Various economic forecasts are estimating 2% to 3% GDP growth in 2012, about the same as 2011. But they are also forecasting a 4% to 6% increase in business spending — which is more relevant for most b-to-b direct merchants.
Most of the revenue growth in 2012 will come from getting more from the customers you have and normally acquire. There will not be a surge of new customers in 2012; rather, refinements in your multichannel tactics will allow you to reap more orders and more sales from existing sites.
Unlike 2011, 2012 is an election year, and business optimism should prevail over pessimism and the seemingly endless shocks to the world economies, making 2012 mildly better than 2011.
In 2011, most b-to-b merchants were still working their way back to their peak years of 2007 or 2008 — before the “great recession.” In 2012 I would expect most b-to-b merchants to surpass their previous best year and achieve modest growth.
In spite of all the hoopla about the latest technologies, mail continues to be the dominant driver of sales and new customer acquisition, and that will continue in 2012.
Online marketing will continue to become more meaningful and erode the dominance of mail and phone, but those who overinvest in the latest online fad will be disappointed. While increasing numbers of customers will place their orders online at their convenience, mail and telephone selling relationships will continue to dominate b-to-b when it comes to creating and maintaining customer lifetime value.
B-to-b merchants will continue to take share from the retail channel as they improve the breadth and depth of their product lines and service offerings. At their core, b-to-b merchants are specialty retailers and through centralization can offer more product selection, more personalized and customized offerings, and the all important skills and knowledge needed to use the products sold effectively. The retail channel struggles to compete with its limited product selection, overhead costs and ever-changing, low skilled staff.
Here are the trends worth paying attention to in 2012:
- Applied technology and product innovation continue to deliver a stream of new product and service offerings
Knowledge of your customer’s business and how you can partner with him or her to achieve desired business results is key. No longer do we think of ourselves as “shippers of boxes,” but partners in solving problems and purveyors of total solutions.
Often, the cost of not having the product or service sold on time and as promised is much greater than the cost of the product or service itself. B-to-b merchants sell solutions, compliance, health and safety, productivity, organization and avoidance of problems as much as they sell what actually ships in the box.
The smart, innovative product merchandiser will deliver more new solutions and more value while reaping commensurate rewards. In short, you are only as good as the products you launch.
- Your knowledge and content will become increasingly important and will continue to differentiate you from your competition
B-to-b buyers have always bought from knowledgeable people, not just from b-to-b catalogs or websites. In an age where more sellers are selling on price, the value of this knowledge relationship becomes a powerful differentiator.
Telephone sales relationships, online videos, more online information about products and services, warranties, installation, application, best practices, etc., all drive loyalty and the value of the brand. B-to-b merchants are slowly and prudently adopting new technologies to showcase their knowledge and content within their respective buyer communities.
Segmented and targeted social marketing and customer ratings, reviews and continuous feedback will fuel this trend. B-to-b merchants must now manage their online content, including what customers and others may say about them through a multitude of online distribution channels.
- Superlative, consultative selling will continue to grow
It takes a multichannel approach — including mail, customer service, telephone sales, email, web, etc. — to develop, nurture, grow and maintain a customer relationship.
There is no replacement for personal, one-on-one communication, although it’s costly. Balancing all the elements of the communication mix for maximum effectiveness is the key. New multichannel relationship databases being deployed by industry leaders such as MeritDirect are the key to having all customer touches defined and analyzed.
Focus will be on driving customer relationships for higher site penetration and retention. We can no longer afford the customer churn (greater than 50% of contacts) of the boom years. Every customer site must be strategically managed in an integrative fashion, and the direct marketing firepower must be finely tuned like an Exocet missile.
- Tablet and mobile applications will continue to grow
The smart b-to-b merchant will be prudent in testing these new applications to ensure that they actually meet a customer need and deliver value.
We have passed the point where new technologies get adopted for technology’s sake. The ROI of such investments is now vigorously compared to more established, proven marketing expenditures like mail and telephone sales. The multichannel metrics now available give merchants the tools to be rigorous in this regard. While some investment spending and pioneer testing is warranted, the majority of the marketing spend will still take place through proven channels like mail, email and phone.
- Growth will not come from getting more new customers as much as it will come from getting more from existing customers
Most b-to-b merchants know that the recency-frequency-monetary/lifetime-value of customers acquired online is significantly less than that from those acquired via mail or phone prospecting. They also know that the majority of new customers acquired online were driven there mostly by offline activity.
At the same time, the world has changed in that customers have unlimited product and service selection at their finger tips via Google search. The task at hand is how to attract more online buyers from pure organic search, and how to convert those Google searchers to buyers with RFM and LTV comparable to mail order buyers.
An integrated and systematic conversion and upsell program tailored by new customer segment is required, and smart b-to-b merchants have built or are building these systems now.
- International markets are gaining in importance
As domestic GDP is weak, many b-to-b merchants have sought out foreign markets for expansion and higher growth. Canada, while small, has grown significantly in the last several years, given the strength of the Canadian dollar and the relative ease of cross-border transactions.
Many b-to-b merchants report that response rates and average order values from Canada are 30% or more than the U.S. The U.K./Euro zone is also an attractive market. Mexico, Asia, the Caribbean and South America are also possibilities, assuming the product offering translates.
Uline, Myron, Seton, Grainger and other b-to-b specialty catalogers — both large and small — have succeeded in foreign markets. The breadth and depth of the product/service offering is often significantly superior to that which can be supported by a much smaller market like Canada or the U.K.
BY TERRY JUKES, PRESIDENT, B2B DIRECT MARKETING INTELLIGENCE LLC., a consulting practice that helps multichannel direct marketing companies grow.
He can be reached at email@example.com