-BUILDING IN THE WORLD OF B2B Unique Nuances and Special Considerations

The following report is an abridged version from Chapter 10 of The Indispensable Brand by Mitch Duckler. The book provides a roadmap for crafting a brand strategy that rises above the noise and monotony in the marketplace… and for catapulting from indistinguishable to indispensable. The Role and Importance of Branding in B2B

Brand management originates back to the world of consumer-packaged goods, but many concepts have been effectively applied to other B2C and B2B businesses. Even so, many B2B marketers still question whether brands are as important in the world of B2B as they are in B2C. And those who do recognize the importance of brands in B2B wonder if the same basic principles, practices, frameworks, and guidelines apply.

There is an increasing amount of evidence suggesting brands are just as important in the B2B world. Interbrand’s Best Global Brands 2017 Rankings evaluated brands across financial performance, consumer choice influence, and the ability to command a price. It featured multiple B2B brands in the top twenty-five.1 Additionally, below are snapshots from three independent research studies that demonstrate the role and importance of branding in the world of B2B.

2 Unique Nuances and Special Considerations www.fullsurge.com 1. B2B INTERNATIONAL

A 2017 study from B2B International indicated that branding is the single most important strategy for marketing executives.2 Executives in this study placed branding ahead of product development, , and .Figure 10.1 Branding vs. Other Marketing (B2B International)

Figure 1 Branding vs. Other Marketing Q: What would make you more interested in any brand? Q: Which of these marketing strategies are you focusing on at present?

WAVE WAVE WAVE 2017 2016 2015 Branding 60% 60% 50% 61% Product development 55% 55% 52% 51% Customer Satisfaction 55% 55% 51% 54% Marketing 51% 51% 51% 50% Market Segmentation 41% 41% 48% 52% Competitor Analysis 38% 38% 31% 32% New Industry Sector Opportunities 38% 38% 29% 37% Route-to-Market 32% 32% 24% 30% New Country Opportunities 23% 23% 20% 23% Environmental 16% 16% 3% 12% Raising Prices 13% 13% 9% 9% Low Cost Leadership 9% 9% 6% 6% Volume at Low Prices 3% 3% 3% 3%

more than other countries (30%) along with low cost leadership (26%), Signi cantly Higher Base: Varies and volume sales at low prices (11%) B2 Intentional (AN Respondents) Signi cantly Lower

Source: B2B International

Source: B2B International

3 Unique Nuances and Special Considerations www.fullsurge.com Despite the recognized importance, however, B2B marketing executives do not believe they are successful in building strong brands. In the same B2B International study, only 38 percent of marketing executives in the United States believed their corporate brand had a strong, unique selling proposition. This number is only slightly higher in Europe, at 43 percent.3

Figure 10.2 Figure 2 Perceived StrengthPerceived of Strength USP (B2B of USP International)

Q:Q: T Too wh whatat e extentxtent do do y ouyou b believeelieve y ouryour o rorganizationganization has has a a USP (unique selling proposition) that sufficiently drives differentiation of your corporate brand?

Top3 1 2 3 4 5 6 7 8 9 10 Box

USA 7% 6% 11% 14% 15% 21% 9% 8% 38%

Europe 8% 16% 18% 29% 9% 43%

UK 10% 17% 16% 27% 9% 41%

Germany 17% 22% 34% 8% 8% 50%

RoE 7% 11% 15% 11% 15% 26% 11% 37% Knowledge Based 7% 13% 14% 19% 23% 10% 37% Process & Construction 10% 9% 16% 20% 21% 11% 36% Trades & Services 20% 14% 37% 10% 7% 54%

$5 billion 7% 12% 11% 21% 25% 10% 6% 41%

$1 - $5 billion 7% 7% 15% 18% 24% 9% 6% 39%

< $1 billion 8% 22% 16% 30% 7% 7% 44%

4 Unique Nuances and Special Considerations www.fullsurge.com 2. CEB (GARTNER)

CEB, now a part of Gartner, found that B2B marketers increasingly turn to branding to drive purchases, win preference, and achieve premium pricing. The CEB study, conducted with fifty-five CMOs, discovered that branding is the second-highest priority among marketing executives.4

