B2B (business-to-business) commerce organizations have always operated in a complex multichannel world. Engaging customers in this world remains increasingly complex. It requires a focus first on breaking down barriers— taking steps to minimize channel conflict with internal sales teams and outside partners and then going directly to the business buyer. For companies that can move nimbly to navigate the channel complexities and bring value directly to the business buyer, the future has never looked brighter for B2B online commerce.
The B2B Online Opportunity
B2B online commerce continues to grow at a tremendous pace. According to a recent report from Forrester Research, in 2009 – the latest year for which data was available – the U.S. Census Bureau reported that B2B online commerce totaled $352 billion –net of Electronic Data Interchange (EDI). That's up from just $25 billion in 2000, for a 34% compound annual growth rate in nine years. In addition, many B2B companies predict that online commerce will soon comprise 50% of total sales.
Challenge Dominates the B2B Ecosystem
As great as the B2B online opportunity is, so are some of the challenges in deploying a successful B2B program. One of the biggest barriers may be your own organization. An existing channel strategy and architecture often loom as the most formidable obstacles. Many organizations are not structurally, nor culturally, ready for the challenges of a robust, direct-to-business-buyer online commerce operation.
In a sense, with any direct-to-business-buyer sales effort, channel conflict is unavoidable. Many businesses were built largely through the strength and growth of their traditional channel strategy. The sales pipeline, its accompanying organizational structure, and incentives and compensation are specifically designed to funnel sales efficiently and in large volumes.
Attempting to bypass any partner in your channel operations by going direct-to-business-buyer could conceivably threaten to upend an established and, potentially, well-functioning system. But if carried out strategically, a well thought out B2B e-commerce plan can provide the best of both worlds – opening new revenue sources while boosting the success of the entire organization and all of its channel partners.
Keys to Optimizing Your B2B Model
Evolving your channel strategy to go direct-to-buyer requires a nuanced approach that fits the overall company goals and appetite for risk. The following three areas of focus can unlock significant additional revenue from your B2B online commerce program:
1. Improved User Experience
Customers’ expectations for B2B online commerce have dramatically shifted and continue to evolve rapidly. Just like everyone else, your customers are spending time – whether work or personal – on Netflix, Zappos and OfficeMax. B2C sites such as these are increasingly setting the bar for B2B in terms of the level of customer service, ease of navigation and overall online shopping experience that users look for – whether in a B2B or B2C setting.
Understanding how your business buyers are shopping means meeting their desire for a richer, deeper shopping experience. One area where B2C online commerce sites typically excel is in their ability to gather relevant data and provide recommendations tailored to each buyer. Knowing the right products or bundles of products to place in front of your business buyer opens tremendous opportunities for upselling, cross-selling and cross-promotion.
2. Subscription and Renewal Revenue
Your relationship with the business buyer doesn’t end at the initial sale – it’s only beginning. But channels usually focus on landing that initial sale. They often overlook the customer lifecycle; ignoring opportunities for follow-up sales, and other ongoing revenue streams such as subscriptions and renewals.
This occurs for a number of reasons: sales may fall below minimum order sizes; the sales cycles are different; compensation structures don’t create sufficient incentive to pursue renewals, etc.
Nonetheless, an attempt to capture subscription revenue through direct-to-business buyer sales is likely to be viewed as a channel conflict. Some of your sales channels may feel threatened that they are being asked to give up their customers, and in the process, lose opportunities for future sales.
The reality is that many resellers are not set up to manage subscription and renewal sales. A direct online channel can more effectively service those customers. Your resellers can be compensated for the loss in potential sales through an annuity-like revenue stream. We have seen some leading edge businesses employ this type of arrangement, resulting in improved renewal rates, lower channel costs, and closer relationships with customers - all while freeing resellers to pursue larger, more lucrative sales.
3. Closing Open Niches
The various B2B sales channels that companies rely on can deliver significant value doing what they do best – pursuing enterprise sales and large group orders. But this may also be leaving significant money on the table by neglecting smaller orders: everything from small businesses to individual orders from inside large organizations.
In fact, some of the sales channels companies rely on—both internally and externally—to deliver revenue are typically built to focus on large orders. Their compensation structures, order processing, sales training and management are specifically designed towards that. Some channels, whether resellers or internal sales teams, often even have minimum order size requirements.
Capturing smaller customers and orders requires coordinating ordering, payment processing, invoicing and supply chain with your existing infrastructure. When done correctly, pursuing untapped niches can add up to significant new revenue, as well as develop invaluable one-on-one relationships with business buyers and lead to whole new pools of opportunity.
Evolving the Ecosystem
Many organizations also struggle to adapt their internal sales channels because they’ve become dependent on the existing ecosystem. But at a certain point, it becomes somewhat of a bottleneck, restraining the business from fully realizing the opportunities for sales and preventing channel evolution.
Business buyers are rapidly evolving in terms of where, when and how they want to make their B2B purchases. And your commerce ecosystem needs to evolve with them in order to meet those changing expectations. In an increasingly competitive market landscape, you need to ensure that you are not only capturing those purchases, but also maximizing the revenue potential from each sale.
Optimizing B2B online commerce can be challenging. It requires buy-in from many parts of the organization as well as outside partners with whom you have long-standing relationships.
Some proven methods that can help bring about the organizational shift needed to achieve a successful B2B online commerce strategy include:
Understand where your business has been and where customers are going
How have you handled customers within various customer segments? What do analytics show about where customers and their buying patterns are moving to? How can your business use a direct B2B-buyer approach to address unmet needs?
Identify where power resides within the business
What are the biggest sales channels? Who “owns” each revenue stream? Every organization needs to have the proper balance of where their revenue comes from your internal and external sales channels– spend the critical time now to determine what your ideal balance is now and in the future.
Find an “internal champion” and a “channel champion”
See which leaders are open to learning about how B2B online commerce can drive success for the business. Find someone willing to advance the idea in the C-suite. Is there a key reseller, distributor or strategic channel partner willing to work together to create a win-win setup?
About the Author: Michael Chuma is from Digital River