Customer Behaviour is Changing: The Rise of Digital Commerce

Revenue is at risk unless manufacturing companies transform

The purchasing behavior of B2B customers is moving online and, as such, manufacturing companies need to respond to current changes in the market. The pandemic has accelerated this trend, with more than 70%1) of the global industrial B2B market now being derived from online interaction, in one form or another. Excellence in managing the digital commerce purchasing funnel (see figure below) end-to-end, along the entire customer journey, from the first contact with a supplier to the purchase of a product or solution, will reward the companies who are proactive.

However, less than 20% of companies undertaking digital transformations are reporting performance improvements2). The pitfalls are numerous and include, but are not restricted to, a lack of smart leadership and top management vision and/or buy-in, too much focus on the technology, rather than business acumen, erratic decision-making, and inconsistent execution, as well as weak governance models.

To succeed in digital commerce, particular focus should be given to the research phase of the funnel as the decision for a supplier/brand is highly influenced at this stage. Considerations are, to enable customers to obtain personalized and relevant information early in the buying process and to be able to evaluate and configure products or solutions for individual customer requirements. Consequently, winning the battle for research online i.e., the pre-sales phase, is something that can no longer be ignored and requires the role of marketing to be redefined1).

Research shows that change is essential1):

• 80% of B2B buyers start their research online and the decision for a supplier/brand is strongly influenced at this point

• 90% of B2B customers realize the benefits of digital B2B purchasing processes and are willing to use new tools e.g., CPQ, portals, and selectors in the early stages, before transacting

• 100% of B2B customers state that online supports or complements the offline purchase journey

There is no `one size fits all` approach, as there are numerous varieties of digital commerce. Research and transactions will take place in “pure” digital commerce channels, such as distributor web shops, supplier portals or marketplaces such as Amazon B2B. Also, “ROPO – research online, purchase offline” channels, such as finalizing the purchase via supplier sales reps or in a distributor outlet. All of them need to be managed simultaneously for an outstanding end-to-end online customer experience, starting from search engines or social media platforms to the point of conversion and life-cycle support. Adding to the complexity, all channels must be optimized for a multitude of heterogeneous target groups, geographies, and offerings - be it commodities or complex project businesses.

Holistic funnel management will become a differentiating capability for all B2B organizations. A hybrid customer experience will utilize technology and digital self-service to complement existing experienced sales consultants and back-office support. Failure to implement these new and increasingly necessary demands will result in a loss of market share and revenue and will be magnified in circumstances of economic downturn. To triumph, implementing the digital commerce success formula (see figure below) will be a key component to successfully navigating the challenges of the delivery of a superior customer experience.

All five factors above need to be considered equally. As in a mathematical formula, if only one factor in this equation is sub-optimal it will result in zero. The entire digital commerce approach will underperform. Just imagine, perfect data and content, eCommerce optimized assortment, and excellent marketing but with the wrong pricing on marketplaces – it simply doesn`t work. As a foundation for digital commerce, companies must establish the right enablers, including a pragmatic CRM and collaboration platform, analytics capabilities, a well-functioning master data management, as well as product information and digital asset management systems.

Major roadblocks are the required investment in both digital marketing capabilities and technology, which necessarily increase the overall SG&A cost base. To compensate, sales costs must be adjusted to manage the resulting shift in SG&A cost positions. This may prove to be quite a challenge in the current economic climate with cost pressures pushing companies back towards established approaches, rather than investing in future customer interaction.

Future revenue is at risk if a B2B company does nothing or their approach to these new online market realities is hesitant and half-hearted. A consistent approach towards the new realities of customer experience from the beginning to the end of the purchasing funnel is a must to secure future business where the “winner takes all”, and speed is of the essence.

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1) Accenture, Industrial Consumerism Study, Winning the race to reinvent B2B sales, The reinvention of the CMO Role

2) McKinsey: Unlocking success in digital transformations