Author: Mark Cotgrove | Reading Time: 4-5 minutes.
You might well ask in response to this question, why does it matter as long as I have a good business idea? Of course, it matters that you have something you believe will be a viable business but it matters even more who your customers are likely to be. In other words, do you want to be selling something to consumers (B2C), usually directly, or should you focus instead on selling to another business (B2B)?
What defines value to your customers?
So how do you determine who your customers could be and how you should engage them? To answer this question, it is essential that you understand how they define, perceive and realise value. The “value” we allude to here is always measured in the customer’s context, not yours.
A typical consumer’s view of value will vary considerably from individual to individual and will be influenced by many apparently random factors, such as peer pressure, brand image, the weather and so on. If you consider, for example, a simple white cotton tee shirt. You can buy a decent one in a reputable department store for anywhere between £10 and £20. But if you bought a superficially identical one with a famous designer’s logo or label on it you might find that it costs nearer £100, and possibly even a lot more.
To some, there is value in the more expensive garment even though it does pretty much the same as the cheaper unbranded one. But a month later, if that label goes out of fashion, the consumer might not be so willing to pay the same price. Others who don’t place a value on such things will be happy to stick with the chain store version. As you scale this up you can see that the way that you as a business can understand this is based on aggregated randomised numbers not on understanding any specific individual’s needs or buying style.
Now, contrast that to the way a typical business understands value. This is something that is measured, typically as a realisable financial benefit, then is assessed and decided upon through a series of processes that are economically and financially rational. In other words, they are predictable and repeatable. Because businesses are subject to the very similar constraints in financial terms, they are driven to behave in a much more logical manner that satisfies the needs of shareholders, investors, auditors and regulators.
Consumers are tricky to understand
We would argue that you have a greater chance of success as a startup if you can understand business customers than if you have consumer customers. There are several fundamental reasons why this is the case but first, let’s use a simple analogy to illustrate the differences and then we’ll elaborate a little more.
Imagine you have a new garden, nicely landscaped with a lawn, plants, water features and so on. Summer is approaching and it needs water. You could get yourself a hosepipe and a sprinkler, connect them up to your water supply and leave the water running through the sprinkler. The sprinkler will not differentiate between those plants that need a light watering and those that need more. It won’t worry about which plants are in the shade or which are in full sun. Everything in its path gets the same dose regardless. You can’t tell until it is too late, whether you’ve watered it appropriately. Some plants may drown, others die from lack of water.
This is like selling to consumers. You treat them all the same because you know nothing about them individually. You ‘spray’ them with your message having assumed this is what they need, water in the case of the analogy, and hope that some of them get the right amount. You get no feedback other than they live or die. You don’t have to do much other than pay for the water. But you have no control over what you get back.
Businesses are easy
What if you took the time to understand your garden, or your customers, a bit more and knew what they really needed and when, as well as the best means to deliver it. You have a range of techniques at your disposal – a watering can perhaps, trickle hoses, sprinklers, plant food, timers and so on. And you also know that you only water when the plant is ready. You see your garden respond and blossom (literally) as you are managing that growth. OK, you have to be a bit more proactive now but your resources are targeted precisely where they are needed.
This is like selling to businesses. You have something they all need (water) but you understand the many different ways they consume it and so you tailor your offering to align with that. You find that you can charge a lot more for the water than merely sprinkling it at random because you are bringing something they value and will pay for – your expertise.
We won’t stretch the analogy too far but hopefully, the differences are clear. In one market, you know very little about who is receiving your uniform message and you don’t know if their response is down to you or some other factor, so you can’t plan or predict your growth. If you look at some consumer markets – let’s take fashion clothing as an example – you are always second guessing what the customer wants and you don’t know if you’re right until you have spent a lot of time, effort and money making something so they can buy it. Or not. You don’t have to get too many of those decisions wrong and you’re out of business and probably broke. And if this is your first venture into running your own show, that’s going to hurt.
How businesses make buying decisions
In the B2B market, decisions are made in a very different, and more predictable way than when we all act as consumers. Any company seeking to invest in something that their business needs is going to go through a process that will include stages like, identifying a problem, coming up with an idea to expand their business, finding a new bit of kit that will increase revenues or reduce costs or increase market share, creating a business case for making the investment. Identifying potential solutions and suppliers of those and then finally executing a procurement exercise to acquire the solution, followed by an implementation plan and measuring the benefit. This approach is repeated many times and done so in a rigorous manner with various people involved along the way – all of whom can be identified and engaged in advance. Unlike consumers, they only engage when you put your product in their hands and then act in a way which is pretty unpredictable except at a macro level of say trends in fashion. Which can change in days.
You will be able to build individual relationships so that you get a much better picture of the value you can bring to their business, which in turn allows you to enhance and adapt your offering as well as add more solutions, so you can create even more opportunities. Your understanding of their decision-making processes and the people involved in them will come before you have to invest in anything yourself which in turn reduces the risk of you producing a complete lemon or a white elephant that no-one wants or will buy.
This does take time of course but so does getting to grips with the herd-like behaviour of consumers en-masse. We believe that the lower risk combined with the more precise targeting of solutions to the correct people for reasons they actually care about, will lead you to a greater chance of success than trying to find some space in a crowded consumer market.
There is a caveat of course…
Which is that you need to be able to quickly assimilate enough information about the buying styles of your potential customers, how they define and measure value when it comes to acquiring products and services like yours and then align yourself to meet their specific needs and ways of doing business. Everyone with a business idea is usually itching to get their brainchild out there and wait for customers to beat a path to their door. But time spent in understanding how your customer buys will pay massive dividends in the longer term. It is also essential to understand that if your offering doesn’t fit with a particular buying style employed by the customer, you cannot simply change your selling style – you have to change your offering. We expand on this fundamental concept in other blogs.
Determining the B2B customer buying style and aligning to it if your product/service is appropriate, is not a skill that everyone is born with but it can be learnt. Visible Pathway assists B2B startups by providing the specific knowledge and insights they need without the typical heavy costs of bringing in expensive consultants. Our approach allows you to work at your pace and tailor it to your situation. The distilled experience of many who have gone before you is at your fingertips and guidance on how to leverage it is provided simply and effectively.
Still think a B2C startup is a good idea?