Grainger Branch Impulse Sales: Customers make impulse purchases off of displays because they see products they need or like. The Grainger brand may have gotten them in the door but most buyers are likely repeat customers and not prospects – so marketing’s role is mostly limited to building a compelling assortment of attractive displays. The driving brands at this point in the decision cycle are mostly the manufacturers who make the products.
84 Lumber Project Sales: A very large portion of these sales are driven by account managers working with contractors in offices and on jobsites. Average transaction sizes are large, deals are negotiated and price and service play a major role. Marketing can provide awareness so that 84 Lumber gets on the “consideration set” of potential suppliers but sales has to close contracts and manage relationships.
As you can see, the brands skew to the right because B2B purchases are inherently less emotionally driven than consumer products. The vast majority of the volume in B2B is in the upper half of the matrix because B2B transactions are much larger on average than consumer purchases. Sometimes purchasing decisions are contracts, which are nearly always of high value and thus take on the dynamics of multiple purchase decision-makers and the use of analytical criteria by buyers.
It’s important to understand where your brands and value propositions fit on the matrix because it guides your investments in sales and marketing. For example, if your company gets most of its growth from long-term contracts with large customers, marketing should focus its efforts on lead generation and collateral for your salespeople. Your website should offer advanced e-procurement capabilities and you should be an expert user of CRM processes and systems.
If your company is launching a new business unit or offering, then communicating the brand is important and more general brand advertising will be important as you build awareness.
Role of market size
One dimension that’s not on the chart is the number of customers and prospects in your market. It doesn’t affect the fundamentals about the role of branding in your marketing, but it can be an important factor in how you decide to communicate with your customers and prospects.
84 Lumber, for example, has a fairly tightly defined market. It sells to building contractors and there are great lead sources like Dodge and Blue Book to help them identify jobsites that are being planned or are underway. Most of its marketing should consider these and other data sources and should be providing leads to the sales force. For customers too small to justify an account manager, marketing can drive sales growth directly.
However, this is not a market of tens of millions of prospects, so the company’s 2017 Super Bowl ad was a poor investment – TV advertising is about making a huge number of awareness impressions at a low cost per impression. 84 Lumber needs to make much more substantive marketing and sales contacts to a small, targeted audience. The Super Bowl ad may have made impressions on more than 100 million people, but the vast majority of them had no potential to buy from the company.
As you might expect, 84 Lumber’s Super Bowl ad came from an agency that claims, “We’re best known for producing creative that ignites brands and connects with consumers. We do that by grounding everything we do in brave thinking.” The agency claims online that its goal for 84 Lumber was to “create a very big splash for the nation’s largest private building materials supplier with a very niche and little-known brand.”
“Very niche” and “Super Bowl commercial” are at total odds with each other. This demonstrates that the agency understood that 84 Lumber has a very small audience for its branding and yet the agency produced, placed – and likely recommended – the Super Bowl ad anyway – and now feature this damaging campaign on its homepage when it belongs instead in an agency hall of shame.
We can only speculate as to why this agency thought a Super Bowl ad was a good idea for 84 Lumber, but I’m sure the fees for a campaign that may been $20 million or so were quite lucrative.
This is another lesson on why you need to be careful about engaging with traditional ad agencies. A specialized B2B agency signed up for the long haul would have understood 84 Lumber and recommended something much more effective.
Grainger has also advertised on television. In some ways, TV is a better fit for Grainger than 84 Lumber because the former has products to sell nearly every establishment in the U.S. However, I suspect that even in this case, Grainger would get a better return in much more targeted campaigns via online marketing and salespeople because the company already enjoys a very high level of awareness in its target audience and most people who see the ads are not influencing B2B purchasing. Thus, the majority of the impressions are wasted.
Mass advertising is extremely expensive because it is designed to build a little bit of awareness across very large numbers of people at a low cost per impression. It rarely provides anything like a reasonable return for B2B marketers and has little to no value for most distributors.
