There’s a lot of business marketing content that emphasises the differences between marketing strategies geared towards businesses as opposed to consumers. You can find a plethora of articles with titles like “digital marketing B2B vs B2C”, “B2B versus B2C marketing differences” or “social media marketing B2B vs B2C”.
While there are certainly some valid differences, there’s also plenty of overlap between the two areas. This brings up an important question: Do we have a demarcation in our heads between “people” and “businesses” that’s no longer true? Are those differences dissolving?
A growing body of literature is talking about how B2B marketing and B2C marketing are becoming more alike due to technological innovation and changing customer expectations. While it’s important to acknowledge key differences between B2B and B2C, we want to explore how both forms of marketing are similar. By understanding these similarities we can improve our ability to successfully market to businesses, both on a personal and professional level.
It seems simple enough. Business-to-business is based on rational arguments while business-to-consumer is rooted in emotional ones. Following this set of assumptions, here are some of the most commonly cited differences between the two marketing approaches:
Research is showing that business-to-business and business-to-consumer marketing is converging. Or, more accurately, we are becoming increasingly aware of the human element in business purchasing.
Based on three decades of B2B research, the Harvard Business Review identified 40 fundamental “elements of value” that B2B customers use when making a decision. These elements are divided into five categories: table stakes, functional, ease of doing business, individual, and inspirational.
As you can see, it’s not all about numbers. Indeed, HBR found that beyond meeting price, specifications or regulatory needs “. considerations such as whether a product can enhance the buyer’s reputation or reduce anxiety play a large role.”
This is further supported by research from Deloitte Digital. Over three years, they found that organisations that create a “human experience” (e.g. aligning to the values of their customers, workforce and partners) were twice as likely to outperform competitors in terms revenue growth. They also experienced 17 times faster store growth.
“Appealing to the rational side of B2B buyers can work for immediate activity driving sales and leads. It makes sense for short-term activation. However, it’s hard to build a brand that will give you long-term competitive advantage if you can’t generate creative ideas that resonate with audiences on an emotional level.”
This is hardly a new phenomenon. B2B and B2C branding methods have been quietly converging for quite some time. However, the business marketing field isn’t fully receptive to that fact.
Faster, bigger, higher — that was the environment we lived in for the past 12 years. Founders raised money faster, rounds were bigger, and valuations higher. FOMO was real as was free capital. Investors rushed to pay for businesses two years forward, valuing them at an x multiple on y revenue at some point in time in the future… During the first lockdown of 2020, I re-read Benjamin Graham’s The Intelligent Investor and was trying to understand why the current market was paying such high multiples, and how the environment was different compared to previous decades… Certainly, the multiples of today’s business reflect more visible SaaS models, but the abundance of capital, FOMO, and irrational behavior had stretched valuations significantly.
Fast forward to 2022 and we are in an environment of depressed multiples. The World economy is constrained by supply chain troubles, a war disrupting energy supplies, rising inflation, and increasingly divided societies. Multiples for growth companies are down about 2/3rds, and while the music hasn’t stopped, we’ve gone from Katy Perry to Tchaikovsky.
5x used to be a 2-year forward, in some cases 3-year forward multiple, now it is a 12-month trailing multiple and only businesses with robust fundamentals raise money. Investors are no longer paying for futures but for visibility and margins, and if a company’s bottom line is not close to a profit, the stock is thrown in a penalty box. Since covid began, many companies doubled revenue, customers, and users, but their shares are cut in half. With inflation and interest rates still going up to the right, there is no sight of calm.
But what we know is true over time is that business fundamentals and sustainable growth are directly correlated to enterprise value creation. As Peter Lynch said, “People may bet on the hourly wiggles of the market, but it’s the earnings that waggle the wiggle long term.” Accordingly, we continue to focus on companies that score high on our 5 Ps — People, Product, Potential, Predictability, and Purpose, as those ultimately lead to strong earnings.
Some of the recent noise suggests that Edtech is in reversal, with companies being roman candles as things are back to normal, and with Edtech valuations back at discounts. Well, in reality things are different. Yes, Edtech stocks are down 60% but that’s in-line with the broader market for growth stocks and SaaS companies. Meanwhile, we continue to see strong underlying trends in our sector; in K12, essentially all after-school activity is shifting to digital, in higher ed, degrees are getting augmented/improved and all of the growth is happening online, and in workforce learning, the opportunity is massive and growing. The quality and breadth of businesses continue to be impressive and fundamentals are holding strong.
