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6 Business Markets and Business Buyer Behavior

Chapter Preview

In the previous chapter, you studied final consumer buying behavior and factors that influence it. In this chapter, we’ll do the same for business customers—those that buy goods and services for use in producing their own products and services or for resale to others. As when selling to final buyers, firms marketing to businesses must engage business customers and build profitable relationships with them by creating superior customer value.

To start, let’s look at IBM. Although the IBM brand is very familiar to most final consumers, nearly all of the company’s almost $100 billion in annual revenues comes from business and institutional customers. More than just “selling” its products and services to B-to-B customers, IBM succeeds by working closely and deeply with them to develop complete solutions to their information and data analytics problems. From its lofty customer-solutions mission to the “boots on the ground,” IBM wants to become a strategic information and insights partner with its business customers.

IBM: The World’s Most Valuable Business-to-Business Brand

IBM is a household word to most of us. However, throughout its long history, IBM’s fortunes have come not from final consumers but from large business and institutional customers. “Big Blue”—as it’s often called—is the quintessential B-to-B brand. In fact, corporate brand tracker Millward Brown recently named IBM the most valuable B-to-B brand in the world. Valued at $94 billion, IBM is worth about 50 percent more than the number-two B-to-B brand, giant GE. Even more impressive, IBM has survived and thrived for more than 100 years, something no other Fortune top-25 company has managed.

In some ways, IBM selling B-to-B is like P&G selling to final consumers. It requires a deep-down understanding of customer needs and a customer-driven marketing strategy that engages customers and delivers superior customer value. But that’s where most of the similarities end. Rather than selling small-ticket purchases to masses of individual consumers, IBM sells complex big-ticket purchases to a smaller set of much bigger buyers, with each purchase involving perhaps dozens of decision makers. So IBM’s B-to-B emphasis is less on selling to customers and more on partnering with them to help solve their complex information and analytics problems.

Solving customer problems has always been a hallmark of IBM’s strategy, culture, and success. Over the years, IBM has transformed itself time and again to meet changing customer needs. For example, two decades ago, IBM was known mostly for peddling mainframe computers, PCs, and other basic computer system components. Back then, if you’d asked top managers at Big Blue what their mission was, they’d have answered, “To sell computer hardware and software.”

By the early 1990s, however, IBM’s sales had plateaued. To learn why, IBM sent its top managers to meet face-to-face with important customers—what it called “bear-hugging customers”—to relearn about their problems and priorities. The managers learned that in the new connected digital age, companies face a perplexing array of data and information technologies. Today’s customers don’t need just computers and software. Instead, they need total solutions to ever-more-bewildering data, information, and analytics problems.

This realization led to a fundamental transformation of IBM’s business. Now, if you ask IBM managers to define the company’s mission, they’ll tell you, “We deliver insights and solutions to customers’ data and information technology problems.” Under this new customer-solutions focus, IBM shifted emphasis away from mainframes and computer hardware. Instead, it added a full slate of integrated information technology, software, and business consulting services. Most recently, to meet customers’ ever-changing digital needs, IBM has shifted even more deeply into data analytics, cloud computing, cybersecurity, social networking, and mobile technology solutions.

Thus, customers can still buy mainframe computers from IBM, but they are more likely to buy solutions involving a complex, integrated mix of hardware, software, services, consulting, and advice across collaborative online, mobile, and social networks. The transformed IBM now works arm-in-arm with B-to-B customers on everything from assessing, planning, designing, and implementing their data and analytics systems to actually running those systems for customers.

According to IBM CEO Ginni Rometty, the company’s focus on working closely with customers and changing to meet their needs is what makes IBM special. “We’re 104 years old,” she says. “The reason we’re the only tech company still here at 104 is how many times we’ve transformed.” IBM’s customer-solutions focus is summed up by its new marketing campaign: “Cognitive Business: Outthink.” The campaign positions IBM as a company that helps customers to “outthink your challenges, competitors, and limits” in the new “cognitive era.”

But good B-to-B marketing at IBM goes well beyond a high-level customer-solutions mission, sweeping transformations, and imaginative positioning campaigns. At the most basic level, it involves “boots on the ground”—IBM teams and individuals developing close day-in, day-out working relationships with customers.

