Once so different: The growing similarities between business- and consumer-marketing

Though not formally entrenched in all firms, marketing plays a crucial, yet sometimes anonymous role. From gathering data on the market, including but not limited to customers’ and potential customers’ needs and wants, to pricing and promoting offerings, marketing has always held a very firm and critical role in the way organizations lead their businesses. Yet, the question is, is there a difference in the way businesses market to other businesses, known as business-to-business (B2B), compared to when they market to consumers, known as business-to-consumer (B2C)? Many will argue that there are stark differences between B2B and B2C marketing. This essay’s goal will not be to argue against that statement but, rather, to show the growing similarities between the two, especially in the 21st century with the development of technology and the changes in social trends. This essay will begin with an understanding of how businesses must strategise regardless of customer group, it will then identify the role of relationships in marketing, followed by the role of brand equity in an organization, and finally it will analyse the changing trends in standardization and customization.

Strategising

In order to identify some of the similarities that business-to-business and business-to-consumer marketing have we must begin with an understanding of marketing and business strategy. The latter term has long been associated with the work of Harvard academic, Kenneth Andrews (1971), who along with Igor Ansoff and Alfred D. Chandler have been credited with the introduction and popularization of business strategy. The trio formed what is now one of the most well known forms of strategizing and analysis titled SWOT, after its key elements: strengths, weaknesses, opportunities, threats (Andrews, 1997; Hunt/Lambe, 2000). Their model looks at understanding the organization’s competencies as well as their ability to tackle opportunities and challenges.

In that sense, all firms, regardless of whether their customer is a consumer or another business, must managerially and conceptually strategize based on their strengths, weaknesses, opportunities, and threats. This can also be dealt with on another level through the identification of an organization’s marketing strategy, which focuses around three elements: segmentation, targeting and positioning. Segmentation, wherein a firm looks at a pool of possible customers and groups them based on their similarities, allows organizations to better understand the regrouped needs and wants of different possible customers in order to know where to focus their efforts. This leads to targeting, where a certain group has been deemed attractive through the identification of size, profitability, and accessibility. Finally, positioning is when marketers must make the offering distinctive and unique (also known as the unique selling proposition) which should be based on the creation of a competitive advantage and long term capabilities and sustainability in order to create a cheaper, better and/or different offering. This means both business and marketing strategies aim to deliver offerings based on the equilibrium reached when external opportunities and internal capabilities meet. For as Andrews (1997 p. 57) bluntly put it, “opportunism without competence is a path to fairyland.”

Strategizing must therefore take place in both a B2B and B2C context, following the same basic procedures. The limitation in their similarities are anchored around the opportunities of their relationships with their customers. However in that regard, while both groups of organizations hold different touchpoints, relationships as a whole hold a vital role in the aggregation and dissemination of information, as well as in the retention of profitable future interactions between customers, suppliers, and other stakeholders. Much of the past century’s academic literature has associated relationship marketing primarily to B2B marketing (Sheth & Parvatiyar, 1995, [1]). This was due to several factors, including the wave of mass production during the Industrial Revolution which changed the dynamic of the typical buyer-seller relationship, as producers could no longer deal directly with consumers (Sheth & Parvatiyar, 1995, [1]). This led to the introduction of middlemen and not only generated distance but also led to impersonal relationships between consumers and producers. With that being said, some argue (Sheth & Parvatiyar, 1995, [1 & 2]; Malthouse & al., 2013) that the evolution of technology has paved the way for the rebirth of direct contact with consumers and therefore the potential for relationship marketing on a B2C level.

Relationship Marketing

Pre-Industrial Revolution economies were centered around trade, thus allowing producers to sell their own goods directly to the consumer at bazaars, and as a result, retain a close relationship, which could often lead to loyalty (Sheth & Parvatiyar, 1995, [1]; Jacoby & Kyner, 1973). During the Industrial Revolution, the advancement in technology and machinery meant that producers could increase output in a more efficient manner. That increased supply phenomenally and meant that local producers were no longer producing locally but often nationally or even internationally. The expansion into unknown territories created middlemen who knew local trends better and could buy in bulk to resell the same way producers would have done in the past. While producers and consumers still often hold middlemen with regards to the exchange of goods, the progress in technology has allowed these producers to develop relationships with consumers.