For the vast majority of distributors, marketing resources should be focused on building a deep and detailed prospect and customer database, acquiring and configuring marketing and sales force automation tools and then driving prospects into a funnel. From there, marketing can send relevant offers to targeted customers and sales can close deals and build relationships. Distributors with these sales and marketing models will get a much better return on their demand generation investments than those who buy consumer-oriented advertising on TV, radio or outdoor alternatives like sports stadium banners.
Use the Branding Matrix as a discussion tool to estimate how important branding is to your business. Know your market size so you pick channels that are efficient for your customer and prospect pool. And if you hire an agency, pick a pure B2B firm that can help you with everything from branding to pay-per-click. To some degree, brand awareness is helpful to every distributor, but only if you create it in people who can actually buy from you.
In the third and final article of this series, Ian will talk about how to create branding slogans and messages that say the right things about your company, with an emphasis on the customer instead of on the distributor.
who sell them supplies. No one is likely to run home and breathlessly brag to his kids, “We just selected Ian’s Supply as our janitorial products distributor!” Generally, individuals buying for their businesses simply are not as emotionally engaged as they are for many of the purchases they make in the personal lives.
Plot your brand on the Branding Matrix
You need to define the nature of your transactions, how your customers buy products from you and your competitors, and to what degree there is some potential to build an emotional connection.
Even within distribution, there is a great deal of variation on both of these dimensions, but branding agencies simply do not have the ability to understand your business well enough to take this into account when they give you recommendations. And it wouldn’t matter anyway. They want to persuade you to spend a great deal of money on an engagement and so they must try to make you believe that branding is extremely important to your company – even if it is not.
It’s helpful to plot your brand on the Branding Matrix (Figure 1) to get a sense for the potential of using branding to influence your customers and prospects.
It’s important to note that your brand may have more than one position on the matrix. For example, you may plot your major contract sales (annual MRO contracts, vending contracts, specified products, etc.) in the top right and your convenience sales (impulse items at branch counters, email promotions) in the bottom right.
Also, you will find that you can plot specific initiatives on the chart – and their positions may move over time. For example, if you launch a new business unit and you need to communicate it, that brand’s position will be farther left than your legacy business – people are curious about new suppliers and a compelling brand message may make them decide to give you a try.
Or you may have promotions that are designed to generate immediate sales and these can be very different than your core business because you’re tempting someone with strong money-saving offers and that gets customers excited.
Let’s plot some distributor brands on the matrix as examples. (Figure 2)
Here’s my reasoning for where I plotted each of these value propositions:
Grainger Strategic Accounts: These are long-term, negotiated agreements. Customers will carefully review their MRO requirements and ask suppliers to respond to an RFP. Typically, a cross-functional purchasing team will establish requirements based on their needs and make suppliers compete on a number of dimensions, including price.
Fastenal Vending Contract: Similar to the Grainger example but with fewer competitors. However, the customer will make a long-term decision based primarily on capabilities. Marketing supports the salespeople with collateral and presentation materials, but sales is the driver of the business.
New Business Unit – Amazon Business (AB): Since AB is a new venture for Amazon, it has some branding challenges to build awareness. In addition, the business model enables Amazon to accomplish sales and marketing activities online that traditional distributors get from their sales function. Also, there is a lot of brand equity in Amazon’s retail business that the company can borrow for B2B selling to drive familiarity and preference. For now, many business buyers are curious about this new entity and so good branding can drive trial. Over time, the role of branding in AB’s marketing mix will move to the right, but they have so few customers as a percentage of the total market that they can benefit from branding communications for years. In addition, at this stage, Amazon’s contracts are often limited to “P Card” agreements, so contracts are likely much smaller on average than Grainger’s strategic account relationships. This will also change over time as it attempts to dominate e-procurement for large purchasing organizations. For more on this strategy, see our recently published report, Your Amazon Business Playbook.
