Who’s There?

Consumers who try to pass themselves off as business customers at the Website of Hero Arts, a wholesaler of arts and crafts products, will find the going a little more difficult than they might have anticipated. Before they’ll set up a business account and accept orders from a prospective client, employees at Hero Arts require a voided business check, as well as a letter stating that the products being purchased are for resale. In addition, one of the company’s sales reps may call on the prospect.

The San Francisco-based company goes to these efforts to protect its retail clients. Several years ago, a very small number of consumers were able to pass themselves off as business customers, says executive vice president Louise Burns. “They would go into a store and get ideas,” she says. Then they would try to buy the products directly from Hero Arts at wholesale prices.

Today most people who might be tempted to pass themselves off as retailers are dissuaded once they realize that it isn’t as easy as just calling and requesting an account. “It’s helped us a lot,” says Burns.

Like Hero Arts, many other online marketers find that distinguishing business from consumer customers is one key to prospering online. Whether it’s to protect their dealers or resellers, to more effectively market to different customer groups, to provide credible information on site visitors to advertisers, or to protect against fraud, online marketers need some idea of who is on the other side of the transaction.

Some businesses are able to distinguish business clients from consumer shoppers by monitoring the path they take through the site. Many, however, require proof of a customer’s business identity through such information as a tax identification number, a cancelled check, or a business letterhead.

Legitimate business customers generally don’t mind the extra steps. “Business buyers are extremely willing,” says Ruth Stevens, president of New York-based consulting firm eMarketing Strategy, “and understanding of the need to provide information like this.”

Once they’re confident the person requesting an account represents an actual business, most online b-to-b marketers allow him or her access to a special “business customers only” section of the site. A few online marketers establish distinct Websites for consumer and business customers.

Information, please

Napco Security Group, an Amityville, NY-based manufacturer of home-security systems, sells through distributors who in turn sell to a network of dealers who install its security systems for homeowners. Napco uses the Web to communicate with the general public as well as with its dealers. But the company doesn’t want all the information that’s available to its dealers also accessible to consumers browsing its site.

For instance, Napco posts installation manuals and software updates for its alarm systems online. “We don’t want this information in the public domain,” says director of marketing Judy Jones. In addition to security concerns, some dealers worry that homeowners might try to install the systems themselves. Along with depriving dealers of the business, do-it-yourselfers may install the systems incorrectly and generate false alarms. The local authorities could then take future alarms less urgently, which can reduce consumer demand for security systems.

So Napco has virtually roped off a portion of the site, making it accessible only to dealers who have established accounts with Napco’s distributors. Before gaining entry to the section, dealers must input their name, address, license number, and account number with a distributor, says Jones. The amount of information they have to provide makes it unlikely someone would be able to bluff his way through the form, she adds.

T-Shirt King, an online purveyor of — not surprisingly — T-shirts, also requires business customers to supply myriad information. The Mountainair, NM-based company is reentering the wholesale market this fall, having abandoned it several years ago because of the high rate of fraud.

To be classified a business customer, a company will need to provide T-Shirt King a tax identification number, contact information for three previous suppliers, and a cancelled check.

What’s more, T-Shirt King has contracted with a factor — a company that purchases another business’s accounts receivable. This enables T-Shirt King to defray some of the risks of nonpayment and to receive sales revenue, from the factor, more immediately than if it had to wait for payments to clear. In exchange, the factor receives a small percentage of the sales and has final say over which orders get filled. “If the customer is not approved by the factor, it’s just tough luck,” says T-Shirt King president Bill Broadbent.

Admittedly, fraud is an issue with consumer orders as well. But whereas a phony consumer order typically means the company is out about $20, with a business order, T-Shirt King could be on the hook for several thousand dollars. “Online commerce really revolutionizes wholesale selling, but the amount of fraud just shocked us,” says Broadbent, who once received three fraudulent orders in one week.

Rather than creating separate sections of a site for b-to-b and consumer customers, online marketers can set up completely different sites for their different audience segments. Action Office Supplies in Adelphia, NJ, for instance, used to have a separate site, www.cheapofficesupplies.com, for small office/home office customers, while customers buying school supplies did so at www.schoolsuppliesplus.com.

During the summer, however, management brought the sites together. Now all transactions take place within www.actoff.com. Customers come to the company’s home page and click to get to the section of the site that best fits their needs. The Website features sections for small and home office buyers, corporate buyers, government buyers, purchasers of school supplies, and those buying in bulk.

“We wanted the branding power of our name,” explains president Sonny Aurora. “Before, different groups of customers knew us by different names.”

The government and corporate sections of the site require purchasers to set up accounts. Action Office asks potential account holders for supplier and bank references; it also may check the company’s financial status through Dun & Bradstreet. Once they input their user ID and password, account holders shopping online can see the prices negotiated for their organization.

Following the trail

Rather than asking qualifying questions to ascertain which customers should be classified as business or consumer, some online marketers determine this by monitoring customers’ navigation paths around the site. “We can distinguish business from consumer customers by their clicks and what they buy,” says Dan Hoskins, director of e-business for Hello Direct, a San Jose, CA-based distributor of telecommunications products. Consumers typically are more interested in deals and like to see lots of product information, he says. Business customers tend to be less sensitive to price and more interested in quickly getting what they need.

Because the company operates within a small niche — it sells headsets and phone systems — setting up separate areas for business and consumer segments didn’t make sense. Instead, Hello Direct tailors discrete e-mail marketing campaigns to consumer and to business customers. “We would lead with promos for the consumers,” Hoskins says. “For business customers, they’re looking for the latest, greatest technology to help them be more efficient.”

Since December 2001, when Hello Direct began tracking customers’ navigation paths and tailoring its e-mail messages, revenue attributable to the e-mail marketing program has risen 35%, says Hoskins. The costs required to classify customers based on their navigation paths are nominal; typically it requires some coding to mine the data and establish the parameters that identify each group of customers.

Hello Direct also maintains an extranet — a private network that uses the public telecommunication system — for its larger business customers; after logging in, clients can see catalogs and pricing specifically for their organization. Currently Hello Direct uses a relatively inexpensive off-the-shelf extranet program, but it’s considering a change. “We’re maxed out,” says Hoskins. “We need a larger scale and may need to go to something custom.”

Of course, online marketers who want to reach primarily business customers can screen out consumers in part by targeting their promotional efforts accordingly. “We’re careful to market only in places where retailers are likely to go,” says Lisa Rioni, chief technology officer at Wholesale Central, a Bethel, CT-based online aggregator of wholesalers. For Wholesale Central, that means attending trade shows and advertising in print and online trade publications.

If consumers do end up at a site geared to business customers, however, they should easily be able to find out how to track down and buy products. That may mean having a consumer catalog available online or posting online a directory of retailers with contact information.

“You don’t want to make a person mad because it’s difficult to buy your product,” says Mitchell Levy, strategist with ECnow.com, a consulting firm in Cupertino, CA. “You don’t want to say, ‘You’re a consumer and we’re not going to service you.’” Instead, let consumers know how they can find your products. You keep your channel relationships intact, while your end users get what they want as well. And by directing business to your resellers, you increase their revenue as well as yours.


Minnetonka, MN-based Karen M. Kroll contributed to Catalog Age’s e-mail marketing coverage, which this year won a Gold Award from the American Society of Business Publication Editors.

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