In 2019, I ran a full-day 'B2B marketing' training for the overseas dealers of a major corporation, D. I asked them this question: "If you described a B2B customer, an account, as an animal, what would it be?" A gray-haired South American dealer said, "B2B customers are amoebas." The other dealers laughed and asked, "Why? Because they have no brain?" He replied, "No, because they change shape depending on the environment. Well, maybe they could be chameleons too. Ha ha."
So what needs do B2B customers have, given that they shift like an amoeba with their environment?
(1) Cost reduction
If you have B2B sales experience, you know how intense customers’ pressure for supply price cuts can be. Parts vendors in the auto industry in particular face price-cut demands every year. The serious problem is that even when a vendor cuts production costs through innovative product development, the savings don’t come back as profit. Automakers bank those savings and then ask for another discount. This is the worst kind of practice, because it removes the vendors’ motivation to innovate. For B2B customers, efficient value chain management and cost reduction are the most basic needs.
(2) Production efficiency
A product that dramatically improves production efficiency, for example by easing a bottleneck in the customer’s process or sharply cutting the defect rate, can command a higher price. The supplier’s sales rep should calculate the benefit the customer gains from the product and negotiate to secure a premium price. Customers typically start by buying high-efficiency products from advanced countries at a high price. Once production is efficient, they ask local (domestic) suppliers to provide the same, or at least a similar, level of product. Local suppliers who struggle to match that performance work hard on customization and tuning to meet the request, and they end up offering a much bigger discount than the incumbent supplier.
(3) Fast delivery
Lead time. Delivery. When you buy electronics or food on Auction or Naver Shopping, how long does it take to arrive at your door? A day at best, two or three days at most, right? But what if it took a week? You would be impatient and a little disappointed, but most of us could wait. What about B2B customers? Say a company that makes LCDs for LG TVs is waiting on tools for processing LCD glass, and the delivery is a few days late while the customer has no stock on site. That can cause enormous losses for the customer, and the supplier may have to pay damages. Especially when the customer’s products are selling like hotcakes, they may prefer a faster-delivered product even at a slightly higher price.
(4) New product development
Suppose you are on the development team at a smartphone maker. As the market shifts from bar-type phones to foldable form factors, your company has to develop a new product fast. If only one or two companies make the glass and PCBs that go into foldable phones, the suppliers hold the upper hand. In that case, the customer’s most urgent need is the components that make the new product possible, and that has to take priority over cost reduction, production efficiency, or lead time. Once more manufacturers can make the components, needs like cost reduction, production efficiency, and lead time come back to the fore.
(5) Good after-sales service
This story is from a business trip to a Japanese solar cell manufacturer in 2011. I had meals with the Japanese engineer in charge, who was about my age, and we bonded over shared interests like history and games. When I got back to the head office in Korea, I found a strange email from him. The subject line was “Supplier management file.xls.” It was his supplier management file. It had over a hundred sheets, with cost, quality, delivery, purchase share, and an overall evaluation for each supplier recorded in minute detail. It reminded me of the joke that when a plane is going down, a Japanese person starts by taking notes. He had sent it to me by mistake. He called right away and said, “Kim-san, I think of you as a brother. Please delete the email I sent by mistake.” I still remember what the overall evaluation in that file said: “Supplier S is good on price, quality, and delivery, but its after-sales service is very poor. Slow to respond when problems occur, and the sales rep handles them poorly. Purchase share to be changed.” After-sales service is a classic reason for replacing a supplier. It is a key need of B2B customers.
(6) Safety
I have two main experiences with safety in production. In 2002, when I was working in China, a punching machine on the shop floor that continuously punched holes in products had two buttons. The design was meant to keep hands out of the machine: you had to press both buttons at the same time, one with each hand. But a Chinese employee had taped down the right button with duct tape and operated the machine with his left hand while moving products with his right, and his right hand got caught in the machine. The other case was in 2007, when I was an expatriate in Taiwan. A machine that processed semiconductor wafers had a small window with a safety feature that stopped the machine automatically when it was opened. A Taiwanese employee switched that feature off while operating the machine and died. In 2022, a worker also died at an SPC bakery plant. When accidents like these happen, safety inevitably becomes the biggest and most important need for B2B customers, at least for a while.
(7) Salesperson credibility
Reputation. Credibility. In B2B, a company’s credibility can only be proven over time. It is proven by references: a long record of supplying products or services to many customers without major issues, and resolving the issues that did arise well. Customers perceive a sales rep’s credibility as a combination of product expertise, understanding of the customer, understanding of the industry and business, interpersonal skills, and attitude. If a rep is highly trusted, customers may even switch suppliers when that rep starts selling a different product. For example, suppose you have had a good relationship with a domestic parts supplier’s sales rep for years, and he becomes a dealer for foreign-made parts. If he sets up a warehouse nearby and hires sales staff to greatly improve service and delivery, you might swap your existing domestic supplier for the foreign one.
(8) Kickbacks
A “back margin” (a kickback) can be explained through two cases. In one, a seller sells a KRW 1 million (≈ US$750) product to the customer at full price, tells the company it was sold at a KRW 700,000 (≈ US$525) discount, and pockets the KRW 300,000 (≈ US$225) difference. In the other, the seller sells it to the customer for KRW 1.1 million (≈ US$825) and hands the KRW 100,000 (≈ US$75) to the customer’s contact in cash. In B2B sales the latter is by far the more common, and companies carry it out in many ways. Some buy gift certificates in bulk for entertainment and hand them out to customer contacts, while the salesperson pockets part of the money. Some entertain excessively outside the area monitored by the client’s audit team. Others slip cash into a paper bag or provide a luxury car through a lease or rental. The same thing goes by other names, such as “yaro,” “mochi,” and “under-the-table money.” When I was selling in China, a purchasing manager once wrote “3” on a piece of tissue and showed it to me. It meant he wanted 3% of the supply price as a kickback. Sometimes the need is not the client company’s at all: it is the client contact’s personal need for a kickback.
To be continued