Customer Relationship Management The Business To Business Marketing Essay

Published Date: 23 Mar 2015

When it comes to customer relationship management, the business-to-business (B2B) world has good reason to feel neglected. It is easy to forget that CRM is a concept with its roots in the B2B sector when it is often so poorly served with relationship techniques and examples. And with B2C 'customer champions' stealing the limelight, B2B CRM success stories rarely get a look in - indeed, outside of Dell, how many other B2B firms attract similar praise as their B2C contemporaries? As such, you can appreciate why the business-to-business field could feel somewhat short changed by customer relationship management.

Nevertheless, despite this imbalance, there is just as much benefit from customer relationship management for the B2B firm as there is for the B2C business. There are of course, some significant differences between the two. B2Cs may serve millions of customers whilst B2Bs often have only a few large customers. B2Bs also often have smaller product ranges than their B2C peers, and the purchases are less frequent but higher value. Yet despite these discrepancies, most of the principles that have proven such a success in business-to-consumer can also be applied with equal achievement in business-to-business - as well as providing the same ROI.

The elements of customer relationship management may take unique forms in B2B industries - there is 'dealer management' for automotive companies for instance, or 'trade promotions management' for consumer products firms - but the overriding concepts are still the same: understand your customers, form a strategy and then set in place the pesople, processes and technologies. High-level CRM may have emerged out of industries such as telcos and banking, but B2B has been catching up - and learning from the mistakes of B2C sectors too and these mistakes are many.

 

The B2B sector is developing and will lead to increased profits for the business world.

Unifying B2B Marketing and Sales

The business-to-business (B2B) sector presents marketers with a number of challenges not found in other sectors of our economy.

In this article we'll explore several aspects of both B2B marketing and B2B sales:

B2B Lead Generation

B2B Campaign Management

B2B Sales B2B Ecommerce

Each of these areas has a part to play in the process of attracting B2B prospects and turning them into B2B customers. We'll see that only by using a customer relationship management (CRM) system based on a unified marketing and sales approach can a B2B company fully understand their customers - and generate the maximum revenue possible from serving each customer.

B2B Lead Generation

For many years trade magazines were the dominant source of inquiries for most B2B companies. Large B2B companies advertised in the trade magazines to generate inquiries, while small B2B companies relied on editorial coverage of new products to generate inquiries. This worked well in good economic times with long product development cycles. Advertising could be planned months in advance and timed to the release of new products.

Direct marketing consisted of renting mailing lists from trade magazines and similar B2B lead sources. Reply cards were mailed back to the B2B vendor, which then mailed printed literature - taking weeks to fulfill a request for information about a B2B company's products. Inquiries from B2B prospects could be processed over weeks because B2B sales took months to close.

As B2B companies started selling to a global market, and many print trade magazines either disappeared or do not reach the B2B company's global market, it has become important for B2B companies to turn to the Internet for more of their B2B lead generation activities.

Two Internet-based techniques work well to generate inquiries for a B2B company:

Targeted advertising on content-based Web sites targeted at B2B readers.

Search engine optimization that generates traffic to the B2B company's Web site.

But how does a B2B marketing manager know how well their lead generation techniques are working?

Unlike the consumer sector, B2B marketing managers have tools available to determine the source of every lead. This is done by tracking every click from ads on content Web sites and clicks to the company's Web site from search engine results pages.

This means a B2B marketing manager can determine the ROI for all B2B lead generation techniques.

B2B Campaign Management

The life of every qualified lead for a B2B company can range from 6 to 24 months. It's important for a B2B company to maintain top of mind awareness with qualified leads over this period in order to be assured of an opportunity to be on the "short list" of vendors considered for a purchase. It's impractical and cost prohibitive for the salesforce at a B2B company to contact every prospect every month, so a marketing communications campaign needs to be implemented to maintain contact with these qualified B2B leads.

The best approach is to use a customer relationship Management (CRM) system that uses data collected by the B2B lead generation system to send appropriate marketing messages to each qualified lead. Since the CRM system already knows the source of each lead, the B2B campaign management system should select which message to send based on profile data and the source of the each lead.

The two approaches to B2B campaign management are:

E-mail newsletters to prospects and customers interested in the B2B company's products.

Mail post cards and multi-piece direct mail pieces to qualified leads.

Both campaign techniques should promote returning to the B2B vendor's Web site where a profile form allows the prospect to describe their needs - data that's used to qualify the prospect.

