OPINION13 April 2015

Why is B2B research the poor cousin?

B2B Opinion UK

Sixteen times more is spent on consumer research than business research but business-to-business companies need to understand their market just as much as consumer-facing ones explains Andrew Dalglish.

The research industry is full of dichotomies: qualitative and quantitative; domestic and international; B2C and B2B.

There’s no value judgement within these pairings. Each side of the coin meets a different need and requires a different skill set. However, while there might not be a conceptual value judgement, there is a commercial one.  This is especially stark when B2C is compared with B2B. ESOMAR estimates that a whopping 16 times more is spent on B2C research than B2B (the Global Market Research 2014 Report estimates that 6% of global research spend is on B2B). 

Are there 16 consumer companies for every one ‘industrial’ company? No, in fact the opposite is true. Behind every single consumer product sit many, many B2B products. 

Take a humble tin of Heinz Baked Beans. Heinz buys machinery to equip its factories, energy to power the production line, raw ingredients to be transformed, packaging to keep the product fresh, logistics to deliver to the retailer, accountants to tally the figures…the list goes on and reveals that hundreds of B2B transactions went into that tin of beans in your cupboard.

Maybe B2C companies are just bigger and have more to spend on research? That doesn’t seem to be the case either. 

For example, B2B-led online marketplace Alibaba is worth three times as much as the more famous B2C-led equivalent eBay (based on market capitalisation). And that’s not an isolated example. Around two fifths of the UK’s largest publicly traded companies (the FTSE 100 ) are B2B.

So B2B is an economic powerhouse, yet in the world of market research it’s the poor cousin. What’s going on?

Well I think part of the disparity is down to the nature of the beast. One of the most notable features of B2B products and services is that they are often (but not always) targeted at a very small population. The telecoms market illustrates this well. Putting ongoing merger activity to one side, a manufacturer of mobile network infrastructure equipment has just four major prospective customers in the UK – Vodafone, EE, O2 and Three. In contrast, each of these operators has a target market numbering many millions. This means that sample sizes in B2B research, and therefore project fieldwork costs, are much lower than in B2C.

But smaller sample sizes alone don’t explain all of the imbalance. Rather, I suspect that it boils down to cultural differences between the two sectors. 

In B2B companies research is less likely to be at the core of decision making:

  • B2B companies are often heavily sales and ‘engineering’ led. This means that the traditional champion of the customer voice, the marketing team, can be side-lined.
  • B2B purchase decisions are more (but not entirely) ‘rational’. This focus on functional criteria and structured decision making, can create a false sense of security; a sense that it’s obvious who the customer is and what they need.
  • Relationships are more important in B2B. This personal closeness to the customer means that those on the front line may feel they already have an intimate understanding of the target market (especially if it’s small).

However, that needs to change. B2B buyers are behaving differently nowadays and this means that suppliers need to start putting the voice-of-the-customer at the heart of decision making. 

It used to be that when a B2B buyer had a need, one of their first actions was to approach potential suppliers to discuss it and learn about options. This made the sales team critical not just for the supplier, but also the buyer.   

However, the information age means that potential buyers are more informed and independent than ever – they use the web to educate themselves, learn from others’ experience and narrow down the list of potential suppliers. The result of this is that much of the decision making process is now invisible to potential suppliers. 

In fact, a study from Google and CEB suggests that almost three fifths of the buying journey has been completed before the average buyer reaches out to prospective suppliers. In addition to this, suppliers’ own actions are further widening the distance between buyer and seller – Frost & Sullivan estimates that by 2020 $6.7 trillion worth of B2B transactions will be through ecommerce.

So as the gap between buyer and supplier grows, B2B companies need a mechanism to keep them close to customers. They need research.

Andrew Dalglish is director at Circle Research