The Convergence of B2B & Consumer Marketing

| By Jonathan Fletcher

Introduction

One of the stereotypical images of a corporate buyer in the middle part of the last century was of a man who never had to buy his own booze at Christmas or pay for a round of golf in summer, because his suppliers catered to his personal needs as well as his business needs. Such blatantly corrupt practices are a thing of the past (in Western markets at least). But quite legitimate personal considerations of different kinds do still play a role in many business buying decisions and a number of trends in business and society are likely to make this more common.

The first section of the paper will look at the range of general similarities which already exist between business purchase decisions and consumer purchase decisions. The second section explores examples of B2b markets which already have a strong consumer purchase dimension to them. The third and forth sections of the paper explore the trends in business and the wider society which the author believes will drive the spread of personal criteria in the business purchase decision into a wide range of markets. The final section of the paper will explore the implications of the convergence between B2b and consumer purchasing for B2b research and marketing.

Some general similarities between business and consumer purchase decisions

The idea that business purchase decisions are similar in some respects to consumer purchase decisions is nothing new. As long ago as 1973 Jagdish Sheth wrote

‘. . . similar to consumer behaviour, the industrial buyers often decide on factors other than rational or realistic criteria’
(Sheth, 1973)

However, the undeniable differences between consumer and business purchase decisions are all too easy to caricature. This is particularly the case with larger businesses. Whilst the overlap between business and consumer decision-making is generally acknowledged in the case of SMEs (see for example, Dexter and Behan, 1999), it is often assumed that purchase decision-making in larger businesses differs qualitatively from consumer purchase decision-making. This assumption can be summarized in two myths.

Myth number 1: Purchase decisions within large businesses are largely rational whereas consumer decisions are largely emotional

In fact it is unlikely that any decision in any sphere of life is entirely free from some form of emotional stain. The findings of neuroscience seem to indicate that all forms of practical judgment are underpinned by feeling states. Individuals who have suffered neurological damage which dissociates their higher cognitive processes from the emotional centre of the brain in the limbic system seem unable to balance risks, costs and benefits in the way required to make real-life decisions (Damasio, 1996). The emotional basis of thought is manifest in a number of strictly non-rational biases to which our thinking and decision-making is subject. One such bias is our tendency to attach a greater value to potential losses than to potential gains, a phenomenon first described in Kahneman and Tversky’s Prospect Theory (Kahneman and Tversky, 1979). It has long been known that consumer reasoning is subject to this bias. For example, consumers will buy lottery tickets (small cost for potentially large gain) and insurances (medium sized outlay to avoid large losses) but are generally not prepared to risk larger sums of money in high yield, high risk investments. But this tendency can also be seen very clearly in the risk aversion that characterizes much business buying behaviour. There was a saying amongst computer executives in the 1970’s that ‘No one ever got fired for choosing IBM’. Although cheaper solutions than IBM were available, virtually no cost saving was thought to be worth the perceived greater risk of these alternative solutions failing. This phenomenon is alive and well, though to judge from the blogging on the subject is apparently now updated as ‘No one ever got fired for choosing Microsoft’!

This type of behaviour is an example of what economists and decision theorists call Bounded Rationality. The theory of Bounded Rationality maintains that in the vast majority of decision making situations the decision-maker is unable to meet the 3 main requirements of strictly rational behaviour. That is to say, the decision maker cannot: 1) identify all possible alternatives; 2) establish what the consequences of pursuing each of these alternatives would be; or 3) compare the benefits of these different consequences. The decision-maker cannot do this because he/she lacks the time and information processing capacity. As Herbert Simon, the leading theorist of Bounded Rationality, expressed it:

‘ . . information consumes . . . the attention of its recipients. Hence a wealth of information creates a poverty of attention, and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.’
(Simon, 1971)

To allocate information efficiently the decision-maker simplifies the problem facing him or her by using heuristics – rules of thumb and shortcuts to cut down the range of alternatives and evaluative variables that bear on the problem. This heuristic process draws on a whole range sources, most of them not purely empirical. This is where emotional and other motivated biases enter into the decision. Consumers, for example, cut through the huge range of choice facing them by using diverse techniques such as relying on emotional commitment to brands or word of mouth recommendation or by focusing on a single, lead attribute such as price and aiming for a low, medium or high spot in the category price range.

Some of the emotional biases which enter into our heuristic reasoning are innate, programmed into us by our evolutionary past. For example, the reason we are more sensitive to losses than gains is probably that for much of our evolutionary past we were not faced with a superfluity of resources as we are now, but instead had to focus on survival and subsistence. In such a situation losses can be fatal, whereas there is little use for gains beyond a certain subsistence level. But these biases may also be motivated by the situation the decision-makers find themselves in. In business decision-making contexts these can include a whole range of factors. Some of them may relate to the interests of the firm, such as its interest in maximizing profits. But many of the biases will relate to the decision-maker’s own interests – everything from a desire to be thought well of and advance in the organisation to the need to balance work and personal life by not spending too long at work. Which brings us to the second myth.