The CRM system should monitor the responses from each qualified lead, whether they come back to the B2B company's Web site via clicking on a link in an e-mail or in response to a offline direct marketing campaign. Tracking each of these responses is important for a B2B marketing manager to be able to calculate the ROI for the marketing campaign activities.

B2B Sales

For people who have not been directly involved in B2B sales activities, the sales process looks simple.

You would think that a single small book could teach the steps of learning what a prospect is looking for and showing the products that meet those needs. However, B2B selling turns out to be very complex because the product evaluation and purchase process used by B2B customers is complex.

Because the purchase of many products is so complex, affecting many parts of the B2B company, representatives from every department within the company participate in the product evaluation and purchase recommendation committee.

This means every aspect of B2B sales, from product demonstrations and proposals through contract negotiations and closing, requires a professional, experienced team to close the sale.

Large B2B enterprises frequently have plants and offices scattered across the country - and in other countries. This frequently means that sales activities need to be handled by a team of salespeople lead by an account manager who can draw upon resources from throughout the company.

This also means that a great deal of information needs to be gathered and shared with the sales team and with sales managers.

The software tools used by salespeople have gone under several names over the years, such as "contact management" and "salesforce automation" software. Today, these tools are called "customer relationship management" (CRM) products. When B2B sales was done by individual salespeople calling on a single location, standalone salesforce automation products (such as GoldMine and ACT!) worked well.

Now that teams of salespeople in multiple geographic locations need to work together a new approach to CRM is needed. A B2B salesforce needs a hosted CRM service from a company such as Salesforce.com or Coravue to capture information from the salesforce and provide sales managers with a real-time view of their company's B2B sales activities.

B2B Ecommerce

One aspect of B2B marketing and sales that has not fully developed is the area of B2B ecommerce. While ecommerce for business-to-consumer sales continues to experience double-digit growth rates, B2B ecommerce requires different software and systems to fully satisfy B2B customers.

The reason for the complexity in B2B ecommerce software and systems is that many B2B customers have negotiated special quantity pricing for many products sold by a B2B company. In addition, many of these products are not stocked in inventory, and the payment terms for each B2B customer can vary widely.

As customer relationship management (CRM) software systems grow to include B2B ecommerce features, we will see B2B companies including B2B ecommerce on their Web sites. This will have a dramatic impact on reducing the cost of sales and increasing the profit margins for these B2B companies as they take advantage of the efficiencies of B2B ecommerce.

Summary

B2B marketing and sales techniques need to reflect the complex needs of B2B customers.

It is becoming increasingly important for B2B companies to better understand what attracts inquiries, how to move qualified leads to become qualified prospects, and how to improve the effectiveness of B2B sales organization. Since B2B prospects have a unified view a B2B vendor - from seeing the company's advertising through to issuing a purchase order for the B2B company's products - it's important for companies in the B2B sector to adopt the same attitude toward their prospects and customers. This means having a unified view of potential customers from their first response to an advertisement through the purchase cycle through to issuing a purchase order.

Only by using a customer relationship management system based on a unified marketing and sales approach can a B2B company fully understand - and serve - their customers.

Critical Result or Appraisal

During the last few years, the topic of customer relationship management (CRM) has emerged as one of the most important areas in marketing and in the overall management of the firm. Numerous articles have been published that point to the importance of maintaining long-term relationships with customers in business-to-business (B2B) markets. The basic idea behind CRM is that if a seller can create a strong and trusting relationship with its buyers, then these buyers are more likely to perceive value in the relationship and may create a long-term revenue stream for the seller. The buyer also benefits because of the seller's earnest attempts to satisfy the needs of the buyer by becoming a dependable and high-quality supplier. Companies now recognize that CRM can contribute to a value-creation strategy because of the advantages associated with being a trusted participant in the network or set of strategic alliances that are maintained in a CRM relationship (Morgan and Hunt, 1994; Morris, Brunyee, and Page, 1998). As a result, the use of CRM strategies and tactics now serve as one of the major driving forces behind many companies' efforts to create superior value for their customers and generate a long-term revenue stream for themselves. (Kothandaraman and Wilson, 2000; Ulaga and Chacour, 2000). Since the creation of a superior value for customers is needed to generate and maintain a sustainable competitive advantage (Slater, 1996), many companies now view their CRM activities as an important part of their arsenal of competitive weapons.

At the same time that CRM has emerged as a major trend in the business world, companies have also increased their ability to organize, store, process, and analyze data from their own internal business activities as well as from external sources. Improved computer technologies, combined with more powerful software,

Literature Review

Customer Relationship Management (CRM): The Concept

Firms today are becoming more aware of the fundamental changes of customer relationships and the need to implement new solutions and strategies that address these changes (Rygielski et el. 2002). And thus the concept of CRM has been introduced.

