Long-tail sales focus boosts top line for B2B companies
In recent years, many manufacturing and trading companies have focused heavily on their A-list customers. That’s a shame, because with a long-tail focus that systematises sales to smaller customers, revenue can in many cases be increased by 20 to 30 percent – while keeping administration and operational costs at a minimum.
The list of customers in a successful company can often be long, and as a sales manager or key account manager, it seems logical to focus on the large customers. After all, at first glance they make up the portfolio’s cash cows.
Fear of weak profitability means that many B2B companies focus most of their resources on selling large volumes of goods to few customers. The popular belief is that selling to customers with small order intakes will increase the OPEX to an extent that it exceeds the sales potential. This – of course – will reduce profits. However, that belief means businesses are missing out on a large earnings potential.
With a long-tail strategy it is possible to increase sales to the “long tail” of small customers in the portfolio – without any loss in profit. A clear strategy is the solution, and the benefit is an increase in both the top and bottom line.
Fight your sales instincts and make a strategic shift
For a sales manager, it’s an instinctive choice to focus on sales to large customers. Even though the lead time can be long and complex, a large order volume awaits once you’ve gotten in the door. In many B2B companies, there is also a clear conviction that the sales effort is the same, regardless of the customer’s size. If you pursue that thought, it wouldn’t be very profitable to do business with small customers.
However, this perception can be changed if companies make a strategic shift toward e-commerce and digital self-service solutions. If you manage to do this, it can be a particularly good business to invest in the small C customers as well. There is huge untapped potential in selling low volumes to a high number of customers, as marginal costs are very close to zero. The reason being that a large number of the manual tasks in a classic sales and customer process can be automated with the right digital setup.
Increase turnover by up to 30 percent
In many cases, the small and under-prioritised customer segments account for up to 80 percent of the total customer volume. In other words, there is significant potential for sales growth.
In the past five to ten years, we’ve seen sales strategies in B2B companies become more focused and professional. In many cases, this has resulted in a narrowing of segments and an increased focus on A and B customers.
But now we see that there is room for defocusing in favour of a larger target group in the form of the many C customers. I estimate that three out of four B2B companies have very good opportunities to increase the top line by typically 20-30 percent
A new generation of B2B buyers
The shift towards increased focus on e-commerce and self-service solutions is about more than just increasing earnings. Improving the company’s digital presence also accommodates the so-called “digital natives”, a popular term for people born after 1981.
While digital natives have been in focus for B2C companies for a number of years, we now see that they have risen through the ranks and are in work functions with significant responsibility, including professional procurement. As this target group is characterised by preferring to serve themselves digitally, there is an obvious differentiation option for manufacturing and trading companies if they can cater to the demands of the new generation.
We're dealing with a target group that has completely different expectations and requirements when doing business. They want to be able to meet their supply needs through self-service solutions.
Unlike the older generation of buyers who are more relationship-bound in their buying behaviour, digital natives are less loyal to the companies they do business with. The crucial thing for them is that procurement be accessible, efficient and intuitive
One of the central focal points is that the company should not exclusively offer standard products to small customers. On the other hand, a large part of the product portfolio must be available, so that the product range contains both standard and custom products that match the customers’ specific demands.
Let your customers do the configuration
If a company wants to embark on a long-tail strategy and thereby increase sales to C customers, product configurators will be a crucial element. Not only because they meet the customers’ desire to serve themselves, but because a very large part of the automation (and thereby the streamlining that leads to a reduction in OPEX) depends on a well-functioning configurator.
The exact configuration of course depends on the company’s domain, but typically it concerns elements such as dimensions, batch sizes and choice of materials.
Digital technologies now make it possible to offer product configurators of extremely high quality. That means they can handle a high degree of product complexity, as well as live up to customers’ expectations for functionality and user experience. In cases where touch-and-feel is a crucial element of the sales process, it is, among other things, possible to add realistic texture and shadows to make product configuration a sensory experience for customers.
For example, Montana has expanded and streamlined its B2B business by offering digital product configuration. That means that smaller retail stores, which previously would not have merited a salesperson’s visit, can now serve themselves. Montana’s B2B solution is based on Optimizely, Microsoft (Azure), inRiver PIM, Cylindo and Microsoft Dynamics NAV.
Read the case here.
Our experience shows that there is often a very high level of customer satisfaction associated with allowing customers to configure their own products. From the company’s perspective, it will also be more profitable to sell complex custom products to smaller customers, as they are able to serve themselves
The long tail requires solid data
A crucial prerequisite for product configuration is that the company have control over both product and customer data. Typically, self-service solutions will have to serve several different account structures, each with their own user rights, pricing models and product preferences. This creates an opportunity to offer a customised experience for every single customer, e.g., spare part sales with a configuration automatically matched to the customer’s existing product lines.
The essence of offering digital commerce and self-service capabilities is that customers have the ability to handle things themselves, allowing the company to leverage a greater share of the total market potential with minimal effort. Digital product configurators also support the growth journey, as a larger number of the company’s product groups can be made available to an even larger customer segment. Digital self-service options such as product configuration are no longer just a nice-to-have functionality, but gradually form the baseline for B2B customers’ expectation level, which is particularly relevant to the new generations of buyers and dealers.
Now that you have reached the end of the article, you will hopefully feel inspired and motivated to increase your efforts toward your many C customers.
While this article has focused on the business and digital dimensions of a long-tail focus, the truth is that the biggest barrier for many B2B companies is the organisational transformation. The shift from working with account managers to offering self-service requires a deep change in the company’s internal processes – from skills and workflows to pricing models and marketing efforts.
Regardless of whether you would like to discuss the business aspect, the technology behind it or the organisational changeover, we would like to invite you to a constructive dialogue. In this process, we will, among other things, prepare a maturity analysis and uncover the potential for your particular business.
Want to know more?
Contact Kasper Knudsen for a more detailed discussion of how we can help identify your growth potential.