Business-to-business (B2B) firms that adopt strategic marketing practices are winning the race for market share, according to a new study conducted by Booz & Company and the ANA (Association of National Advertisers ). The study found that 40 percent of firms with above-average marketing capabilities gained market share versus only 26 percent of firms with below-average capabilities. However, the study also found that nearly half of all firms (49 percent) limit marketing to a tactical role within the business, rather than a strategic one.
The study clearly shows that strategic marketing is more important than ever as B2B companies face new challenges. Competition has increased through deregulation and globalization, while products have become more commoditized. Educated and sophisticated buyers now have easy access to research and information through the Internet and other sources. These factors make the traditionally tactical role of many B2B marketers insufficient to grow their businesses.
“Industry leaders build market share in recessions – companies that understand this reality are winning,” says Matthew Ericksen, a Partner at Booz & Company. “While more companies are waking up to the importance of strategic B2B marketing, many others have not embraced this path to growth.”
More than one-third of B2B marketing organizations have been strategically realigned over the past three years. However, nearly half of the firms surveyed do not take a strategic approach to marketing. While 53 percent of firms surveyed have a chief marketing officer (CMO), only 13 percent of those surveyed agreed that senior leaders greatly value marketing experience, especially in grooming high-potential employees. As a result, B2B marketers tend to oversee advertising (68 percent) and public relations (50 percent) programs, but have much less responsibility for strategic areas like new market entry (35 percent), high-level strategy (33 percent), and customer retention (28 percent).
“Marketers must be involved in the entire corporate strategy process to be fully effective, and to get an edge in the race for market share. They need a voice in discussions about product development, pricing, and distribution—not just promotion – in order to successfully market those facets of the business,” says Bob Liodice, President and CEO of the ANA.
The study also found that companies winning market share consistently excelled in three core capabilities. However, these are areas where many B2B marketers are traditionally weak:
Market-back Product-Development Process: The majority of marketers surveyed do not collect the information needed to make educated decisions about product development and pricing. While most collect information on the customer’s buying decisions (73 percent) and buying history (58 percent), less than half look at the customer’s financial position (49 percent), marketing strategies (35 percent), or pricing strategies (24 percent). Only 9 percent collected enough information for a 360-degree view of the customer’s history, buying motivation, and business goals. Just 10 percent of B2B companies have integrated marketing with research and development – the great majority of companies take a “build it and the customers will come” view towards product development.
Brand and Reputation Management: Most B2B marketers do not manage their brand strategically to differentiate themselves versus competition. For example, fewer than half of B2B companies track brand attributes, such as familiarity, awareness, and recall. In addition, only 6.5 percent of marketers at these firms have above average branding capabilities. However, leaders in market share growth consistently identified their capabilities in brand management as a strength.
Marketing-Driven Pricing: Relatively few companies set prices based on market response and value to customers (29 percent) as opposed to more internal cost-driven approaches. Instead, 68 percent use either cost-based or bid-based approaches, with 19 percent opting for cost-to-serve pricing. However, most companies are not adequately capturing the cost to serve their customers. Only 15 percent strongly agreed that they have the analytical capability to track sales and cost-to-serve data for individual customers across channels.
The implications for B2B marketers are straight-forward: successfully managing these three core capabilities will increase the effectiveness of the marketing team and grow business overall. Such an approach requires senior-level attention to both raise the influence of B2B marketers to strategic advisors – as well as a pipeline of trained, experienced marketing talent able to fulfill the rigorous demands of such a role. Fundamental capabilities must be emphasized and built, including capturing more extensive customer insights to inform market-back product development, branding, and pricing decisions.
“Overhauling the marketing function in a time of economic distress is a challenge, but it is an investment in survival and growth,” says John Jullens, a Booz & Company Principal. “Winners in the marketplace integrate marketing throughout the entire value chain from new product development to branding and distribution. Strategic marketing is an investment that will position a company for long-term strength.”
The findings of this survey will be discussed in depth at the ANA’s upcoming conference, BtoB Marketing in the New World. The conference is being held on August 4-5, at the W Chicago City Center in Chicago, IL. The session regarding this survey is titled, ” The Awakening – B2B Companies Acknowledge the Need for Greater Marketing Prowess and that it Wins Increased Market Share, ” and will be a panel discussion moderated by Booz & Company’s John Jullens. More information about this conference can be found here.
Booz & Company and the ANA surveyed more than 100 business-to-business marketers across nearly a dozen industries through a custom on-line questionnaire and personal interviews. Many of those surveyed were marketers from large, multinational corporations.
About The ANA
The ANA's mission is to provide indispensable leadership that drives marketing communications, media and brand management excellence and champions, promotes and defends industry interests. The ANA is the industry’s foremost and recognized source of marketing communications best practices. It also leads industry initiatives, influences industry practices, manages industry affairs, and advances, promotes and protects all advertisers and marketers. The trade association represents 400 companies with 9,000 brands that collectively spend more than $250 billion in marketing communications and advertising. For more information visit www.ana.net.