CRM requires the firm to know and understand its markets and customers. This involves detailed customer intelligence in order to select the most profitable customers and identify those no longer worth targeting. CRM also entails development of the offer: which products to sell to which customers and through which channel. In selling, firms use campaign management to increase the marketing department¡¯s effectiveness. Finally, CRM seeks to retain its customers through services such as call centres and help desks. (Rygielski et el. 2002)

Many practitioners recognise that keeping customers is more profitable than attracting new customers (Bitran and Mondschein, 1997). According to Srivastava et el. (2002), to acquire a new customer costs five to seven times more than to retain an existing one. Hence, many companies are adopting CRM as a means to develop and maintain successful customer relationship (Verhoef and Donkers, 2001). This generally accepted view on the motive of adopting CRM focuses more on maintaining the relationship of existing customers, not on acquiring new customers. However, acquiring new customers, which can be viewed as Customer Relationship Establishment (CRE), should form a part of Customer Relationship Management. My arguments are a) all the CRM activities are based on the acquisition of new customers, it is the premise of the CRM activities onwards, and b) to understand a potential customer¡¯s need is as strategically important as to understand a current customer¡¯s in terms of product design as well as after-sales service, and furthermore, c) the same theory and practise of CRM activities on a current customer can also be applied to a prospect, e.g. marketing segmentation on differentiating profitable (potential) customers from those non-profitable. Thus, marketing activities involving converting prospects to customers should also be included into the CRM domain.

CRM in Business-to-Business (B2B) Industry:

CRM is not only applicable for managing relationships between businesses and consumers, but even more crucial for business customers. In B2B environments, transactions are more numerous, custom contracts are more diverse, and pricing schemes are more complicated. CRM strategies, such as customised catalogues, personalised business portals, and targeted product offers, can help smooth this process and improve efficiencies for both companies. (Rygielski et el. 2002)

From the respective of customer behaviour, Bush (2002) suggests that B2B buyers choose a supplier with whom they can develop a relationship; one they can go back to as required and one on which they feel they can depend. Once they have chosen a supplier, having invested this time and effort, they are more likely to stay with that supplier for longer. This invokes the equal importance of deploying CRM in both recruiting new customers and maintaining existing customers. 

 

 CRM can be viewed from two perspectives. Operational CRM refers to the business strategy that focuses on the day-to-day management of the customer relationship across all points of customer contact and is enabled by sales and service technologies. Analytical CRM is the part of the CRM business strategy that drives increased customer intelligence and makes information actionable across all touchpoints. (Collins 2001) It encompasses a host of data mining applications (e.g., marketing, forecasting and budgeting) that enable companies to develop greater customer intelligence and accordingly customer-specific strategies. Analytical CRM will be the main theme running throughout the research/project.

The essence of CRM is understanding customer needs and leveraging that knowledge to improve a company¡¯s long term profitability. It requires the alignment of three building blocks: insight into customer decision-making, information about customers, and information-processing capability. (Stringfellow, et el. 2004)

Recent developments in Information Technology (IT) have improved the information-processing capability dramatically. This along with the increasing availability of customer information, collected internally with continuous transaction records or bought from external sources, has created opportunities as well as challenges for companies to leverage the data and gain competitive advantage. Large amount of customer information is accessible in the databases, however, the knowledge hidden behind the data is not explicit and ready at hand. With respects to these conditions, the need to use data mining tools, which can help uncover the hidden insight of customer behaviours, has been raised.

Data mining is the process of searching and analysing data in order to find implicit, but potentially useful, information. It involves selecting, exploring and modelling large amounts of data to uncover previously unknown patterns, and ultimately comprehensive information from large databases (Shaw 2001). Data mining can be easily fitted into various business functions. Lets take my MSc summer project for example...... Based on the interplay between potential value and realised value, CRM/marketing managers can devise customer-specific strategies.

Conclusion

B2B companies use CRM as a differentiating bridge to get closer to customers.While CRM success is frequently cited among B2C companies, B2B firms have also seen tremendous results from customer-focused strategies. In fact, all of the 2004 ROI Review participants implemented mySAP CRM within the B2B segment of their operations. Characterized more heavily by account development, knowledge-based selling and infrequent purchases than their B2C counterparts, the B2B organization relies on integrated sales management and planning to grow the value of its customer base.