FiguFigurere 10.2 3 RisingRising Impo Importancertance of Bofranding Branding (CEB)

Impact of B2B Brand Connections

80 79%

64% 60%

40

15%

5% 2% 0 Consideration Purchase Pay a Premium

No Brand Connection High Brand Connection

Source: “From to Emotion, Connecting B2B Customers to Brands,” CEB Source: “From Promotion to Emotion, Connecting B2B Customers to Brands,” CEB

5 Unique Nuances and Special Considerations www.fullsurge.com 3. FULLSURGE

Our brand strategy consulting firm, FullSurge, conducted back in 2015 to understand how successful high-growth companies achieve their impressive results.5 The goal was to see what high- performance growth companies (definedFigure as 10.4thoseFigure with a10.4 greater than 15 percent three-yearFigure 10.4compound annual growth rate) do differentlyBrand in Performance branding,Brand Performancemarketing, in B2B and innovation. in B2B WeBrand expected Performance to find some in B2B level of disparity, but the magnitude of the difference between high-growth companies and the rest was shocking.

Figure 4 Brand Performance in B2B

Strength of Agreement Strength of Agreement Strength of Agreement Strength of AgreementStrength of AgreementStrength of AgreementStrength of AgreementStrengthStrength of of Agreement AgreementStrength of AgreementStrength of Agreement Strength of Agreement “Our companies “Our corporate brand is a “We have brand value “Our companies“Our companies“Our corporate brand“Our corporate is a “We “Ourbrand have companies is branda “We value have brand“Our value corporate brand is a “We have brand value bbrand-buildingrand-buildingbrand-buildinggreat deal strongerggreatrea tthan dealdeal strongerstrongerpropositionsbrand-building than than thatpropositions are thatpgreatropositions are deal stronger that thanare propositions that are capabilitiescapabilities are are capabilitiesa agreat grea t areour a greatcompetitors.” ourour c competitors.”ompetitorformallycapabilitiess.” documented areformally a great documentedfourormally competitors.” documented formally documented dealdeal strongerstronger than thandeal those strongerthose than those anddeal well-understood stronger thanand well-understoodthose by and w ell-undersby tood by and well-understood by ofof our competitors”competioftor ours” competitors” customers.”of our competitors”customers.” customers.” customers.”

Growth Gurus Growth Gurus Growth Gurus % are 79% more % are 27% more % are 33% more +79 likely to agree. +27 likely to agree. +33 likely to agree.

Growth Gurus 24% Growth Gurus 30% Growth Gurus 67% Non-Growth Gurus 13% Non-Growth Gurus 24% Non-Growth Gurus 50%

Actual Percentages:Actual Percentages:ActualSource: Percentages: ”TheActual Anatomy Percentages: of a GrowthActualActual Guru,” Percentages: Percentages: FullSurgeActual Percentages:Actual Percentages: Actual Percentages: • +79% • +79% • +27% • +27% • +79%• +33% • +33% • +27% • +33% • GG: 24% • GG: 24% • GG: 30% • GG: 30% • GG:• GG: 24% 67% • GG: 67% • GG: 30% • GG: 67% • Non-GG: 13% • Non-GG: 13%• Non-GG: 24% • Non-GG: 24%• Non-GG:• Non-GG: 13% 50% • Non-GG: 50%• Non-GG: 24% • Non-GG: 50% Higher-growth companies—dubbed as “Growth Gurus”—accounted for 19 percent of the total sample. B2B Growth Gurus were 33 percent more likely to believe their respective companies’ value propositions were clearly understood by employees and well-defined. Additionally, they were 31 percent more likely to state that their company’s brand portfolio was logically organized and well understood by customers. Finally, Growth Gurus were an astonishing 79 percent more likely to rate their company’s brand-building capabilities as much stronger than their competitors’ capabilities.

