Mark McDonald

A member of the Gartner Blog Network

Mark P. McDonald
GVP EXP
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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Smearing the lines between B2B and B2C

by Mark P. McDonald  |  September 26, 2012  |  1 Comment

The differences between a Business-to-Business (B2B) and Business to Consumer (B2C) business are fading as digital technology; consumerism and competition redefine expectations and the customer experience.  Everyone wants to be treated like a customer in terms of service level, information transparency, and easy to use commercial interfaces.  This is one of the aspects of consumerism that is reshaping the business and operational landscape.

Traditionally B2B organizations viewed themselves as selling to peers and therefore subject to different rules and requirements than their consumer-oriented peers.  B2B organizations worked through procurement and purchasing processes, often-linking companies via technologies like EDI or interfaces between ERP systems.  B2B value chains consisted of original equipment manufacturers (OEM’s), wholesalers, distributors and then customers.   B2B customers were the people involved in the purchasing decisions and purchasing processes.  The end customer/consumer was important, but business flowed through these internal intermediaries.

During the first wave of the Internet, B2B companies sought to disrupt the value chain by using the web to reach end customers and consumers directly.  This form of disintermediation was supposed to eliminate the need for wholesalers, distributors and other ‘middle men’ that drove up costs and separated manufacturers from their real customers.  Web portals, eStores, direct email and other technology-based tools helped break down many of these walls, particularly in terms of after sales service, warrantee and replacement parts.

The Internet may have changed the nature of B2B commerce, but it did not fully disintermediate the B2B value chain for several reasons.

First, the manufacturing model is different than the intermediary/distributor model in two ways that manufacturers find hard to absorb – payments and inventory.  Manufacturers looking to go direct had to assume the inventory risk previously born by their intermediaries.  They also picked up risks related to the credit worthiness and payment abilities of end customers. Both risks previously handled by intermediaries and distributors.  Not in surmountable issues, but different operations.

Organizations sought to decentralize procurement and purchasing using Internet technology.  Under the banner of ‘employee empowerment’ procurement sites powered by materials, replacement and operations (MRO) eProcurement technologies decentralized individual purchasing decisions.  Purchasing negotiated the contracts but individuals pulled product via the Internet based on those agreements. People served themselves. They became direct consumers rather than requestors engaging corporate supply.

Distributors, wholesalers and other intermediaries got the message.  Many consolidated as they lacked the scale of product or market reach to compete either with their peers or their ‘go direct’ suppliers.  Others used the same technologies to remain relevant by raising their service levels, offering value added services and seeking even deeper connections with the end customers.  Their knowledge of a range of suppliers, clear and rich product descriptions, comprehensive catalogues, last mile logistics and supply chain capabilities built on their strengths.

Distributors, intermediaries, wholesalers began treating their customers as customers.

Consumer oriented companies recognized the potential of selling directly to employees, replacing the procurement office with the company debit card or expense report.  Office supply retailers, online retailers like Amazon and others are remaking the B2B purchasing process into one oriented around individuals – in other words consumers.

These forces smear the line between B2B and B2C companies

Things are moving away from what we used consider B2B and soon everything will be B2C.

B2C in terms of expectations for how easy it is for end consumers to do business with you and your company.

Expect this trend to accelerate in the face of digital technologies such as mobile computing, device to device communications and new global commerce models.  Information and access create choice and that shifts buyer values from compliance behaviors to constantly seeking the best deal for themselves.  We have already seen this in technology with BYOD, office supplies with Single Office Home Office (SOHO), and that same way of working is coming to other areas.

Organizations are recognizing that there is only one ‘customer’ at the end of the chain who makes the choice regarding what they want, who they want to work with and how they want to work together.  This is changing the nature of information sharing – transparency, product offerings and sophistication and the use of technology in marketing, sales and service.

Businesses will continue to sell to other businesses, but that selling and buying is increasingly more retail oriented rather than centered on procurement processes.

Why?

Because once you are treated as a real customer, would you ever want to be treated differently?

1 Comment »

Category: Customer Experience Digitalization     Tags: , , , ,

1 response so far ↓

  • 1 Ed Hawkins   July 11, 2013 at 2:44 pm

    Great Brief – What are you views on Multi-channel