leader.   Retrieved from: http://www.environmentalleader.com/2012/07/03/capitalism-is-alive-and-well-in-the-green-community/

Safeway Requires All Cage-Free Eggs to be Certified Humane. December 2012. Environmental Leader. Retrieved from: http://www.environmentalleader.com/2012/12/27/safeway-requires-all-cage-free-eggs-to-be-certified-humane/

Vijayaraghavan, Akhila. June 28, 2012.  Chipotle Moves Toward Local Sourcing. retrieved from http://www.triplepundit.com/2011/06/chipotle-moves-local-sourcing/