Net-net, most B2B marketers recognize the importance of building and maintaining strong brand assets to establish a competitive advantage and achieve superior business results. Even so, most do not currently believeSource: they do ”The a Source:good Anatomy job ”The at of it. Anatomy aThose Growth who of Guru,” asucceed, Growth FullSurgeSource: Guru,”however, ”The FullSurge can Anatomy follow theof a path Growth of a Guru,”Growth FullSurge Guru and reap the benefits of their efforts.

6 Unique Nuances and Special Considerations www.fullsurge.com B2C versus B2B: Articulating the Differences in Brand Strategy

Before discussing the similarities and differences in branding between B2B and B2C, it is important to distinguish between brand strategy and the marketing activation that supports it. To be sure, approaches to the latter (marketing activation) differ dramatically for most B2B organizations (vs. those pursued by their B2C counterparts). When it comes to brand strategy, however, there are far more similarities than differences. Most principles and best practices are equally relevant in both environments. The frameworks for brand strategy are also essentially the same regardless of industry or product category.

While the basic principles and frameworks for branding are relatively similar between B2B and B2C, there are a few characteristics common to many B2B businesses that should be taken into consideration. These characteristics have implications for how brand strategy development needs to be different in B2B. The following section will cover five “generalizations” about the nature of B2B businesses, each of which have implications for branding. While there is undoubtedly variability across B2B businesses, the following tenets hold true for many B2B organizations.

1. BUSINESS COMPLEXITY

In general, B2C products tend to be simple and more straightforward, like those in the consumer- packaged goods industry. Even relatively more sophisticated B2C products, like televisions and automobiles, still only require a manageable level of knowledge and research.

B2B products, on the other hand, tend to be more technical. Many require at least a base level of expertise to use effectively. Even when B2B products appear to be simple and straightforward, they are often components of more complex solutions. B2B products also frequently require customization to meet the needs of customers.

7 Unique Nuances and Special Considerations www.fullsurge.com The decision-making process is also different. Individuals generally make B2C purchase decisions, but B2B purchase decisions are usually made by groups, committees, or procurement departments. Formal processes may also need to be included in a B2B environment, such as lengthy proposals and pitch presentations. While B2C brands need to be relevant to individuals, B2B brands must do the same for a broader group of people.

According to Steve Wnuk, vice president of marketing for Milwaukee-based Quad/Graphics, “Big businesses, in particular, can be very complex. Purchases tend to be highly considered and not very straightforward. It’s harder to explain your product. Getting your message across typically takes a lot more thoughtfulness than for your typical consumer packaged goods item that shows up in a grocery store.6

2. SALES CYCLE

Sales cycles also tend to differ between B2C and B2B. Many B2C categories have very short cycles, while B2B companies tend to have longer cycles. This is in part due to the number of participating stakeholders and the formal processes involved for B2B companies.

As a result, the role of branding in the B2B purchase decision process is slightly different. With B2C, purchases are often more impulsive and less involved. In the case of B2B, the longer sales cycle causes the objectives of branding to shift. The focus needs to be on building confidence and trust with customers over multiple phases of longer, more complex sales cycles. When the sale is over, it may still take additional months or years for a B2B customer to form a solid impression of the purchased product or service.

Ed Keller, Chief marketing officer at Navigant, a global professional services firm in Chicago, said, “Sales cycles are long, and product use cycles are even longer. Clients may purchase a technology product from us, or they may purchase a consulting service, such as an audit. They may not know for a year whether they like our product or whether they are having a good brand experience. It can take a long time—even several long purchase or sales cycles—for us to establish credibility as a vendor and build trust in our brand.”7

8 Unique Nuances and Special Considerations www.fullsurge.com 3. PURCHASE PRICE AND COMMITMENT TERMS

B2C purchase prices vary widely, but in general, they tend to be less expensive than B2B purchases and require far less of a commitment. Consumers are often motivated by low price points, deals, and discounts. Even so, outside of a few highly price-sensitive consumer segments, cost is rarely the sole driver of purchase in the case of B2C.