Consider the classic example of IBMer Vivek Gupta and how he became IBM’s top salesperson in its fastest-growing industry (telecommunications) and fastest-growing market (India). When Gupta first joined IBM some years ago, he struggled to gain a foothold in a market where more than 70 percent of corporations are family controlled and where relationships, trust, and family ties trump almost everything else. In addition to his formal IBM training, Gupta launched his own extensive investigative effort, getting to know people, learning about IBM and its customers, and developing a rock-solid knowledge of how the company’s products and services fit customer needs.

When Gupta first approached potential customer Vodafone—the dominant firm in India’s exploding mobile phone market—the managing director there told him, “I don’t do any business with IBM, and I don’t intend to.” But the quietly determined Gupta kept at it, getting to know Vodafone’s key decision makers and patiently listening, observing, and identifying how IBM might be able to help Vodafone succeed in its volatile and competitive markets.

Business-to-business marketing: IBM’s “Cognitive Business: Outthink” campaign positions the company as one that works closely with business customers to help them thrive in the new “cognitive era.”

NurPhoto/Getty Images

Gupta came to know more about Vodafone than many people who worked there. It took him nearly four years, but Gupta finally sold Vodafone—the same people who vowed never to do business with IBM—on a gigantic five-year, $600 million turnkey contract to handle everything from Vodafone’s customer service to its finances. Gupta became such a well-known figure at Vodafone’s offices in Mumbai that many people there were surprised that his badge said “IBM” and not “Vodafone.” Gupta thrives on rooting out customer problems to solve. “You have to understand [customers’] pain points,” he explains. “And they are not going to spell them out.”

Flush with success, Gupta set his sights on still bigger targets. He realized that many big Indian telecoms were so busy simply hammering out their basic back-office operating systems that they had little money and brainpower left for strategy, branding, and marketing. However, IBM had all the technology and expertise required to build and maintain such systems. What if IBM were to take over managing the system innards, freeing the customer to attend to strategy and marketing? Gupta proposed just such a novel solution to Bharti Airtel, then a relative newcomer to India’s wireless industry. The result: IBM now runs the bulk of Bharti Airtel’s back-office operations, while Bharti Airtel focuses on taking care of its own customers. In the first five years, the deal produced an incredible $1 billion for IBM. Bharti Airtel is now India’s wireless industry leader and the deal is a staple “how-to” case study in IBM’s emerging markets sales training.

The IBM and Vivek Gupta stories highlight the essentials of B-to-B marketing success. It starts with a customer-focused mission that translates down to individuals working closely with customers to find complete solutions. Gupta doesn’t just sell IBM computer hardware, software, and analytics. He works with customers, feels their pain, finds solutions, and sells the IBM systems and people that will deliver results for the customer. “It’s at once radically simple and just plain radical,” says an analyst. “He wants to convince you that IBM can run your business—your entire business, save for strategy and marketing—better than you can.”1

Objectives Outline

IN ONE WAY OR another, most large companies sell to other organizations. Companies such as IBM, Boeing, DuPont, Caterpillar, and countless other firms sell most of their products to other businesses. Even large consumer products companies, which make products used by final consumers, must first sell their products to other businesses. For example, General Mills makes many familiar consumer brands—Big G cereals (Cheerios, Wheaties, Trix, Chex, Total, Fiber One), baking products (Pillsbury, Betty Crocker, Bisquick, Gold Medal flour), snacks (Nature Valley, Bugles, Chex Mix), Yoplait yogurt, Häagen-Dazs ice cream, and many others. But to sell these products to consumers, General Mills must first sell them to its wholesaler and retailer customers, who in turn serve the consumer market.

Business buyer behavior refers to the buying behavior of organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. It also includes the behavior of retailing and wholesaling firms that acquire goods to resell or rent to others at a profit. In the business buying process, business buyers determine which products and services their organizations need to purchase and then find, evaluate, and choose among alternative suppliers and brands. Business-to-business (B-to-B) marketers must do their best to understand business markets and business buyer behavior. Then, like businesses that sell to final buyers, they must engage business customers and build profitable relationships with them by creating superior customer value.

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Table of Contents for 6 Business Markets and Business Buyer Behavior

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Table of Contents for
6 Business Markets and Business Buyer Behavior