Myth number 2: Purchase decisions in large businesses are disinterested, impersonal decisions

The Decision Making Unit (DMU) or Buying Centre framework helps us to organise how we research business decisions. However, it can give the impression that business decision making is well organised with individuals in clearly defined and fixed roles, co-operating to make the best decision for the business. In fact, for most purchase decisions this is very far from the truth. A more accurate (though still rather oversimplified) depiction of the process would be as a sort of war between competing individuals and functions each seeking to further their own interests by their participation in the decision. Theorists of the firm have long held the view that individuals within businesses pursue their own personal interests in parallel with, but to some degree at the cost of, the interests of the firm as a whole. In the 1960’s economists such as William Baumol (Baumol, 1959) and Oliver Williamson argued that managers aim to maximize a single personal interest such as salary, perks, job security or status, whilst achieving a minimum acceptable level of profit for the company. The asymmetry in information and knowledge between managers and business owners (such a shareholders) create the opportunity for managers to sacrifice the firm’s interests in favour of their own interests. Richard Cyert and James G. March analysed the behaviour of firms in terms of the often conflicting interests and aspirations of individual decision makers. On this model the tendency for individuals to satisfice rather than seek to maximize interests and the compartmentalization of decisions into different stages to which different parts of the Decision Making Unit are a party, serve to defuse these conflicts and prevent them from causing harm to the organisation (Cyert and March, 1963).
Philip Kotler depicted the business purchase process in terms of conflicts between individuals in his Hobbesian Organisational Factors model of business buying. Kotler named his model after Thomas Hobbes, the C17th English philosopher. Hobbes viewed society comprising individuals all pursuing their own interests and only curtailing this pursuit in favour of the common good to the extent necessary to prevent all-out war which is ultimately against the individual’s best interests. In the same way, Kotler claims, individuals who are party to a purchase decision seek their own interest up to, but not beyond, the point that it clearly threatens the interests of the business as a whole (Kotler, 1967). Jagdish Sheth in his integrative model of industrial buyer behaviour (see Figure 1. below) also gives an important role to the personal background of the individual contributors to the decision (Sheth, 1973).

Figure 1. Sheth’s Integrative Model of Industrial Buying Behaviour (Sheth 1973)

Sheth’s model has stood the test of time as a comprehensive framework for thinking about the process of industrial buying. It highlights the importance not only of individual factors such as education, role and lifestyle but also of the need for conflict resolution between different individuals, factors related to the product type such as time pressure and risk and factors related to the organisation such as its size and degree of centralization.

Business-consumer hybrid markets

In some business decisions the personal factors outlined in the previous section are the dominant purchase criteria and appear to cross the boundary that divides business from consumer concerns. These markets are sometimes called business-consumer hybrid markets.

The best established of these is the business air travel market. Criteria for purchase in this market include both business criteria such as price, the need to arrive in time for business meetings and the ability to work during the flight, as well as a range of personal criteria. Some of these personal criteria relate to work, such as the desire for the flight class to reflect the traveller’s status within his or her organisation. But others such as the desire to earn personal frequent flyer scheme points, buy duty free goods or get home quickly and spend time with their families, are clearly consumer needs. In a study we conducted recently amongst business members of a major airline’s frequent flyer club, consumer requirements such as comfort and frequent flyer points were considered significantly more important than more business-like considerations such as price or the company’s policy on travel.

Figure 2. Mean importance of factors in selecting airline amongst frequent business flyers
(2006, on-line study)

The business air travel market illustrates the range of factors which give rise to the presence of consumer purchasing criteria in business purchase decisions:

• High value added / high status Users
• A legitimate claim on the part of the User for some form of ‘compensation’ which the purchase can meet
• An asymmetry in knowledge and information between the User and other potentially interested parties in the decision
• A purchase category which, even considered from a strictly business perspective, has a relatively ‘soft’ or intangible evaluative dimension

High value added / high status Users

High end knowledge workers and senior managers often have the necessary power within an organisation to impose their consumer criteria on a business purchase. Figure 3. below shows the results of a study conducted amongst frequent flyers (Mason and Gray, 1999). The data show that more senior workers are able to fly in higher travel grades. Clearly, for very large, strategic purchases high value-add and high status individuals do not have the same incentive or the same latitude in imposing their personal preferences, much less their consumer preferences. However, even in the case of these purchases, Users needs and personal considerations may play a very important role. A recent study of strategic purchasing in the bio-technology industry, for example, concluded that the Users of the products purchased (usually scientists within the organisation) were highly influential and were the main focus of the decision-making process. Senior managers often kept the very final decision for themselves but only as a perceived personal risk reduction strategy because they would be held responsible for the outcome of the decision (Howard and Doyle, 2006).
Figure 3. Travel grade by corporate status for European and Intercontinental travel
(1999, self-completion study administered at Stansted airport)

 

A legitimate claim that ‘compensation’ is due to the User

Business travel involves the User staying away from home overnight or at the very least in a long working day and is generally agreed to be quite tiring. This gives rise to a legitimate claim for some form of compensation to make up for this perceived imposition on the User’s personal time and resources – i.e. the organisation and the individual tacitly or explicitly agree that some kind of personal compensation is due to the business traveller. Figure 3 supports this notion. It shows that at all levels of seniority a higher grade of travel is used for longer, intercontinental flights than for European, short haul flights. Intercontinental travel typically involves more curtailment of the User’s personal time and resources and therefore a greater level of compensation (in-flight comfort, room, frequent flyer points etc.) is allowed than is the case with European travel.
An asymmetry in knowledge and information between the User and other potentially interested parties in the decision
The business traveller has almost unique access to the information required to make the purchase decision for his own travel. He is usually best placed to know where he needs to get to and by when – the key information in booking business flights. The inaccessibility of this information to others is reinforced by the fact that business travel often has to be booked at fairly short notice – or at least it is difficult to prove that it does not have to be. Such is the imbalance in information that most or all of the key DMU roles are concentrated in one individual, the User. In the study we conducted amongst business members of the frequent flyer club we found that over half of respondents had complete freedom in the choice of airline and class of flight that they used and that less than a fifth of them had to follow company travel guidelines in all cases. In effect, for the majority of travel purchase decisions almost all key DMU roles – Initiator, User, Influencer, Decider, Approver and Buyer – are fulfilled by one individual, the business traveller. If they book their own flights on-line – an increasingly common practice even amongst quite senior managers – then they are also the Gatekeepers of the DMU as well.