Conversely, B2B purchases tend to be higher dollar value, and many represent long-term investments. Binding contracts between the supplier and customer may be necessary. Even if those contracts don’t involve exclusivity, the hard and soft costs associated with switching are often limiting and prohibitive. These factors raise the stakes on getting it right the first time, placing elevated pressure on the brand to instill confidence and trust among its customers.

4. FEWER CUSTOMERS, FEWER SEGMENTS

Unlike in B2C, B2B companies tend to compete for business among a smaller set of prospective buyers. B2B companies with fewer than one hundred customers are not uncommon. Even a small handful of customers can account for the vast majority of a B2B company’s revenue and proportion of profits.

One outcome of having fewer customers and prospects is that B2B markets generally have fewer needs-based segments. A low number of segments can only be divided so finely before distinctions in the segmentation become meaningless. Additionally, B2B customers’ needs tend to differ to a smaller degree than the needs of buyers in consumer markets. Quality seekers, price-sensitives, best-in-class performance drivers, and collaboration seekers are some common B2B attitudinal and needs-based segments.

Taking it one step further, fewer distinct segments can also mean fewer brands are needed to go to market. According to Navigant’s Keller, “In almost any consumer segmentation, you’re going to have six, seven, or even eight segments. We (in B2B) have far fewer segments. I don’t need a big portfolio of brands when I’m not trying to appeal to six different client segments.”8

9 Unique Nuances and Special Considerations www.fullsurge.com 5. IMPORTANCE OF RELATIONSHIPS

Generally speaking, B2C tends to be more transactional than relational. The depth of customer relationships, even with and other advances in activation, cannot compare to the personal face-to-face relationships found in many B2B businesses.

In fact, B2B branding is all about building customer relationships. The brand must stand for something greater than the product or service it sells. It must house an entire solution or offering, providing an experience that is desirable to customers and in line with the promise of its brand positioning. Many B2B customer-supplier relationships consequently carry high levels of loyalty and multiyear engagements.

Serta Simmons Bedding is a quintessential B2B2C business, where the customer is the partner, acting as an intermediary between the manufacturer and the end consumer. Andrew Goss, executive vice president of marketing for Serta, said that Serta aims to create a strong relationship with customers by being retailers’ partners in growth: “For some retailers, that means helping them to advertise our national product line better. So we do a lot of work on strengthening co-op programs where we provide them tools to give them access, for instance, to media that they would never be able to access on their own. And then for other retailers, it’s really making big plays with differentiated products that are logical extensions of our national lines…We’re always working on our ability to consistently serve retailers on time, and to strengthen our relationships with them.”9

10 Unique Nuances and Special Considerations www.fullsurge.com Targeting in B2B Markets

Many B2B marketers talk in terms of organizational entities, defining their targets in terms such as “Fortune 500 companies” or “large hospital systems.” This is often referred to as firmographic segmentation. The obvious drawback to this approach is that people, not companies, make purchase decisions. Keeping that in mind, establishing an organization as a brand target is dangerous because it assumes that the decision-makers in those institutions have similar needs and purchase drivers— an assumption that is based solely on the nature of their sectors. This means that although “large hospital systems” may describe parts of the target, defining the target requires more buyer-specific characteristics.

