Cutting the B2B Gordian Knot

What are some of the key “trends” in B2B that caused customer fragmentation?

Check out the remaining segments of this six-part series
Part 1: Setting or Following Construction Trends to Build Your Business
Part 2: Cutting the B2B Gordian Knot
Part 3: Adopting an Anticipate, React, Adapt B2B Strategy
Part 4: Et Tu Trends?
Part 5: “Other” Factors Influencing What You Think Increases Sales
Part 6: “Other” Factors Influencing What You Think Decreases Sales.

Knowing what trends that have emerged to split apart your customer base can help you shape your business strategy correctly by aligning or realigning product and services development. Let’s cut the Gordian Knot[1] and untie those trends to help your strategy.

Digital Transformation and Increased Buyer Sophistication.

B2B customers have increasingly adopted digital channels for research and then purchasing. For example, in the past architects or engineers would have to rely on reps for information; today, they hop on the internet and go directly to the manufacturer’s website[2]. This begs the question: what is the value of a sales rep?

Buyers become as a result more informed and expect seamless, personalized experiences akin to B2C. So one answer to the sales rep question is to provide that “personalized” experience (see How to Treat a VIC (Very Important Customer) Blog). Digital transformation has led to fragmentation based on digital behaviors, with some customers preferring online self-service models, while others still value traditional, relationship-based interactions. This makes the B2B strategy development more complex, often requiring two different approaches to be successful.

Industry-Specific Needs and Specialization.

B2B markets have become more specialized, with industries developing unique needs based on technological advancements and regulatory environments. In the value chain of participants[3], for example, each “player” has different needs, prohibiting “one size fits all” approaches of the past. In other words, you can’t “talk” to a contractor the same way you talk to an architect. Often, the most important step a B2B business can take is deciding which “participant” is the most valuable in his product being sold (and it is rare that only one will be the answer).

Besides, fragmentation has occurred by industry, creating distinct groups with highly specific requirements for products and services (i.e., fire protection engineers are an important subset of engineers and completely different than an electrical engineer). Or, the healthcare sector might demand highly regulated technology which only a few companies can provide, and even fewer install and operate, forcing the manufacturer to “create” his own workers that can be deployed into companies (this is SAP’s strategy) relationship-based interactions. This also makes the B2B strategy development complex, requiring different approaches to be successful depending on who you think is the customer.

Size and Scale of Operations.

The B2B market has fragmented across the size of companies, from startups to large enterprises, each with vastly different needs, budgets, and decision-making processes. This size-based fragmentation means businesses now need to cater to smaller businesses with flexible purchasing behaviors, as well as to larger corporations with complex procurement processes and longer sales cycles. If you take too long to turn the ship, the business will go elsewhere. In fact, our research has proven year-over-year that availability is one of if not THE key attribute for business to succeed.

One company for example, developed a software tool to navigate a complex law being enacted by a major city. That company – an engineering firm startup – wanted to use that tool as the “way in” to working for an owner of a building that had to meet those requirements. When a manufacturer of equipment stumbled on the tool, the manufacturer sought to engage the engineering firm in go-to-market strategy to white label the software. The startup engineering firm put up obstacle after obstacle on the pretext of “proprietary” programming and the deal fell through. In the meantime, a half dozen other “software” companies got into the game and commoditized the software for anyone to use.

Opportunities are lost this way when out-of-box thinking gets overlooked.

Remote Work and Decentralized Decision-Making.

The rise of remote work and decentralized organizations, accelerated by the COVID-19 pandemic, has shifted decision-making from a central authority to a broader range of stakeholders and actually changed the business landscape forever. This is especially true in the service sector. This trend has resulted in a fragmentation where buying committees are more diverse and geographically dispersed, requiring different communication strategies and more stakeholder engagement. Thinking for a moment that anyone of these “remote” character participants can disrupt a deal takes careful planning and strategy development.

For example, focus groups used to be extraordinarily expensive; you had to rent a facility, gather participants, feed them, hire professional moderators, etc. Today, you can pull together experts into a zoom room for a modest investment and get realistic and valuable information to help make decisions.

Sustainability and Corporate Responsibility.

Many B2B companies now place a high value on sustainability, ethical practices, and corporate responsibility, driven by both regulatory pressures and consumer expectations. In a blog — Finding a Working Definition for Sustaining Sustainability – the author noted there are a total of 931 bills going through state legislative bodies that contain “sustainability” in them according to BillTrack50, the legislative tracking software. A brand’s regulatory competence with sustainability should be embraced throughout the C-suite and integrated across functions according to sources, whether you are selling lighting, plumbing, HVAC or other building-related products. But how does the marketer navigate sustainability for the brand? What is the real working definition of the word? And, how is the company to accomplish this?