A‘soft’ or intangible purchase category

Of course, a travel manager or buyer could insist on all flight booking coming through his or her function or could check retrospectively that the best possible deal was achieved from the company’s point of view and challenge the purchase decision after the event. But there is a further barrier to such intervention in the decision. Travel needs to be so tightly integrated with the travellers schedule and his business-related needs that the traveller can always find a form of justification for his or her decision. And the traveller’s ability to justify the flight chosen from a business point of view is further reinforced by the fact that travel is an experiential and therefore fairly intangible and subjective category. If a business traveller says that he can only work on the plane if he has the room and comfort that he gets in First or Business Class, who can really disprove this? He knows the conditions under which he can work. The company purchasing department will not be accompanying him on the flight and probably does not fly much for business anyway, so how can he challenge the travellers claim?

These four factors combine to make the decision for business air travel highly decentralized – decentralized, in fact, to the point that virtually all DMU roles are concentrated in the User. In the last decade the emergence of mobile communications markets has provided new examples of such business-consumer hybrid markets. The most noteworthy of these are the mobile data and PDA markets. The mobile data market is based on data cards which enable remote internet connection through a laptop. PDAs are handheld devices such as the Blackberry, Handspring Treo or Nokia Digital Communicator, which provide remote e-mail access and personal organiser functionality. The mobile data and PDA markets are decentralised but not to the same degree as the business air travel market. Table 1. below, shows how the business air travel market and the Mobile data/ PDA markets compare in terms of the different dimensions of business-consumer hybridity.

Table 1. A comparison of the ‘Hybrid’ nature of the Business air travel and Mobile data/ PDA markets in larger businesses

 

The biggest difference between the two markets is in the number of individuals/ functions in the DMU. By their very nature, mobile data and PDAs (certainly at the present state of the art) require fairly high level technical co-ordination which draws the IT department into the DMU as, at the very least an Influencer and probably in many cases as a Decider. In addition, network providers are linked to equipment (PDA devices and data cards) due to the cross-subsidization of handsets by the networks. Network services are hard to differentiate on anything but price or price-package solutions and this brings the procurement or purchasing function into the DMU. Typically, network and the available range of equipment is decided by procurement and the IT function with the User having some influence, whereas specific equipment used is either very strongly influenced or decided by Users.

Compensation in the mobile data or PDA market is usually given in return for the reduction in downtime during the day and/or impingement on personal time which mobile server access permits. The form that compensation takes in PDAs and related data devices relates to some extent to the status effect of being seen with the latest device. Consumer features on the phone – such as MP3 players, cameras, games and web browsers – can also serve a compensatory function. The Blackberry Pearl range explicitly appeals to this consumer feature overlap, incorporating consumer features such as camera, multi-media player and colour screen and with the tagline ‘It’s a pity just to use it for work’. The Nokia E-range also straddles the business and consumer divide. Under the general heading of ‘Tailored for Business’ the range’s core function is around e-mail and internet use for business. But one of the three phones in the range, the E65, explicitly appeals to consumer benefits, inviting Users to ‘Indulge’ in the stainless steel and leather design and ‘Capture’ moments in business and private life with a 2 megapixel camera.

Both data cards and PDAs also offer another benefit which straddles business and consumer needs: the ability to manage work-life balance. Vodafone’s Wireless office campaign very clearly appeals to this benefit (see Figure 4 below).

Figure 4. Vodafone’s Wireless Office campaign (JWT)

PDAs and data cards enable workers to manage the conflict between work and personal life more effectively, by giving them greater ‘time sovereignty’ – i.e. greater control over when, where and how they work. One of the key challenges for knowledge workers is to make room whilst at work for leisure and family time. Preparing for leisure often involves additional work and stress. PDAs and data cards enable the user to make the most of his working day – reducing downtime during office hours. It also allows a degree of flexibility and choice about where the preparation for leisure time takes place. The user can, for example, still make it back in time to see their children before they go to bed and then resume work or answer e-mails later in the evening, rather than having to try to squeeze all the work into the standard working day in order to be home at a reasonable time. The Work Foundation claims that the greater time sovereignty individuals have the more productive they are because they suffer from lower levels of stress (The Work Foundation, 2007).

A number of forces are at work in business and society now which seem likely to encourage the spread of the business-consumer hybrid market, or aspects of it, to a wider range of sectors and product categories. It is to these trends that we now turn, starting with trends in business, and the largest and most important of these trends, the decentralization of decision-making facilitated by the reduction in communication costs.

Trends driving the spread of personal criteria in business purchasing: I. business trends

Decentralisation and the declining cost of communication

We are in the middle of a seemingly permanent communications revolution. Since the 1980’s new mobile and fixed line technologies have resulted in a sharp decline in the costs of communication. These cost reductions have had a ‘flattening’, decentralizing effect in industry, redistributing power in businesses and regions from the core to the periphery, from the top of organisations to the levels below, and eliminating mediating hierarchies. The latest stage in the revolution, the spread of broadband communications brought about by the massive infrastructure investments of the Dot.com boom, has led one commentator to claim that ‘the world is flat’ – i.e. that geographical boundaries no longer represent any barrier to industrial location and virtually any function can be outsourced to distant labour markets (Friedman, 2006). Developments such as Web 2.0 promise to perpetuate this revolution.

In businesses this reduction in communication costs has facilitated the spread of flatter, more heterarchical organisational structures with decentralized, intrapreneurial cultures replacing simple, formal lines of reporting and narrowly demarcated roles. One study of 300 large US firms found that between 1984 and 1999 the number of positions reporting directly to CEOs had increased significantly, businesses had delayered and more employees received incentives such as shares and stock options (Rajan and Wulf, 2002).