Some B2B companies already segment their markets and define target audiences in a more sophisticated way—establishing needs-based segments and brand positioning targets at the buyer level. In the words of Ann Rubin, vice president of corporate marketing for IBM, “It’s not about B2B or B2C. It’s about B2I. Business to individual. We don’t talk to companies because companies don’t buy our products and services—people do. We have to understand buyers at the individual level—and in their personal lives—to be relevant in their business lives.”10

A perhaps more effective way to define a brand’s target audience could be through combining buyer functions with more attitudinal-based or needs-based factors. According to Steven Wnuk, “We look at buying groups. We start with job function, and then we overlay personas. So, we essentially have four different personas across two different buying groups and titles within those groups (including both purchasing and marketing).”11

11 Unique Nuances and Special Considerations www.fullsurge.com GE Healthcare, the $18 billion division of General Electric that sells medical imaging products and related services, recently developed a B2B segmentation based on buyer-centric needs. GE now focuses on four key buyer segments:

• Decision-makers, who can be administrators or medical practitioners

• Clinical differentiation, covering entities that want to distinguish themselves by using GE Healthcare equipment

• Equipment productivity, addressing how many daily exams the buyer needs the equipment to perform

• Value-added services, for buyers who want additional services like data management

This segmentation approach has resulted in higher growth and greater cost savings for the division.

B2B Brand Promise: Rational Versus Emotional

Another ongoing debate in B2B brand strategy is the level to which emotion-based promises should be considered over rational-based ones. Business decision-making tends to be more rational than consumer decision-making—so the thinking goes—therefore, it makes sense for the promise of B2B brand positioning to also be rational. This mindset, however, is both shortsighted and flawed.

In the CEB market research referenced earlier, researchers differentiated between business value and personal value. Business value was defined as appealing to “logic/reason in areas such as functional benefits and business outcomes.”12 Personal value was defined as “emotional appeals in areas such as professional benefits, social benefits, emotional benefits, and self-image benefits.

CEB tested the relative importance of the factors against fourteen business outcomes; they included consideration, purchase, premium payment, and advocacy. The research indicated that personal value had twice as much impact as business value across this set of commercial outcomes.13 CEB concluded that with B2B buyers, emotion matters more than logic and reason.

12 Unique Nuances and Special Considerations www.fullsurge.com Figure 10.5 Personal ValueFigure vs. Business 5 Value (CEB) Personal Value vs. Business Value

Impact of Perceived Brand Benefits on Commercial Outcome

50% 42.6% ease

nc r 25% 21.4% t I e n c e r P 0.0% Business Value Personal Value

• Business outcomes (e.g., career advancement)

Source: “From Promotion to Emotion, Connecting B2B Customers to Brands,” CEB Source: “From Promotion to Emotion, Connecting B2B Customers to Brands,” CEB Interestingly, business value (arguably the most common form of brand promise in B2B) is not seen by B2B buyers as a differentiator. The research shows that only 14 percent of B2B buyers were able to see enough meaningful difference between brands’ business value to be willing to pay extra for that difference.

13 Unique Nuances and Special Considerations www.fullsurge.com Figure 10.6

Figure 6 Business Value is not Differentiating

Average AgreemeAveragent with St Agreementatement: with Statement: “This brand will“This he brandlp us awillch ihelpeve b ususi achieveness go businessals.” goals.”

10 t

eeme n 5 r g A

1 Individual Brands, Grouped by Industry

Industry Professional Tech Software Network Shipping Supplies Services Security Equipment

Source: “From Promotion to Emotion, Connecting B2B Customers to Brands,” CEB

Source: “From Promotion to Emotion, Connecting CEB thus concluded that “BusinessB2B Cusvaluet (rationalomer factors)s to B isran just dtables,” stakCEBes. It gets a supplier into a buyer’s consideration set but doesn’t make them stand out within the consideration.”14

The research also notes that B2B buying is highly personal, contrary to popular belief. The study found that B2B buying is even more personal than B2C buying. Researchers believe this is because buyers feel more personal risk in their business-related purchase decision-making (vs. personal-related decision-making).

