When asked about the business they are in marketers will frequently reply in terms of the immediate customer that the serve. Thus, marketers will identify their business as business-to-business (B2B) or business to consumer (B2C). Recruiters also often differentiate positions in terms of the need for a B2B or B2C focus. While such differentiation is a useful shorthand, it fails to capture a larger truth about marketing and markets, a truth that has implications for strategic thinking about the business.
When placed within the context of the full array of relationships and institutions required to deliver value to a customer, there is both a business-to-business component and an end-user consumer. Some businesses are closer to the end-user consumer, but in most businesses, there is one, and it is that end-user customer who ultimately drives demand in most markets. The computer chip manufacturer sells to computer, telephone, automobile and many other manufacturers. These B2B customers ultimately sell to end users. When demand for these items among end users is rising, chip manufacturers do well; when demand is falling, chip manufacturers often need to retrench.
At the same time, even the most consumer-focused company is likely to have a broad array of business-to-business relationships and customers. Consumer products companies have to deal with retailers who often control direct access to the end-user customer. And, of course, the B2C company has to manage an array of suppliers, agencies, and other partners. An exclusive focus on the end-user customer can produce a wide variety of dysfunctional outcomes ranging from poor product quality to suppliers becoming direct competitors for the end-user consumer.
Marketing strategy, and indeed, the strategy of the firm depends on thinking about the whole value chain. Forecasting requires paying close attention to the ultimate drivers of demand, which usually reside among end-user consumers and their purchasing behavior. A firm far back in the value chain would do well to track end-user consumer behavior at the end of their value chain(s) in order to plan for increases or declines in demand for their own products and services. Failure to do so means that the B2B firm located far back in the value chain will be surprised by changes in demand and have little time to prepare for these changes. Firms serving end-user consumer markets can often enhance the value their own products by working with suppliers and retailers to improve quality, convenience, service and other product attributes.
Even brand, which is most often considered of primary importance to B2C companies is important throughout the value chain. Dupont, a specialty and commodity chemical company that is far back in the value chain of most of the markets it serves, built a very strong brand among end-user customers. Although Dupont only made the chemicals and synthetic fibers that were used to make carpet, DuPont’s Stainmaster brand became synonymous with high quality carpet and commanded a premium price in the market. Dupont was able to create a strong, high value business by marketing to end-users and carpet retailers, even though it was not in the “carpet” business. Although Dupont sold its synthetic fiber business almost twenty years ago, the brand it created remains strong today. Conversely, Hewlett-Packard which sells many products directly to end-users has a long history of working with suppliers to improve the quality and reliability of its products by imparting best practices in manufacturing and quality.
The lesson in these examples, and there are many others, is that strategic thinking, including brand building, is not a B2B or B2C activity. Rather, successful strategic thinking and brand building requires attention to the whole value chain, the B2B part and the B2C part. Firms, and managers, that fail to appreciate and act on this perspective are doomed to failure. Successful business strategy and brand building must rest on an understanding of the whole value chain and the opportunities for creating value and profit in each node.
Contributed to Branding Strategy Insider by: Dr. David Stewart, Emeritus Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.
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