ISBInsight: B2B marketing is an established field in the West. How is it evolving in emerging economies?
DVR Seshadri: B2B transactions predominate in any economy, in any country. Of course, there are pure-play B2B companies such as consulting firms, many manufacturing companies, IT service providers, etc. Likewise, on the supplier side, there are B2B transactions. Interestingly, a company in the B2C space also has a huge amount of transactions from a purchase perspective– either products or services– that are B2B.
B2B is pervasive. However, the level of attention paid to it within Indian business schools in particular is negligible. B2C is a lot more glamourous and attractive for young MBAs. And that spills over when our MBA graduates enter corporate careers. Generally, in emerging economies, we try to force-fit B2C or general marketing concepts to address B2B issues. But B2B and B2C are very different. B2B marketing is a specialised area. And you can’t just interchange knowledge across these areas.
In the developed countries, maybe due to intense competition, a whole body of knowledge and application of B2B has developed over the years. Unless B2B companies applied relevant knowledge, they couldn’t stay afloat in those markets. Now with the full play of globalisation that has been unleashed, Indian companies need to get their act together.
As a first step, they need to learn and apply the state-of-the-art knowledge that is relevant to address business markets successfully. Next, academics and industry should jointly create knowledge that is unique to emerging markets’ B2B realities. We can’t just transfer Western models and overlay them into India, because the reality here is different. For example, take supply-chain, which is very predictable in the West. You can plan around the container leaving New York and reaching Frankfurt on a certain day, and then the goods reaching the factory within six hours after landing at the port. In India, many events could make this supply chain unpredictable– a strike, a collapsed bridge, failed infrastructure. So, the body of knowledge has to be customised. Also consider buyer behaviour in India. Traditionally we are used to haggling and bargaining. You see that mindset even in the B2B context. Businesses must grapple with these realities.
Can you give some examples of B2B quandaries in the Indian context, and how companies have evolved strategy around these?
There are many commodity players who are struggling. Some companies have realised they cannot sustain in this lose-lose scenario. Tata Steel is an example of a company that did something about this situation. About 15+ years ago, they realised the need to change track. They are in a pure commodity game– steel is steel. But the wisdom of the top management motivated them to strategically move from product into services and solutions. Now they are moving a step further into experience. Typically, you see this transition in B2C markets. Thus, even companies like Tata Steel that have a large percentage of its revenues coming from business markets are seeking to find ways to get out of the commodity trap. Due to the extensive work they had done over many years, they have succeeded in a large measure on this front.
Once the company moves out of the commodity trap, and innovatively looks at how to move up the value chain, the price pressure abates. You have always had multinational corporations (MNCs) such as Siemens, ABB, and several more stay away from the commodity game and focus on value.
A lot of B2B companies in India are facing the heat of Chinese competition, which is essentially a price play. How do you survive when the Chinese competitor offers products at 40% less price than what you have been selling in B2B markets? For example, Thermax has been the king of industrial boilers in India. They had to find answers to this question when Chinese boilers were available for 30% less price. The decisionmaker might say – especially in the government: “My longevity is 4-5 years. I am being assessed on compliance to budgets and lowest acquisition price. So how do I justify a higher price? I will go for the cheapest option. What happens after seven years is somebody else’s problem.” In this way, the decision horizons might become short-sighted. In such a scenario, how does one sell value to the customer and capture a fair share of the value delivered?
Let’s go back to Thermax. What is the way forward? Our applied research at the ISB Centre for Business Markets can suggest a host of approaches: the way they dialogue with customers, showcase value, come up with new services, bundle offerings, come up with alternate business models such as selling steam instead of selling boilers (which they are doing), etc. When they do this, from a customer’s perspective, they are moving from capital expenditure (capex) to a revenue line item. These are some innovative ways in which effective B2B strategies can be evolved.
How will the new wave of technology impact business markets, for example, through data analytics and artificial intelligence (AI) driving business insights?
We are at the early stages of this tsunami of digital transformation. There is a Forrester report which suggests that 70-80% of the buying decision is already made before a sales pitch can be made by a salesperson. In this scenario, how does a B2B sales manager get into the customer’s mind-space? This requires thinking proactively and thinking ahead before the customer has crystallised her decision and zeroed in on a vendor. This is where there is huge potential for many of the new digital technologies.
Ironically, India has been the workhorse of providing IT solutions to the world. However, in terms of applying big data and analytics to purchasing or sales, we are way behind the rest of the world. This state of affairs cannot continue going forward, especially in a globalised world.
The new digital technologies will revolutionise B2B marketing and selling. For example, when a large machine tools industry expo is planned in one of the metros such as Bangalore, an event that is spread over a few weeks, instead of requiring mega-spaces for huge products that are transported over long distances, could we use virtual reality (VR) for the customer experience and structure the whole expo around VR? The customer can then view the supplier’s offering in the comfort of her office, at a time convenient to her. If we ignore these trends it will be at our peril. Both supplier and customer firms have to address these new technological advancements.
How can academic insights from the Centre for Business Markets help industry and government shape their B2B marketing strategies?
The academic progress in B2B marketing is proceeding at a brisk pace. Take the example of marketing insights. This is a well-developed field with top-rated academics working on how to make sense of the markets by wading through vast amounts of data. Unless companies are aware of this research, they cannot leverage it. They might have worked off hunches in the past. But the days of decision-making by relying solely on intuition are over.
If you have a competitor with a fantastic analytics team within the sales and marketing organisation to constantly scan markets for more data-driven decision making, they will be far ahead in terms of performance on the marketing and sales front. To merely survive in the marketplace, you must be digitally enabled as a company. For instance, patience levels of customers to access information is wearing thin. They want information and insights here and now, at the click of a mouse. Another example is to look at how B2B firms can get the pricing right. They cannot base this on benchmarking with competition or considering manufacturing costs and pricing slightly above or below that price any more. They must rely on sophisticated modelling and big data analysis. If a company ignores these developments, it would be a great peril, especially if competition is way ahead on the learning curve.
Since functionality in B2B marketing is key, B2B marketing is country-agnostic in terms of which country you are selling to, as opposed to B2C where it might be culturally differentiated. How can a supplier in business markets craft a new offerings strategy that resonates in the marketplace across geographies? It is easier to do this in B2B than in B2C. There is less need to tweak the product or service to the local culture, taste or aesthetics.
Of course, even in B2B, there are cultural nuances in terms of business practices. A B2B company based in India that seeks to go to China or Japan will face language barriers and cultural barriers in terms of business practices. If the company seeks to do business in the Middle East, it may not be appropriate to charge interest on delayed payments. This is where the supplier firm will have to strategically partner with local firms. This might require honing partnering skills, negotiating skills and configuring channels to create customer value. These are some of the many areas in which the Centre for Business Markets at ISB aims to contribute with our 50+ specialised B2B Marketing faculty.
About the Interviewer:
Yogini Joglekar is Managing Editor of Management Briefs@ ISBInsight.