14 Unique Nuances and Special Considerations www.fullsurge.com Figure 10.7 B2B BuyingFigure is Very P7ersonal (CEB) B2B Buying is Very Personal

Figure 10: Relationship Between NumFigureber of 10: Pe Relationshiprceived Personal Between Risks Numberand Emotional of Perceived Connection Personal Risks and Emotional Connection tion onne c ength of t r S Emotional C

0 1 2 3 Perceived Personal Risks Risk of Losing a) Credibility, b) Time, c) Job

Source: “From Promotion to Emotion, Connecting B2B Customers to Brands,” CEB Source: “From Promotion to Emotion, Connecting B2B Customers to Brands,” CEB The report goes on to state that B2B buyers feel three primary personal risks when it comes to business decision-making: losing time and effort if a purchase goes poorly, losing credibility if they recommend an unsuccessful purchase, and losing their jobs if they are found responsible for a bad purchase.

Consider the case of Motorola Solutions. With a focus on government and enterprise customers, it decided to assess the impact its products and solutions have on people and society. Its brand position, “To help people be their best in the moments that matter,” is a holistic proposition that applies to Motorola’s many product offerings. From an emotional perspective, the positioning focuses on both mission-critical situations of first responders and life-enhancing scenarios of people like retail sales associates.15

This isn’t to say that promises based on logic are irrelevant in B2B environments. Rationality will always be an important component of B2B branding, but rational benefits are not much more than table stakes for many B2B companies today. Those benefits may be necessary, but they are not sufficiently differentiating. B2B companies need to leverage rational benefits into an emotion-based brand payoff to achieve meaningful differentiation. This is the differentiation required to deliver superior business results.

15 Unique Nuances and Special Considerations www.fullsurge.com Moving Forward in B2B Branding

Branding is as relevant and important in B2B as it is in B2C. The importance of brand and the enhanced skillsets of B2B marketers are evident across rankings, as shown in Interbrand’s Best Global Brands Ranking, CoreBrand’s 100 most Powerful Brands, and Kantar Millward Brown’s BrandZ Top 100 Global Brands.

Furthermore, while there are some significant differences, there are far more similarities when comparing branding in B2B and B2C. The two share similar frameworks, and most best practices are equally relevant in both environments.

16 Unique Nuances and Special Considerations www.fullsurge.com Notes

1. Interbrand, “Best Global Brands 2017 Rankings,” 2017, https://interbrand.com/best-brands/best-global-brands/2017/ranking/. 2. Paul Hague and Matthew Harrison, “Marketing Segmentation in B2B Markets,” B2B International, accessed September 10, 2018, https://www. b2binternational.com/publications/b2b-segmentation-research/. 3. Hague and Harrison, “Marketing Segmentation in B2B Markets.” 4. CEB, From Promotion to Emotion: Connecting B2B Customers to Brands, 2013, https://www.cebglobal.com/content/dam/cebglobal/us/EN/best- practices-decision-support/marketing-communications/pdfs/promotion-eomtion-whitepaper-full.pdf 5. FullSurge, The Anatomy of Growth Guru, 2015, https://www.fullsurge.com/growth-guru-3. 6. Steve Wnuk (vice president of marketing, Quad/Graphics), in phone interview with the author, April 2018. 7. Ed Keller (chief marketing officer, Navigant), in phone interview with the author, May 2018. 8. Keller, interview. 9. Andrew Gross (executive vice president of marketing, Serta), in phone interview with the author, May 2018. 10. Ann Rubin (vice president of corporate marketing, IBM), in phone interview with the author, May 2018. 11. Wnuk, interview. 12. CEB, From Promotion to Emotion. 13. Martha Mathers, “B2B Buyers Are Full of Emotion. Is Your Branding?” CMO.com, August 28, 2017, https://www.cmo.com/opinion/articles/2017/8/9/b2b- buying-is-full-of-emotions-ptr-tlp.html. 14. CEB, From Promotion to Emotion. 15. Jess Pike, “7 B2B Brands Using Emotional Engagement to Enhance CX,” B2B Marketing (blog), August 18, 2017, https://www.b2bmarketing.net/en/ resources/blog/7-b2b-brands-using-emotional-engagement-enhance-ex.

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