Sheth and Parvatiyar (1995) have been credited as having “advanced” (Peterson, 1995, p. 281) the field of marketing for their research in the “controversial” (Peterson, 1995, p. 278) debate over why consumers choose to take part in marketing relationships with businesses, a topic that has been dealt with very lightly in recent decades. Sheth and Parvatiyar (1995, [2], p. 2) believe “consumers like to reduce choices by engaging in an ongoing loyalty relationship with marketers.” They argue that, much like in a B2B environment, both parties can greatly benefit from a direct relationship. For example, the information age, where technologically aggregated and disseminated data can tell marketers how to cater to needs and wants more efficiently and effectively, has led to the birth of loyalty programs. Programs such as those offered by supermarket chains including Tesco, Sainsbury’s and Asda (just to name a few) revolve around an ongoing relationship between two parties: the consumer and the organization; where, in exchange for information about buying habits in the long-term, consumers receive financial benefits and rewards. In other words, it’s a value-creation relationship where value is defined as being subjective and critical for both parties to sustain a relationship over a long period of time (Shani & Chalasani, 1992; Gronoos, 1990). This type of B2C relationship is extremely similar to what was often only seen as B2B relationships, in part as shown earlier due to the Industrial Revolution’s introduction of middlemen and specialties. While B2B relationship marketing remains a strong — if not stronger — component of general relationship marketing, the development in technology is regenerating greater touchpoints (and therefore relationship opportunities) between businesses and consumers (Bejou, 1997; Malthouse et al., 2013). Bejou (1997) argues that another factor changing relationship marketing is the emergence of the service economy, which with the evolution of technology has meant that businesses are more accountable for their offerings. This is clear through the popularisation of social networks which has led to the democratisation of individuals, giving them a larger platform to callout businesses publicly when they deem deservable (Kotler, 2011).

Of course differences remain regarding relationships between B2B and B2C marketing. Personal and tangible contact are much more prominent in business-to-business relationships mainly due to market size. This means that firms cannot hold the same relationships with consumers as they would with business representatives. The players in each party vary tremendously and reduce the opportunities for tangible and personal relationships between the brand and the customer, requiring businesses to find new ways to maintain, or in some cases, create relationships with customers.

The responsibility businesses have to maintain relationships with consumers is growing more imperative, even beyond the value-creation benefits presented earlier. The importance stems from other factors as well, many of which are also coming from the growth of democratisation enabled by technology. One of these factors is brand image and the way consumers act based on their perception of a brand’s value, quality and, more importantly these days, sustainability (Kotler, 2011). That new dimension of consumers’ brand perception is affecting companies at all levels of the supply-chain. Walmart, one of the world’s largest retail corporation, with over 11,000 stores across the globe said that, “by 2012 [it] would require more than 60,000 of its suppliers to source 95% of their production from highly ranked ‘environmentally oriented’ companies” (Kotler, 2011, p. 133). Such examples are a clear sign of the ramification of the consumer’s power going beyond B2C organizations but pushing organizations to deal with their suppliers and other partners solely if they share their sustainability goals. This emergence, which is called corporate social responsibility (CSR), is taking place, as noted earlier, with the power of technology in the hand of an ever louder consumer. Kotler (2011, p. 134) states, “consumers can be emailing, blogging and tweeting to their friends and acquaintances good things or bad things about a company. Companies are increasingly swimming in a highly transparent fishbowl.” For at the end of the day, the American Marketing Association’s (AMA) definition of marketing, one of the most highly regarded, has the creation of value for society as a key element of the term. They state that marketing is, “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” (AMA, 2014)

Branding

The topic of price premium is very closely associated with the topic of brand equity, which itself is dealt similarly in both B2B and B2C marketing. Brand equity is defined as, “the assets or liabilities associated with the brand that add to, or subtract from, the value the product provides” (Khun et al., 2008). In order to see how both B2B and B2C marketers function regarding brand equity we must compare empirical and theoretical research from both fields. Recently, Niklas Persson (2010) wrote that the subject of brand image and its effect on price premium products in B2B interactions had seen very little research and therefore studied the topic empirically himself. On the other hand, B2C brand equity has seen much attention in marketing research (Aaker, 1996; Keller, 1993; Ailawadi et al., 2003; Agarwal & Rao, 1996). Using the work of Aaker (1996), one of the most prominent researchers in B2C brand equity, and Persson (2010), one of the few who has written about B2B brand equity, we can identify what leads buyers to pay a premium for an offering based on the brand name. Through Persson (2010) and Aaker’s (1996) work we can identify similarities in the factors that make up brand equity for B2B and B2C. These are, brand awareness/familiarity, quality, firm’s reputation, commitment/loyalty, and customer relationship. Having said that, while many will argue that such criteria are used to select sellers in a purely rational form in B2B interactions, Andrews (1971) offers a different opinion. He says, “there is no way to divorce the decision that names the most sensible economic strategy for a company from the personal values of those who make the choice.” (Andrews, 1971, p. 103) Such is another example of the similarity that is often ignored between B2B and B2C marketing. However, while Persson (2010) and Aaker (1996) seem to respectfully acknowledge similarities in brand equity, one that is mentioned by the former and not by the latter is the criterion of distribution. We can argue that Aaker’s (1996) work at the time doesn’t take into account distribution as a criterion for brand equity due to the time of his publication, which wouldn’t have witnessed the soaring success of e-commerce (according to the U.S. Census Bureau’s Annual Retail Trade Survey, retail e-commerce, in the United States alone, grew from $5 million to $227 million between 1998 and 2012, or 4,440%).