There are certainly temporary headwinds due to macroeconomic pressures. In U.S. K12 for example, there’s a lack of teachers and mismanagement of ESSER funds which has caused some companies to lower their projections. In Higher Ed, weak enrollments have been slowing down growth, and in the workforce, tightening budgets are pressuring renewals and new bookings. But learning needs are significantly outweighing current macro headwinds. The importance for individuals and companies to up-skill and re-skill is increasingly more critical if they want to stay competitive in the global economy.
The good news is today’s leaders are more diversified and more global than ever. Course Hero, Chegg, and Quizlet started out with U.S. college students but over the past few years, they expanded globally and did so organically. Coursera, Roblox, and Duolingo were born global. And many non-U.S. companies have expanded internationally at impressive speed; Emeritus, Hotmart, Kahoot!, GoStudent, Quizizz, Brightchamps, Photomath to name a few. Compare that to the first generational leaders of Edtech who were all focused on their local markets and serving only one age group.
More good news is today’s leaders deliver education in engaging ways. It’s all about driving frictionless learning, and gamification is a great example of how that can be done. Kids learn through play without realizing they are getting schooled. As Byju likes to say — it’s like covering broccoli with chocolate. Roblox and Minecraft are two stars that teach kids to code, build, and collaborate in a metaverse type of environment. Others like Quizizz and Kahoot provide the tools for teachers to create engaging games for in-class and after-school work. Duolingo has been acing gamification in the language learning space as reflected by its daily to monthly active users engagement (DAU/MAU) of 27%. In Education, a DAU/MAU of 25% or higher is strong, above 30% it’s impressive!
Institutional markets include nonprofit organizations such as the American Red Cross, churches, hospitals, charitable organizations, private colleges, civic clubs, and so on. Like government and for-profit organizations, they buy a huge quantity of products and services. Holding costs down is especially important to them. The lower their costs are, the more people they can provide their services to.
The businesses and products we have mentioned so far are broad generalizations to help you think about the various markets in which products can be sold. In addition, not all products a company buys are high dollar or complex. Businesses buy huge quantities of inexpensive products, too. McDonald’s, for example, buys a lot of toilet paper, napkins, bags, employee uniforms, and so forth. Pretty much any product you and I use is probably used for one or more business purposes (cell phones and cell-phone services, various types of food products, office supplies, and so on). Some of us own real estate, and so do many businesses. But very few of us own many of the other products businesses sell to one another: cranes, raw materials such as steel, fiber-optic cables, and so forth.
That said, a smart B2B marketer will look at all the markets we have mentioned to see if they represent potential opportunities. The Red Cross will have no use for a fighter jet, of course. However, a company that manufactures toilet paper might be able to market it to both the Red Cross and the U.S. government. B2B opportunities abroad and online B2B markets can also be successfully pursued. We will discuss these topics later in the chapter.
Figuring out who exactly in B2B markets is responsible for what gets purchased and when often requires some detective work for marketing professionals and the salespeople they work with. Think about the college textbooks you buy. Who decides which ones ultimately are purchased by the students at your school? Do publishers send you e-mails about certain books they want you to buy? Do you see ads for different types of chemistry or marketing books in your school newspaper or on TV? Generally, you do not. The reason is that even though you buy the books, the publishers know that professors ultimately decide which textbooks are going to be used in the classroom. Consequently, B2B sellers largely concentrate their efforts on those people.
That’s not to say that to some extent the publishers don’t target you. They may offer you a good deal by packaging a study guide with your textbook or some sort of learning supplement online you can purchase. They might also offer your bookstore manager a discount for buying a certain number of textbooks. However, a publishing company that focused on selling its textbooks directly to you or to a bookstore manager would go out of business. They know the true revenue generators are professors.
The question is, which professors? Some professors choose their own books. Adjunct professors often don’t have a choice—their books are chosen by a course coordinator or the dean or chair of the department. Still other decisions are made by groups of professors, some of whom have more say over the final decision than others. Are you getting the picture? Figuring out where to start in B2B sales can be a little bit like a scavenger hunt.