Thomas Malone of the MIT Sloan School of Management views this wave of transformations in business as recapitulating a pattern already seen in the way human societies are organised (Malone, 2004). The shared pattern is as follows:

1. Societies and organisations start off as small isolated units – hunter gatherer ‘bands’ in the case of societies or small workshops/ firms in the case of companies. Individuals in these small groups are highly motivated and enterprising and, up to a point, are in control of their own lives. However, they are relatively insecure and poor.
2. As communication costs come down societies and businesses centralize – forming kingdoms and nations or larger corporations. The lowering of communications costs facilitates this centralization process but it is driven by human values, wants and aspirations. In the case of societies the benefits of bigness are greater protection, more food and access to economic goods: in the case of businesses the benefits to employees are stability and job security and the benefits to employers are economies of scale. These gains from bigness outweigh the loss of individual freedom and motivation that comes with greater centralization.
3. As communication costs continue to come down societies and businesses start to decentralize, again – societies start to democratize, moving from feudal hierarchies to more democratic states; businesses start to delayer, empower employees and outsource functions to other organisations. The motive force here, again, is human desires and wants. In societies subjects want the greater freedom and control over their lives that is due to citizens. In businesses employees want more ownership (of problems and profits) and authority to make their own decisions, and employers want the greater staff motivation and productivity that can be achieved by empowering the workforce in this way (numerous studies confirm that greater empowerment leads to improved motivation and productivity amongst knowledge workers – see, for example, Amabile et al, 1986). The reduced costs of communication enable societies and businesses to reap the benefits of both bigness and smallness. In business this means that communications technology enables companies and individuals to benefit from both economies of scale and enhanced personal control and motivation.

For it to be worthwhile businesses decentralizing in this way, the benefits of decentralization, such as improved motivation and more responsive local decision making, have to outweigh the costs of losing central control. This means that it is more likely that decentralization will actually occur in businesses, or in parts of businesses, where local decisions made by knowledge workers can contribute to significant increases in efficiency or effectiveness, than in other areas of business. Paradoxically, the use of certain minimum, rigid, central controls or processes can allow a greater degree of decentralization by mitigating the risks of inefficiency or loss of economies of scale. For example, guidelines and approved supplier lists communicated through internal servers, or IT applications to facilitate internal buying groups, can allow individuals to make their own purchase decisions whilst continuing to benefit from the buying power of a large organisation.

Malone cites a number of examples of companies which have already decentralized decision-making in significant ways. Cisco Systems, for example, permits all employees to make their own expense purchase decisions via an Intranet booking site and special credit card. Provided selections fall within certain purchase guidelines managers are not involved in any part of the decision. But he claims that these instances are just the beginning of a long-term trend which will result in widespread decentralization either in the form of more empowered employees, greater outsourcing to smaller companies or networks of small companies and a growth in partnerships and democratic co-operatives.

Businesses will have a strong incentive to decentralize decision-making wherever the motivation and creativity of large numbers of employees is vital and where the need for communication between remote parts of the business is high. This will be found wherever knowledge workers benefit from coming together and sharing expertise and information in large organisations. However, central decision-making is likely to be retained wherever:

• Resolving conflicts is key – especially when industries or businesses are contracting and difficult prioritization choices need to be made;
• A central, holistic vision is required to drive the development of a business – such was the case with Bill Gates and Microsoft’s decision to pursue Internet in the mid 1990’s;
• Employees do not have the skills to make the decisions – the decentralizing trend will, at least in its early stages, be confined to knowledge workers and high value added employees.

Another factor which favours decentralization which Malone does not highlight explicitly, is the degree to which a business is focused on large-scale project work. The commercial and civil engineering construction industry, for example, has always been highly decentralized, depending on shifting alliances of contractors and sub-contractors to undertake huge projects, usually with considerable lead time and lengthy project times. The film industry is another such example. The long lead times and project durations in these industries mean that there has never been any real advantage to centralization. But in many quite highly centralized industries the constantly changing competitive and commercial environment is leading to a situation of nearly constant change management. In these conditions the work of the organisation does become rather like a collection of overlapping projects drawing together individuals from different functions as the business aims to adapt its structures and processes to emerging challenges. This situation, of course, favours decentralization.

Decentralization can take many forms in business. It could just result in the delayering and flattening of the existing organisational hierarchy, with more people reporting directly to the top of the organisation. It could manifest itself in the form of outsourcing functions to smaller companies or outsourcing the workforce to individual contractors or freelancers. Malone even cites examples of companies experimenting with internal markets, with functions and employees in a single organisation buying and selling their services to one another.

If Malone’s predictions about the growth of decentralization are correct, then we are likely to see more purchase decisions being made by employees at or close to the point of use, based on their personal purchase criteria. These personal criteria may well be moderated by central purchasing guidelines, constrained by corporate culture or the competing power of peers within the organisation, but increasingly it will be individual Users making decisions that they feel, for whatever reasons, they can work and live with.

The other, more dramatic, implication of Malone’s work is that organisations may actually get smaller and that therefore we will increasingly be marketing to and researching smaller businesses. Though Malone notes that the evidence for this is at present ambiguous.

The increasingly complex and intangible nature of many business supplies
As the knowledge economy becomes more and more sophisticated the nature of the supplies that businesses buy and sell becomes more complex and the purchasing criteria become more intangible. This increases the asymmetry in knowledge and information between Users and other centralizing functions such as purchasing or procurement which makes it more likely that Users will buy on personal criteria. The situation we saw with business air travel, where it is virtually impossible for a central purchasing function to challenge a business traveller about the carrier and class of flight they need in order to optimize their productivity, is likely to become more common. Of course not all business buying decisions have the same degree of consumer experiential content that air travel does. In the Bio-tech industry example cited earlier, the types of products and services being bought and sold would not generally include anything resembling consumer benefits. However, the one consumer benefit that could be implicated in virtually any complex business purchase is leisure time and the peace of mind required to enjoy it. And as we shall see leisure time is now a commodity with a very high value attached to it.