MSC Super Saver Flyers: MSC Industrial distributes these flyers every other month and makes them available online. MSC’s well-known brand means that customers are more likely to open them versus an unfamiliar supplier. The flyers offer discounts, which is exciting to many customers. MSC can prospect aggressively with these flyers both online and in print, so good branding can make a difference. However, purchase decisions are likely impulsive and the products need to be relevant to customer needs.
In part one of this three-part series, MDM President and COO Ian Heller explored the dangers of working with a pure branding agency and how the wrong partner can do more harm than good for a distributor. In part two, Ian uncovers how you determine the value of branding for your distribution company.
Whether or not branding is important to your company depends on the nature of your business model and the market you serve. Every company needs a name and most want a slogan and some marketing statements that sum up their value. Brand awareness certainly helps put prospects into the funnel for your salespeople to close or your marketing campaigns to reach.
However, branding is much more important for some B2B companies than others and very rarely does it make sense for distributors to utilize mass media to communicate their value propositions.
In order to determine your branding needs, I recommend you use a model called the Branding Matrix, which I formulated when I owned a distributor-oriented consultancy, Real Results Marketing, now run by my former business partner, Jonathan Bein.
One assumption behind the Brand Matrix is that branding messages are designed to build a bias for your brand that gives you an edge when customers are considering alternative suppliers. I’ve found over the years that there are two components that dramatically affect the potential to influence business customers with branding messages:
1. Size of the purchase
Most customers spend relatively little time worrying about their small purchases, particularly compared to large purchases. The cost is negligible, the risk of making the wrong decision is minor and they have bigger issues to address. Since most consumer products have these characteristics, brand advertising can influence purchases through emotional appeals. However, as customers consider increasingly larger purchases – particularly in B2B – two factors greatly influence their choices:
a. Multiple decision-makers are involved in the purchasing process. Companies often form councils or committees to make strategic purchases choices. That means no matter which bias the individuals on the team have, they are often offset by other individuals with preferences for competing brands. If you bought an ERP recently, I suspect there were multiple decision-makers involved in the selection; the Epicor disciple was balanced out by the Oracle advocate.
Your customers use a similar approach to strategic purchasing relationships. Employing multiple decision makers tends to erode the power of branding to influence the purchase process because the opposing brand forces from multiple companies or products are balanced out on the team. Indeed, whatever emotional preference you can muster probably comes from the loyalty your customer has to your sales and service people – certainly not from your exciting brand tagline.
b. Buyers apply analytical tools to help them make the decision. A customer looking for a distributor for its annual MRO contract or other large purchase is comparing facts about your product assortment, online capabilities, technical skill, locations, etc., and then evaluating these versus your competitors. If you’re selling to engineers, they want specifications, cut sheets, endorsements from other technical buyers, etc. They’re skeptical of advertising anyway and the more emotional appeals probably do more harm than good.
If you’ve ever responded to a customer RFP you know that the buyer was working hard to make the selection process objective and based on hard criteria. Spreadsheet-based scoring models, reference checking, questionnaires, bidding processes – all of these are designed to eliminate bias from the process. Branding is all about creating a bias for your company that is based on emotion and not just the specific capabilities you offer. Customers are trying to evaluate you strictly on the latter while wringing the effectiveness out of the former.
2. Emotional attachment
Some purchases are obviously driven by emotion. People buy expensive wine even though extensive research has proven that master sommeliers can barely tell the difference between the cheap stuff and the premium brands. In blind taste tests, ordinary consumers can’t pick between them at all.
The same is true of most big American beer brands and also for some expensive products – no one needs a Range Rover and almost no buyer takes a $100,000 SUV anywhere it might be scratched. But driving a Range Rover is very fun, it makes you feel successful and discriminating – and capable of driving into the heart of South America if you want to.
There’s nothing wrong with that but you can’t affect distribution customers in the same way – they don’t define themselves by the brand names of the companies