June 2015, by Manfred Abraham, CEO
Our “Branding in the Boardroom” research shows that B2B brands are more reluctant to embrace brand as a powerful business tool than consumer organisations. The 14% of FTSE 100 companies that made no mention of the word brand anywhere in their annual report were all B2B companies. So why should branding have a more prominent place in the boardroom?
Firstly, it’s important to remember that each and every decision maker within the B2B purchase chain is also a consumer and we don’t live in compartmentalised worlds. Despite the B2B reality of complex offerings, long sales cycles and multiple decision makers, people are still at the heart of the relationship and people respond to people and to strong brands, in whom they can build trust. Investing in communicating the brand promise, at the right level and to the right audience, and delivering a consistent experience across each and every touch-point fosters a greater relationship between customer and brand.
Due to the generally high cost and high risk attributed to a B2B purchase – including implications on job credibility, time and budgets, customers look to emotionally attach to brands that can minimise this risk. This presents an opportunity for B2B brands to work harder to engage customers on an emotional level, however the majority of B2B businesses are failing to do this. Research by McKinsey suggests that B2B brands speak predominantly in terms of CSR and sustainability whilst customers value “honest and open dialogue” and a brand that “fits (their) values and beliefs”. If you look to the research, realising the power of brand in this space is under utilised at present. Research by CEB Marketing in partnership with Google and Motista shows that 86% of B2B customers fail to see any rational difference between B2B brands.
B2B customers however are far more responsive to emotional value: they are twice as likely to purchase if the brand triggers emotional drivers such as confidence, excitement, pride, and happiness over purely rational values.
Research by McKinsey shows that in the US, brand has a greater influence on the purchasing decision than purely functional measures like sales performance or product information. So, contrary to the assumption that brand has a lesser or more ‘functional’ role to play within B2B businesses; evidence states that practical business values alone are not differentiating. This is unsurprising when considering the highly personal nature of a B2B purchase in comparison to a typically lower value B2C one. What is particularly interesting is the notion of personal value gained through a B2B relationship. B2B purchasers are almost 50% more likely to buy a product or service when they see personal value, such as opportunity for career advancement or confidence and pride in their choice, in their decision to purchase. Along with this, customers are also eight times more likely to pay a premium for comparable products and services when personal value is present. These are staggering statistics, which should be key in influencing B2B businesses to more carefully consider and invest in their brand approach and the power of personal value as a driver.
When B2B brands do communicate and deliver on a compelling core brand message there is a greater, longer-term payoff, both internally and externally. McKinsey & Company shows that in 2012, strong brands within the B2B sector outperformed weak brands by 20%, up from 13% in 2011. Deepening this relationship isn’t just beneficial on an external basis. Strong brands reduce the cost of attracting and retaining top talent, and as a recent study conducted by LinkedIn demonstrates – a 50% saving in cost per hire can be achieved with a strong employer brand. Of course there are key players in the B2B space who have leveraged their brand with great success. These organisations demonstrate that brand holds a prominent place in the Boardroom, they understand the importance of utilising the influence of their brand, and in doing so, have made great strides in their respective industries. Thinking more like a B2C business is important. salesforce.com has done just that and has changed the shape of the industry. CEO Marc Benioff asked the simple question – ‘Why can’t software be as usable as Amazon?’ This very question has guided the direction of the organisation ever since and in turn has made it far easier to buy and own software. In short, Benioff has built a transformational brand by focusing on “The End of Software”. Interestingly, in 2015, salesforce.com was ranked as number 2 in the World’s Most Innovative Company ranking by Forbes Magazine.
Achieving high growth with minimal marketing spend
Infosys is a good example of how a B2B business has hardwired brand into the business, building its competitive advantage from the inside out. Core to the company’s brand strategy was quality and value, over price and this was demonstrated by a relentless pursuit of ‘zero defects’. This meant that Infosys would walk away from lucrative deals below a certain price point that would compromise its reputation for quality. This quality guarantee has allowed Infosys to charge a premium for its service leading to higher margins and securing long-term revenue through retained customers. In 2015, 97.8% of Infosys’ revenues came from existing clients and at their peak operating margins were around 30%, a figure that significantly outperforms its competitors.
Focusing innovation to drive profits
3M has seen the benefits of the effective implementation of a clear brand positioning built around innovation and connecting ideas. With a clear guiding principle at its core, the organisation has been able to consolidate its business under a clear purpose, whilst advancing its visibility in the B2B sector, where the majority of its revenues are generated. 3M has also integrated brand into its business through the use of the metric “New Product Vitality Index,” or NPVI, which is the proportion of company revenues from new products to all products sold. In 2015 3M’s NPVI was 33.3%, growing from 23% in 2007. This growth has been achieved by maintaining R&D spend as a constant 5-6% of total sales. The company’s culture of openness reduces the potential for ideas or technologies to remain in silos. In a 2015 poll conducted by PwC strategy&, 3M was ranked as the 6th most innovative company, despite being ranked 86th in R&D spend.
Building pride to deliver results
When SAP was faced with some tough decisions some years ago, the organisation turned to brand as the answer. Driven by then CEO Hasso Plattner, the company management structure was centralised and refocused around the brand promise that “SAP turns businesses into best-run businesses”. Plattner set about aligning this promise across every aspect of the business. To align the company around the brand, the business recruited a series of “brand stewards” and created a series of tools that would help the employees deliver on this new brand position. The repositioning also focused the company’s product developments through the creation of a Customers Labs group and a Design Services Team.
It is clear to see that successful B2B businesses are built on strong brands, and strong brands in this space leverage people power, personal value and drive an emotional connection. All dimensions perhaps not traditionally associated with the B2B space, but all key elements that shape leading brands in this sector. Given that we know in B2B, even the slightest growth in market share can have a substantial impact on revenues, investment in brand cannot be ignored. A strong brand reduces customer churn, retains top talent, permits premium pricing, delivers a consistent experience, increases volumes with existing customers and places your business at the forefront for consideration in gaining new customers. If that isn’t enough to encourage B2B businesses to better integrate brand into the Boardroom, we’re not sure what is.
By Manfred Abraham, CEO