The growth in importance of relationships with suppliers

As advanced economies become more dependent on the outsourcing of intangible and complex products and services, the importance of relationships between supplier contacts and Users increases. Such relationships are likely to contain a strong personal and emotional element. The intangible nature of the evaluation criteria for these products and services, the technical complexity that generally accompanies them and the power and influence of the high value-added individuals who are the Users of these categories make it very difficult for centralized purchasing functions to intervene in such purchases.

The personal element is not sufficient, of course. If a supplier does a bad job, even if you like them personally, you probably won’t use them again. But if two suppliers can do an equally good job and you get on with one but personally dislike the other, you are very likely to use the one you get on with – unless you suspect that the relationship could in the future affect the quality of your purchasing decisions. That’s not bad business practice or a lack of professionalism it’s just common sense. Once the business criteria have been given due weight even the most professional and conscientious ‘company man’ is free to choose on the most personal and subjective criteria.

But in practice personal buying criteria are actually likely to play a much larger role than simply being the deciding factor between suppliers who are evenly matched on ‘hard’ and conclusive business criteria, because it is very difficult to gather data about and compare suppliers on such empirical dimensions. As we saw in the discussion of the myths of business purchasing, people generally do not seek to maximize value as they are in no position to do this. Rather they seek to satisfice – using emotion-laden heuristics to achieve an acceptable level of value in the limited time, and with the limited information, available to them. Such emotion-guided strategies are very prone to ‘hijacking’ by strictly irrelevant considerations based on prior assumptions and prejudices. Malcolm Gladwell in his book ‘Blink’, gives some excellent examples of this, such as the election to the Whitehouse in the 1920’s of Warren Harding – the least successful President in history – on the basis that he conformed exactly to people’s stereotype of what a President of the United states should look like (Gladwell, 2005). Gladwell also notes that some people can embed sophisticated learning in these ‘thin sliced’ judgments by noting correlations between initial cues and final outcomes. Gladwell gives the example of a highly successful car salesman who rather than relying on the crude class, age, race and gender stereotypes that other salesman find it hard to see around has developed in the course of his long experience very subtle filters for those customers who are worth putting effort into and those who aren’t. But this ability is fairly rare.

This tendency for satisficing behaviour means that personal buying considerations can go to the very heart of supplier selection decisions. As we have seen, risk aversion is a key consideration in many business purchases. Trust in a supplier is the main way to avoid risk. There are a number of strategies for assessing whether you should trust a supplier. The ones that figure most highly in surveys of business purchasing are the buyer’s past experience of having used a supplier and, the next best thing, the recommendation of someone else who has used the supplier and who you trust. Another important strategy relies on indirect indicators or ‘cues’ to aspects of quality that cannot be directly assessed. Very often there is a strong underlying rationale for using these cues because the indicator used is something that is instrumental to the ultimate purchase objective. For example, the presence of local office may be taken as a cue to quality in an international offering because a local office can be seen as instrumental in delivering quality in international work – through better logistics, cultural understanding, and so on. The cues that people find it most easy to rely on in establishing whether to trust are social and emotional ones such as openness and friendliness. Most people are not that adept at training their assumptions and so the best short-cut method they have for making judgments about who to trust is who they feel personally comfortable with. When direct prior experience, the recommendations of others or conclusive ‘hard’ evidence of quality is lacking, interpersonal ‘fit’ is likely to be an important criterion for most Decision-makers. This is particularly true where the User has to work closely with the supplier on an ongoing basis because in such cases the User is constantly exposed to the interpersonal dynamic with his or her contacts in the supplier organisation. Because this way of establishing trust comes quite naturally to us we are sometime unaware of how much we rely on it. Thus, respondents often play down the importance of personal and emotional factors in their purchase decisions when asked directly.

The growing importance of Corporate Social Responsibility

The growing importance of CSR is likely to broaden the range of situations for which employees can legitimately seek some form of informal compensation through their buying behaviour. If the range of purchases that Users are allowed to make directly does increase, then the widening scope of definitions of health and safety should release new consumer-type demand in business markets. For example, increased sensitivity to ergonomic and physical stress issues in office working environments could result in Users playing a far larger role in purchasing for products such as office furniture, PCs and computer peripherals and telecoms equipment. Users could even start to become involved in more ambient aspects of the working environment such as interior décor, ambient sound and so on.

In parallel with these business trends there are a range of social developments that will favour the spread of personal criteria in business purchasing.

Trends driving the spread of personal criteria in business purchasing: II. wider social trends

Growing concerns over quality of life and work-life balance

The leisure age people were promised 50 years ago has, in many ways, failed to materialize. People are not working shorter hours than they did 50 years ago and the amount that we ‘have’ to do in the time when we are not at work has increased significantly. The range of options for entertainment has increased significantly: foreign holidays are now commonplace; most people have access to 20 or more TV channels; eating out is far more common than it used to be. Raised consumer aspirations generally necessitate two wages coming into a household rather than the more traditional model of a breadwinner who works and a home maker who stays at home. This means that child rearing takes up more of people’s free time. And raising children now is a professional occupation all of its own. There used to be very few ways you could let your children down: now there are dozens! Amidst this collision of consumer aspirations, parental duties and multiplying means of distraction, we worry about our quality of life: universal liberal education has led us to expect something more than ‘bread and circuses’. We want time to reflect and consider our direction in life and our place in the universe.

