B2B Marketing's New Value Proposition

Chart a new course for B2B marketing with customer-focused metrics, meaningful lead generation and integrated marketing strategies.

By Don Peppers and Martha Rodgers, Ph.D

Business-to-business (B2B) marketing is in need of a new mandate. B2B marketers have historically had a tenuous and often fractious connection to the sales force. And, for the most part, these marketers have been slow to embrace online opportunities. In many firms, B2B marketing is viewed as a siloed department with fuzzy accountability whose primary contribution is lead generation, and often even that is of questionable value.

But the world is changing. The Internet is offering new ways for marketers to influence the usually lengthy B2B sales process. Globalization, as well as corporate merger and consolidation activity, is making B2B customer relationships more complex. A firm needs more than strong closers in sales when the customer may be looking for strategic collaboration over the long term. Given these factors, how do you begin to chart a new course for B2B marketing?

The one overarching change that needs to occur in B2B marketing is a shift from a product-focused approach to a customer-focused one. This shift will alter your goals and priorities – and increase the value of B2B marketing to your firm.

In this column, we focus on some tips for making this transition.

Adopt customer-focused metrics
B2B marketing metrics need to expand beyond lead generation and response rates. In a customer-focused world, customer value – the value of a customer as a financial asset – becomes a critical metric. This is defined as the net present value of the expected future stream of profits (remember to calculate and deduct costs) attributable to a given customer.

To arrive at a meaningful measure of customer value, you have to identify the dynamics that drive the future profitability of your customers. In a B2B environment, this information will come, in great part, from the judgments and insights of the staff who deal directly with a given account. The variables in your customer value metric can include recency, frequency and monetary value as well as past and potential referrals, existence of a standing order policy, high level of collaboration, account penetration, and more.

Once you arrive at a measurement that works for your situation, you will want to identify the events or circumstances that might push the value of your customer upward, and your job now consists of developing marketing strategies that will create greater customer value.

For example, suppose a telecom service provider has 100 high-value customers and 20 of these customers also sign up for enhanced support services. Based on history and insights, the company knows that the customers in the enhanced support category remain loyal 25 percent longer and are 25 percent more likely to purchase additional services. The company uses this information to estimate the value created when it moves a customer to enhanced support services. If a customer who is not receiving enhanced support services averages $10,000 per year in profits, and if – on average – this customer uses the telecom service for five years, this results in a $50,000 lifetime value before any discounting. Consequently, moving a customer to the enhanced support category increases the asset value of that customer by about 25 percent, creating more than $12,000 in value even before counting the added potential available from an increase in cross-sell.

Segment and use analytics
Most B2B firms segment their customers by geography, industry or size, and although this is certainly a good start, the most important task is to segment your most valuable customers by their needs. Good analytics are a prerequisite for meaningful and useful segmentation, enabling you to turn your sales and prospect data into valuable customer intelligence.

Analyst Laura Ramos of Forrester Research recommends segmenting decision makers and influencers within a customer firm by role. For marketing purposes, a B2B account should not be thought of as one customer but rather as many customers each with his or her own needs, expectations and degree of influence. "Role-based segmentation" allows you to deliver customized communications to key players within a firm.

Implement meaningful lead generation
When it comes to leads, quality trumps quantity. Leads need to be qualified before being passed on to sales. And, it's best to qualify leads based on criteria that are meaningful to sales. These criteria might include the prospect's role in the purchase decision, the timing of the purchase, whether a budget exists for the purchase, etc. Some firms also score leads based on their pre-established criteria. In this way, leads with lower scores might be routed to a telemarketing group for further qualification and additional pre-sales work before being passed on to sales. Setting up such a lead management system will improve the odds that your leads will result in sales. This will also help to quantify your role in the sales process.

Leverage online strategies
While B2B marketers have been slow to embrace online initiatives, there are signs that things may be starting to change. According to BtoB magazine's 2007 Marketing Priorities and Plans survey, 75.6 percent of B2B marketing executives say they plan to increase their online budgets next year. Savvy marketers will integrate online strategies with more traditional marketing activities. For example, e-mail campaigns can be used to engage prospects throughout the lengthy B2B sales process in a personalized manner that, because it is automated, is still cost-efficient and scalable.

According to Forrester's Ramos, B2B buyers first do research on the Web when looking for products and services to solve their problems. B2B marketers should use a mix of search engine marketing, online advertising and truly engaging corporate Web sites to draw customers into a meaningful dialogue.

Web analytics can provide insights into the online behavior of your customers and prospects. Use these insights to develop strategies that will drive a higher level of engagement.

Some B2B firms are starting to use social networking to engage customers. Cisco's newly designed Web site using the "human network" theme offers its customers the ability to participate in a variety of forums and peer-to-peer communications.

Keep in mind that customers often share information with their peers that might not be divulged in exchanges with a supplier.

Think strategically
While sales might have a 5,000-foot view of a customer with the goal of closing sales in order to hit a quarterly target, your job as a B2B marketer is to adopt a 100,000-foot view of the same customer in order to better understand how you can increase that customer's value over the long term. This involves understanding your customer's business priorities, supply chain and partners. Smart B2B marketers will create customer value by developing programs and strategies that go beyond the mere delivery of a product or service. For example, Cisco's ecosystem of partners ensures that its customers have access not only to its products but also to qualified solutions providers.

This new value proposition is transforming the role of B2B marketing. Using customer-focused metrics, meaningful lead generation and integrated marketing strategies, today's B2B marketer emerges as the chief customer advocate who charts the direction of a firm's long-term relationship with its customers.

Bio: Don Peppers and Martha Rogers, Ph.D., are co-founders of Peppers & Rogers Group, a management consulting firm recognized as the leading authority on customer-based business strategy. www.1to1.com.