However, the phenomenal surge in e-commerce, online shopping platforms where consumers can search and purchase products, is making distribution a key factor in consumers’ decision making process (Esper et al., 2003), much like distribution has affected decision making processes in B2B interactions (Persson, 2010). In Persson’s qualitative research — revolved around speaking to managers entrenched in the decision making process of their businesses — he identified that distribution was ranked a modest, yet substantial fourth (Persson, 2010, p. 1274) in order of importance. Elements under the distribution umbrella included reliability, as one manager was quoted saying, “‘they have no control over their systems, you can’t count on them to deliver the right quantity on the right day’” (Persson, 2010, p. 1272); speed, when businesses could offer quicker deliveries compared to competitors; and ease-of-ordering. Distribution speed and reliability was also related to consumer satisfaction in several e-commerce studies (Esper et al., 2003; Rao et al., 2014). In one by Rao et al. (2014), high returns was accredited to the distribution dysfunctions, “delivery reliability – measured as the extent to which orders are delivered ahead of (or later than) promised delivery times – is related to product returns,” (Rao, et al., 2014, p. 308) they concluded. In fact, 89% of e-commerce consumers rate delivery reliability high in importance (second to privacy), and 85% of consumers who receive their products on time say they would purchase from the same online shop again versus 33% if their product arrives later than promised (Esper et al., 2003).

Standardization vs. Customization

The issue of standardization, when an offering is manufactured in a single and unique way regardless of the customer; and customisation, when an offering is adapted to cater to the unique needs of the customer; has been long regarded as one of the starkest differences between B2B and B2C marketing (Lampel & Mintzberg, 1996). The small niched customer-base with larger volume demands in B2B interactions allowed for much more customization than the large number of customers with smaller volume demands in consumer segments. This came, as was highlighted earlier in this essay, from the growth in mass production during the Industrial Revolution (Lampel & Mintzberg, 1996; Sheth & Parvatiyar, 1995, [1]). However, much like the evolution of technology has affected relationship marketing (Sheth & Parvatiyar, 1995, [1]), it also brought back to light the topic of standardization versus customization in the realm of B2C marketing, which was long deemed inefficient (Lampel & Mintzberg, 1996). Lampel and Mintzberg (1996, p. 21) state that many organizations have tackled the dilemma the wrong way, “what has been ignored in all this is that customization and standardization do not define alternative models of strategic action but, rather, poles of a continuum of real-world strategies.” They argue that managers should find a perfect mix between the extremities, something which technology has helped facilitate (Srinivasan et al., 2002). Quoted in Srinivasan et al., (2002 p.42), Scharge notes that, “the web has clearly entered the phase where its value proposition is as contingent upon its abilities to permit customization as it is upon the variety of content it offers.” This change in B2C marketing can already be witnessed. Screen Shot 2015-05-02 at 12.29.07Taking Motorola’s Moto X smartphone for example, we can identify a level of customization in the smartphone consumer market which would have been unheard of before. The phone, which when ordered through Motorola’s website, allows customers to “design” their smartphone both internally and on the exterior. Customers can choose to design the back of their phones with 25 choices, ranging from simple colors on plastic casings to casings made from various types of wood and leather, with the option of engraving the phone, making it fully unique. Moreover, customers can customize their device to their old device’s settings before it even reaches them. When “designing” their Moto X, consumers can log into their Google account and set a wallpaper, greeting, and import their contact book. Motorola, essentially allows consumers to customize, to a certain degree (a total of 500 different external designings), their smartphone beyond market standards which usually offer 2-3 different colors and internal storage capacities. Using Lampel and Mintzberg’s (1996) continuum we can identify that Motorola’s strategy is set around Tailored Customization, when a, “company presents a product prototype to a potential buyer and then adapts or tailors it to the individual’s wishes or needs” (Lampel & Mintzberg, 1996, p. 26). Though we could argue that the customization border arches just a little bit towards the next level in the continuum, Pure Customization.

Conclusion

This essay doesn’t pretend to discredit the differences between business-to-business marketing and business-to-consumer marketing. Rather, it tries to show the different ways in which this gap is being filled. Many aspects of marketing which were long associated with B2B marketing have been affected by the development of technology. This essay has established that B2B and B2C companies will follow the same strategies when developing offerings. We’ve seen, that relationships with consumers matter again, though how much they matter depends on the way relationship marketing is defined. Regarding relationships, we’ve also taken note of the importance of sustainability, which with the help of technology has made all organizations more transparent and accountable for their actions. Finally we recognised that that the growth of retail e-commerce brought in the the criteria of distribution and customization to have important roles in B2C marketing.

Like most of the changes marketing witnessed in the past, many of the shifts presented in this essay were the result of advancements in technology and machinery. While technology or the internet should not be confused as a channel of delivery we should see them as an enablers. As we’ve seen, technology has enabled B2C interactions to mimic those of B2B. Distribution, customisation, sustainability, relationships are now key criteria in the success of business-to-consumer organizations. But there will always be stark differences between B2B and B2C marketing. These differences are similar to the ones between two irrelevant B2C organizations or two irrelevant B2B organizations.

For at the end of the day, decisions, regardless of whether you appeal to consumers or businesses, will always vary. What won’t vary is the approach and strategies you borrow to make these decisions.


This essay was written for my MSc Marketing degree. The literature used and read is referenced below.

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