But work can exert considerable pressure on the time that we want to keep for ourselves. Flexible labour markets have increasingly blurred the boundaries between work and personal life. People now are less secure in their jobs than they were 30 years ago and this makes working hours very sensitive to competitive factors. This can be seen in the comparison of the unemployment rate and the % of employees working more than 45 hours per week shown in Figure 5 below.

Figure 5. The UK unemployment rate and the % employees working more than 45 hours per week – 1987 – 2006 (seasonally adjusted)

Source: Office for National Statistics

The figures show that working hours increase with unemployment – though this effect is lagged, presumably because it takes time for the labour market to adjust. Thus, when work is scarce people will be prepared to work longer hours, either to keep their jobs or to keep up with others around them who are working longer hours in response to the rising expectations laid of their employers. This suggests that wherever competition for employment or preferment in work is high, there is likely to be increased pressure to work longer hours.

The upshot of all this is that downtime has become a personal commodity in virtually the same way that man hours are an industrial commodity. And these two are competing with each other. Drawing Sheth’s model of industrial buying behaviour now, we have to note the considerable tension between the lifestyle and time pressure factors.

Figure 6. Sheth’s Integrative Model of Industrial Buying Behaviour updated for the C21st !

 

Users of business products and services are increasingly confronted with a trade-off between the time they spend doing their job and the time they spend with their families, or in recreational activities. Business products and services which can credibly promise to save Users time at work and make more time for home life and leisure are likely to meet a deeply felt and increasingly widespread need.

Increased consumer sophistication

People in all walks of life have become increasingly exposed to hard commercial realities at work. Everything now is run the way the best businesses are run: costs are driven out; students, pupils, patients, passengers and voters are ‘customers’ to be competed for with other organisations; commercial accountability or some proxy for it can be found in all workplaces. An increasingly business-literate population is applying the same techniques they have had to use at work, in other aspects of their personal life. We have all become more caught up with machine logic. 30 years ago ‘machine operator’ was a job performed by a few: now it’s a way of life for everyone, with all that entails for the way people think and make choices about the world. The internet has facilitated more rational purchasing techniques amongst consumers, enabling them to put virtually any product or service category out to tender in much the same way as a business buyer would. The effect of this has been to blur the boundary between work and personal life. At work people can move seamlessly between ordering their groceries or paying their utilities bills to making business purchases. From the individual’s perspective the differences in process between consumer and business purchasing are being rapidly eroded.

Greater sensitivity to health issues

The historian of science, Roy Porter, in the introduction to his global history of medicine noted:
‘These are strange times, when we are healthier than ever but more anxious about our health.’
(Porter, 1997)

Concern about health links work and personal lives in a very direct way. This link is also highly asymmetric – that is, it is hard for central functions such as purchasing or even HR to challenge claims that an individual makes about their health. Thus, increased concern about, and sensitivity towards, health matters has provided a new and growing basis for the kind of compensation we identified earlier. There is growing momentum behind the view that long hours and low levels of time sovereignty produce stress which reduces productivity (see The Work Foundation, 2007). Awareness of this fact combined with the Corporate Social Responsibility trend will increasingly drive the demand for informal compensation, on the legitimate business grounds that stress reduces productivity and can be managed to a large degree by giving employees greater control over their conditions of work. This compensation could take the form of more flexible working practices or more working environments which are more closely tailored to individual requirements.

Implications for B2b Marketing and Research Practice

We have identified various types of convergence between consumer and B2b purchasing: the basic psychology of decision-making in both is similar; personal factors lead to power struggles within organisations around business purchase decisions; purchasing in markets such as the business air travel market display distinct consumer features; and trends in business and wider society will, over time, increase the range of B2b markets which exhibit these consumer traits.

We have seen that the types of B2b purchase that will be subject to this convergence with consumer purchasing will be those where:

• The Users of the product or service are high value-added or high status knowledge workers
• The User has a legitimate claim to informal ‘compensation’ relating to long or anti-social hours or a health related issue
• Local decisions made by these knowledge workers can contribute to significant increases in efficiency or effectiveness
• The business is focused on project work
• There is an asymmetry in knowledge and information between the User and other potentially interested parties in the decision such as the purchasing function
• The purchase category is ‘soft’ or intangible – especially where the User has ongoing regular, service contact with the supplierThere are three key implications for B2B research and marketing practice, of the types of convergence we have been exploring. These can be summarized as follows:
• Assess the power and legitimacy in the decision-making unit.
• Find the ‘soft’ emotional-personal cues to ‘hard’ business purchase criteria.
• Appeal to the whole purchaser.

Below we consider each of these in turn:

Assessing power and legitimacy in the decision-making unit.
As purchase decisions decentralize they politicize. If one man at the top of the organisation makes all the decisions, the question of conflicting interests or the need to compromise between these interests does not arise. When the decision is decentralized across a range of individuals or functions, the interests of many of these functions is held in check by the limited, advisory role that they play. These disinterested parties can then play a moderating role between the interested parties – usually, different Users and the Decision-Maker or Buyer, where these roles are fulfilled by different individuals. This impartiality can take the heat out of the decision and the need to take on board the views of those in a purely advisory capacity can serve as force for compromise. When the decision decentralizes to the point that only a User and a Buyer are involved, and the question of which of these gets to play the role of the Decision-maker arises, expect some serious tension. We see this in our own industry in the tussles between, on the one hand, increasingly powerful internal research departments, concerned with maintaining working relationships with trusted research suppliers across a range of specialisms, and on the other, newly empowered procurement departments seeking economies of scale and reduced costs of doing business by working with a smaller number of larger providers.