The focus on sustainability has created a segment of customers who prioritize suppliers and partners that demonstrate strong ESG (Environmental, Social, and Governance) performance. Targeting this “segment within a segment” can pay dividends (i.e., by examining specifications carefully usually shows that sustainability is not always top of consideration: performance is). However, when you can combine performance WITH sustainability, a B2B company can probably write its own ticket.

Tech-Savviness and Adoption of Innovation.

Adoption of cutting-edge technologies such as AI, IoT, cloud computing, and automation has varied widely across B2B customers and further fragment your targets. For example, IoT has played an increasing vital role in “smart” buildings; even in plumbing, products are more often being connected to “central control” in order to monitor not just performance but maintenance issues.

Businesses have become fragmented based on their technological maturity, with some eagerly embracing new innovations and others lagging behind due to cost concerns or lack of expertise. It is important for a B2B company to understand this both from a marketing and sales point of view.

For example, in a recent piece of research, AIM found there was no outstanding service excellence being practiced by any of the dozen manufacturers they studied on a consistent basis. They were all “average” at best, and below average for the most part. But, the research was able to bring together “innovative” and “tech-savvy” solutions that were, well, not so innovative and tech-savvy to bring about customer service excellence (i.e., non-automating the first phone contact with a customers paid dividends over automation). Often, research leads to such insights that help B2B companies become “trend setters” rather than trend-followers.[4]

Globalization and Localization.

While globalization continues, there has also been a resurgence in localizing business models and sourcing due to political and economic shifts (e.g., tariffs, supply chain disruptions). This further fragments a B2B strategy calculation in forcing companies to adapt local requirements (hardly a one-size-fits-all any longer). However, the ability to address this segment can have far-reaching profitability impact. For example, localization has led to geographic fragmentation, with some businesses looking for global solutions while others sought localized, region-specific providers. Sometimes, the global solutions actually can be changed, with slight modifications, to fit the local requirement.

Understanding these trends that have emerged to split apart your customer base can help you shape your business strategy. While taking apart the Gordian Knot of trends is difficult, sometimes it pays to just cut the knot!

We would be happy to help you. Contact us, or read Part 3 in this series: Anticipate, React, Adapt: Targeting B2B Customers into Relevant Groups. And for a convenient single pdf file of the entire series, email inquiries@a-i-m.com  Thanks for reading!

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[1] The Gordian Knot is an ancient Greek legend about Alexander the Great and a complex knot that tied an oxcart to a post in the city of Gordium, Phrygia, in 333 BC. An oracle prophesied that whoever could untie the knot would become the ruler of Asia or the entire settled world.  Many people tried to untie the knot but failed, until Alexander arrived and examined it carefully. With one swift stroke of his sword, he cut the knot in half and claimed the title of king of Asia. The story of Alexander cutting the Gordian Knot is used as a metaphor for a seemingly intractable problem that can be solved by exercising brute force, or “thinking outside the box”. This is exactly what B2B companies have to do today with the multitude of audiences they face.

[2] An AIM Snapshot report noted that a building professionals most often use a manufacturer’s website to get detailed product information, beating even Google searches. https://www.a-i-m.com/wp-content/uploads/AIM7103.17-Product-Info-Sources.pdf

[3] There are seven activities within the value chain in construction that have participants in them. These include: Raw Materials – the companies that make the raw materials for the products that feed construction of buildings and structures; Product Manufacturing – the manufacturers themselves and their processes that create products from the raw materials; Design and Engineering – The design and engineering participants (architects, engineers, construction managers, sales representatives, building owners, etc.) that utilize the products; Construction – the building of the structure itself, which includes the previous participants as well as safety regulators, municipalities, etc. ; Operations and Maintenance – These participants (often overlooked) play a primary role in the value chain, as they maintain the products that were intalled and often influence what WILL be installed; Demolition – people who may be responsible for demolishing the  older buildings before the new construction can begin; and finally, Renovators – industries and participants who work on existing structures to upgrade them.

[4] There were several “best of class” findings which included in this order:1) Answer the phone quickly. It is extraordinary how many companies slip up on this basic “innovative” technique of simply answering the incoming phone. 2) Give your name without being asked was another important one, because it PERSONALIZES the conversation! 3) Be polite and very professional seems basic enough, but sometimes is lost in the “boredom” of day to day answering the phone. 4) Be or seem very knowledgeable about the products/company sounds simple, but often forgotten. These were just some of the “innovative” findings of the research, which by the way, technology can help make even better.