How B2B Manufacturers Can Successfully Adopt B2C Strategies
Over the last few years, we’ve seen a wave of B2B companies adopting some of the profit-driving strategies of their B2C cousins, and to great success.
Let’s explore some of the growing trends.
1. Skipping Steps in the Value Chain
Traditionally, customers who wanted to buy direct from manufacturers were politely but firmly turned away. But with the growth of e-commerce and platforms like Amazon, Direct to Consumer (D2C) selling has become an opportunity for manufacturers to connect directly with their end customer.
Today, customers do their research. Not only will a brand’s own website be the best place to browse the company’s full portfolio, but also to get unadulterated information about one of their products. Visitors are more likely to find the full range of sizes and colors on offer and in stock than they are on a retailer’s site. And there’s a feeling that the manufacturer has more accountability for its products and greater incentive to keep customers happy. Besides which, it’s a way for customers to ensure they’re not being duped into buying fake products.
Apple filed a lawsuit against Mobile Star LLC for selling counterfeit power adapters and cables on Amazon and Groupon because not only did they infringe the company’s trademark, but their products posed a threat to consumer safety as they had not been subjected to industry-standard safety testing.
Birkenstock had such trouble policing all the Amazon sellers that were diluting its brand with inferior products that it told consumers that Birkenstock products bought through the platform couldn’t be trusted. This resulted in many online customers wanting to buy directly from the brand.
By selling products on their own websites, not only do brands create an additional sales channel, but they achieve better control over their brand image, are more able to protect it from market dilution and can build relationships directly with customers. Not to mention increasing margins by cutting a slice out of the value chain.
Tesla broke the selling model of cars by choosing to sell directly to the end consumer through its own network of showrooms. By owning the sales channel, Tesla could help speed its product development and create better customer buying experiences.
2. Finding New and Innovative Channels
In a partnership with car rental companies Sixt Leasing and Vehiculum, retail chain store Lidl will be returning to its idea of selling passenger cars to customers in Germany through a leasing contract.
The firm is preparing to offer the Kia Stonic through its online channels. And while no customization of engine or equipment is possible, the car comes with all the bells and whistles – all for €135 per month.
This provides Kia with a new channel through which to move its excess stock of unsold cars (due to the pandemic) and make way for new models once customers return to showrooms.
Lidl will also start selling the Renault Twingo and the Renault Clio in the near future. They also offer maintenance and insurance packages at an extra cost.
The company actually tested this strategy in 2019, offering one thousand Fiat 500 cars to its customers in Germany for just €89 a month. The purchase took around 15 mins to complete online and all cars were sold inside a week.
3. Creating a Circular Economy Loop
Another B2C trend taking the B2B world by storm is the circular economy of goods. Creating value from old products through reuse, refurbishment and recycling.
ReBuy is an online company that buys individuals’ used products (books, DVDs, hardware, etc.) at a fixed price. Then the company processes the goods before selling them on to buyers with an 18-month guarantee for around half the price of buying the item new. It also allows buyers to trade in something old against the cost of buying something new.
In the B2B world, circular manufacturing seeks to reduce the use of materials and energy in producing new products while recovering as many of the end products as possible for reuse.
A circular model offers a way for manufacturers to decouple their growth from resource constraints and the risks of volatile commodity prices. The economic potential is huge. The cell phone market in Europe totals a massive €3.2 trillion a year, 20% of which can be recuperated though circular practices.
Renault implements a circular system by creating vehicles that not only contain recyclable or recoverable materials, but are repairable and easy to dismantle. It collects 330,000 end-of-life vehicles each year, before refurbishing and reusing parts. The company has worked out it saves 80% of its energy, water, and chemical products through this endeavor.
New products cost more to manufacture than old ones do to refurbish. And those costs are pushed on to the price-sensitive customer. So, an increasing number of B2B players are starting to dive into and take over their own refurbished market.
If you are looking to buy a new Rolex watch (because you left your other two at your estate in the Caymans), you may well have to wait years to get it. Even if you’re just taking it in for repair, you could be on stand-by for months. Ironically, time seems to stand still for those in the business.
One Swiss luxury brand (where a new timepiece could set you back four years and up to €50,000) has started recognizing the value their customer places on being able to get a watch right away. The brand is, therefore, buying back its old watches, refurbishing them and returning them to the market. Not only are they taking control of the refurbished market on their brand and protecting their brand image, but some refurbished watches reach higher prices than new ones thanks to the fact they’re take-home ready.
4. Offering Extended Warranties
Not all reasons for creating a circular economy are green. Many companies adopting the trend are simply trying to fight the gray market – where their components are being sold outside of their authorized distribution channels at the fraction of the cost of new ones.
However, manufacturers can offer a value proposition that no gray-market seller can match, and that’s quality assurance.
If you buy a second-hand car and it breaks down, you might spend the day on a grassy verge making up new cuss words, but you’re going to be okay.
If you buy a second-hand helicopter and your helicopter drops out of the sky… well, you’re simply not going to take that risk. You’re going to pay whatever it costs to ensure the airworthiness of your aircraft. You’re going to buy new.
When you buy direct or second-hand from a manufacturer, you know what you’re buying is in good shape. There are no hidden cracks or nasty surprises.
Honeywell Aerospace offers customers an extended warranty on their products. An aircraft owner can pay a monthly fee, based on the number of flying hours, in return for maintenance and repair services that ensure their aircraft is in tip-top condition. Not only has Honeywell created a long-term customer, but it has ensured a closed loop of its components, as its technicians can be collecting spare parts for refurbishment and reuse among its client base.
5. Offering Subscription Services Add-Ons
Subscription services have taken the B2C world be storm in recent years, and B2B industries want a slice of the pie. But when you sell a product, you get a one-time payment and the product is gone forever.
So, many B2B brands, especially those with smaller addressable markets, are seeking interesting ways of creating recurring revenue streams through aftersales add-on subscriptions.
Tesla redefined the concept of “car” to have a service-first orientation. Their cars are all standardized but built around their software, which delivers automatic upgrades directly to owners, so they always have the latest “model”, and those who pay for extras can get them automatically (through the software, not the car). Tesla can then use the data it collects to continuously enhance the member experience.
It certainly requires a mindset shift in the manufacturing industry to turn a crane/ boat/ pair of shoes/ leaf blower into a recurring revenue stream. But with a sharp focus on what would bring the customer real added value, manufacturers out there are doing just that.
What Manufactures Need to Embrace B2C Strategies
B2B companies in the manufacturing industry that are exploring B2C strategies are finding innovative ways of bringing their products to market and protecting the integrity of their brand. They’re discovering ways of delighting customers with value adds that also become a new revenue stream for them.
However, embarking on a new strategy takes creativity, a deep understanding of your product and customer, and some heavy-duty technology that will help you ensure all decisions are backed by industry-relevant data.
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