When faced with such decentralized decision-making units, researchers need to be alert to the details of tactical compromises and political maneouvering as well as the ‘big picture’ of who actually has the greater power and influence in the relationship. Stakeholder theory provides us with a framework for thinking about this (Mason and Gray, 1999). To be a stakeholder in a decision is to have a vested interest or legitimate claim in that decision and to actively pursue that interest or claim. Stakeholders can be individuals or functions within the organisation. But the organisation as whole may also be a stakeholder – i.e. the notional entity that represents the collective interests of the organisation. Particular functions or individuals may represent the organisation with regards to particular decisions (whilst also representing their own interests) or the organisation’s interests may be embedded in buying guidelines or rules – though, again, these may have been created by a function or individual to serve their own best interests.

A stakeholder or stakeholder group may co-operate with another stakeholder in the interests of the organisation as a whole or on the basis of another shared, but more self-interested motive. Or a stakeholder may compete with another stakeholder and when in competition may have power over that stakeholder or may lack power relative to them. If a stakeholder lacks power relative to another stakeholder he or she may still have a legitimate claim that overrides any power dynamic. With respect to any single purchasing decision a User may be doing all of these simultaneously. For example, the business air traveller may willingly co-operate with a travel manager who is helping him book his flight and be in competition with, but slightly lacking in power with respect to, the procurement function. But he may still be able to achieve many of his consumer objectives with regards to his travel purchase because of the perceived legitimacy of his claims to travel business or first class – either on the compensatory grounds that he is being kept away from home for a long period of time or on the business-related grounds that he needs to work while traveling.

Mapping these power dynamics and identifying the source of stakeholders’ power and legitimacy with respect to a particular decision is key to understanding who marketers should target within an organisation and what criteria the final decision will be based on.

Finding the ‘soft’ emotional-personal cues to ‘hard’ business purchase criteria.

As we have seen personal, emotional impressions are likely to play a key role in business decisions just as they are in consumer decisions. Thus, it is important for research to be alive to these emotional, personal cues to quality that Users and Buyers rely on. In qualitative research the importance of the personal dimension can be probed in depth and can be identified, if not in what respondents actually say, then in how they talk about their individual contacts in the supplier organisation. Quantitative research runs the risk of overlooking the importance of the emotional-personal dimension by being too literal and direct. A recent US study into B2b customers’ requirements of salespeople falls into this trap. The study was conducted amongst 120 ‘sales leaders’ in vendor organisations and 200 of their customers (Kreindler and Rajguru, 2006). The results of the study are shown below.
Table 2. Results from a survey of US vendors and their customers (Kreindler and Rajguru, 2006)

The authors claim that the results show there is a serious misalignment between the customers’ expectations of salespeople and what vendors think customers expect and recruit for. Customers rank social and communication skills as the least important of the attributes show whilst vendors think their customers rank social and communications skills more highly and actually rank these skills most highly when recruiting salespeople. Kreindler and Rajguru believe that it is understandable that vendors recruit salespeople based on their social and communication skills as it is difficult in an interview to assess more important factors such as subject matter and solution expertise and professionalism. But they do not explain why it is any easier for customers to make judgments about the salesperson’s expertise and professionalism during their fairly brief interactions with them than it is for vendors during the course of a job interview. In fact, it is likely that the customer’s priorities are rather closer to the vendor’s priorities than the rankings suggest. It is just that different psychological biases are operating on customers and vendors when they are responding to the survey and this is producing very different rankings.

Kreindler and Rajguru fail to make the important distinction between instrumental and final factors, between quality and the available indicators of quality. Social and communication skills are an instrumental factor in a salesperson because if they are poor communicators, the customer will never find out how expert they are or how well they understand the customer’s business and industry. Vendors focus on this when recruiting salesmen because they know that all the expertise and understanding in the world is useless in a salesperson if he cannot communicate it. But when customers are interviewed they are likely to play down the importance of social and communication skills. This is probably partly because they want to be seen as rational purchasers, partly because they are wary of slick, persuasive salesmen selling them something they don’t want and partly because they are just not consciously aware of how reliant they are on the salesperson possessing these skills.

Getting a more balanced picture through quantitative research of the importance of ‘soft’, emotional-personal attributes in B2B markets requires a more indirect approach than that taken by Kreindler and Rajguru. Correlation techniques can be particularly effective in this respect. By identifying attributes which are connected in customers’ minds it can help to highlight which ‘softer’ personal-emotional attributes might be used buy customers as cues for other ‘harder’, rational attributes.

Table 3. below shows results from a survey of 600 UK car dealers. The figures show the mean importance rating of each attribute on a scale of 1-4 where: 1 = Not at all important; 2 = Not that important, but nice to have; 3 = Important, but not critically so; 4 = Critically important.
Table 3. Importance of factors in meeting the financing needs of car dealers

When asked directly, respondents place ‘softer’ interpersonal factors such as having a long-term business relationship, friendliness and politeness and continuity of contact below ‘harder’ attributes such as speed of response to enquiries and dealing with complaints. However, conducting a factor analysis in the data reveals some interesting links between these hard and soft attributes. Table 4, below shows the results of this analysis. The figures indicate the component loadings on the individual variables.

Table 4. Principal components analysis of factors in meeting the financing needs of car dealers

The factor analysis reveals a correlation (and therefore, potentially, an instrumental relationship) between, on the one hand, softer attributes such as friendliness and politeness of staff and continuity of contact and, on the other hand, harder attributes such as dealing with complaints and speed of response to general enquiries. This seems to indicate that even though they rate them on average as less important, customers in this market do attach importance to these more emotional-personal attributes as indicators of a good relationship with a supplier which is instrumental in delivering the more concrete, business benefits that the customer is ultimately interested in.

Appealing to the whole purchaser

As purchase decision-making decentralizes and personal considerations move higher up the mix of buying criteria, there will be a growing need for B2B marketers to appeal to the key stakeholders in a holistic way, taking account of any potential personal or consumer needs they may have which may be relevant to their interest in the product or service. If we call an individual who brings professional-level expertise to his or her consumer purchases a ‘prosumer’, then by the same logic we can perhaps call someone who introduces consumer criteria into business purchases a ‘confessional’. This name has the advantage of drawing our attention to the problem facing researchers and marketers when dealing with these individuals – getting them to confess to the fact that consumer considerations do, in fact, play a part in their purchase decisions. Identifying these consumer-type needs and marketing to them, has to be sensitively handled for a number of reasons:

• The individuals concerned do not want to be thought of as unprofessional. Indeed in many business purchasers make a point of wanting to be treated differently from consumers in the same category – even though, they actually share many of the objectives of an ordinary consumer when making a purchase.
• The perceived legitimacy of a consumer-motivated purchase may depend to some degree on an asymmetry in the knowledge they have and other interested parties have about the purchase. Most would be reluctant to openly admit to other people in their company that they were motivated in making a decision by consumer-like considerations. Most will seek to justify their decision on business grounds and may not even be fully aware of the extent to which their decision is motivated by their own self-interest.

For researchers, getting business Buyers to admit to having consumer motives will involve adapting techniques from researchers in ‘sensitive’ categories such as healthcare. These techniques could include:

• Use of depth interviews at a studio location rather than group discussions or depth interviews at the respondent’s place of work. This should help to lower the respondent’s guard and free him or her up to admit to any consumer factors which play a part in his or her decision.
• Use of projective techniques. These can be useful in making respondents aware of latent motives in themselves and for providing them with ‘room’ to admit to motives that they would not otherwise want to admit. Two techniques in particular can be effective with business audiences: laddering and ‘ideal world’ approach. The latter can be particularly effective as it removes real world constraints such as cost which often constrain consumer objectives in business buying contexts.
• The use of other ‘permission giving’ techniques such as shifting personal to common views and sharing disclosures. Leading the respondent to believe that other the interviewer or other people the interviewer knows engages in a similar type of behaviour can remove a respondent’s inhibitions to admitting to behaviour that they are reluctant to share.

For marketers the main challenge is to imply that a personal or consumer benefit is available to Users without straying far into consumer territory or language. One method for doing this is to use language that is business-consumer neutral. For example, the Kodak ad aimed at hospital administrators shown in Figure 7, below, uses the phrase ‘life’ in the line ‘Simplify your life with Kodak’ in a way which can be interpreted to mean both ‘work life’ and ‘personal life’

Figure 7. Kodak ad targeted at Hospital Administrators: example of business-consumer neutral language

Another approach is to show the key business scene from a narrative and let the audience complete the story for themselves. In the Microsoft Office ads in Figure 8 below, one ending to the story that many overworked business Users will fill in for themselves will be that these people are not going to get home on time tonight.

Figure 8. Microsoft Office ad: an example of implying personal benefits

 

References

Amabile, T. Hennessy, B.A, and Grossman, B.S. (1986). Social Influences on Creativity: the Effects of Contracted-For Reward, Journal of Personal and Social Psychology, 50.

Baumol, W.J. (1959). Business Behaviour, Value and Growth. New York: The Macmillan Company.

Cyert, R.M. and March, J.G. (1963). A Behavioral Theory of the Firm. Prentice-Hall, Englewood Cliffs, New Jersey.

Damasio, R. (1996). Descartes’ Error. Emotion Reason and the Human Brain. Papermac.

Dexter, A. and Behan, G. (1999). Small Business Consumers: The Emotional Economic Unit.Journal of the Market Research Society 41(2), 171-194.

Earls, M. (2007). Herd: How to Change Mass Behaviour by Harnessing Our True Nature. John Wiley and Sons Ltd.

Friedman, T.L. (2006). The World Is Flat. The Globalized World in the Twenty-First Century.Penguin Books.

Gladwell, G. (2005). Blink. The Power of Thinking Without Thinking. Allen Lane.

Howard, P. and Doyle, D. (2006). An examination of buying centres in Irish biotechnology companies and its marketing implications. Journal of Business & Industrial Marketing, 21/5 (2006) 266–280.

Kahneman, D. and Tversky A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, XLVII (1979), 263-291.

Kotler, P. (1967). Marketing Management. Analysis, Planning and Control. Prentice Hall; 1st edition.

Kreindler, P. and Rajguru, G. (2006). What B2B Customers Really Expect. Harvard Business Review. April 2006.

Malone, T.W. (2004). The Future of Work. How the New Order of Business Will Shape Your Organisation, Your Management Style and Your Life. Harvard Business School Press.

Mason, K.J and Gray, R. (1999). Stakeholders in a hybrid market: the example of air business passenger travel. European Journal of Marketing, 33, 9/10.

Porter, R. (1997). The Greatest Benefit to Mankind. A Medical History of Humanity from Antiquity to the Present. Harper Collins Publishers.

Rajan, R.G. and Wulf, J. (2002). The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies. Paper presented at the National Bureau of Economic Research Conference on Organisational Economics, Cambridge, MA. Available athttp://www-management.wharton.upenn.edu/wulfresearch/Papers/Flattening_Firm_11_02.pdf.

Sheth, J.N. (1973). A model of industrial buyer behaviour. Journal of Marketing, 37. No 4, October, 1973.

Simon, H. (1971). Computers, Communications and the Public Interest, Martin Greenberger, ed., The Johns Hopkins Press.

The Work Foundation. (2007). Employers and Work-Life Balance.http://www.employersforwork-lifebalance.org.uk/work/prod.htm