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The Business-to-business Brand in Brand Diversity: The Types Of Brands10819

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The business-to-business brand

Managers working in the B2B domain regularly complain of the lack of theorization onB2B brands. They are rarely found in academic works on brands, where most examples are drawn from mass- consumption brands, generally food products with low involvement (yogurts, soft drinks and the like). This is why we have purposely used different examples and introduced genuine variety of sectors, in order to establish the relevance of the models proposed as a tool for decision making.

Is B2B different?

Is B2B really different? For us, the B2Bargument is used as a standard, reflecting above all the need for recognition of the sector for world that receives very little attention. The seminars we run for B2B companies clearly show what their principal request is: models are attractive, but need to be demonstrated and illustrated in a B2B context. Moreover, the notion of B2B itself is illusory: it does not reflect a homogeneous reality.

For example, the so-called ‘Soho’ market (small office, home office) functions at a purchasing level very close to the mass or general public markets. We can observe a concentration of distribution under international names such as Office Depot or Staples, which subsequently create their own brand products and substitute them for the producer’s brands wherever possible. In contrast, the high-voltage electrical equipment market, based on invitations to tender, is entirely different in nature.

Another difference is linked to the question of whether the company buys personalized, made-to-measure products or solutions, or service, or just a cost?Finally, can we really place the purchase ofsilicons from Dow, bleach from Arkema, oxygen from Liquid Air, and customer relationship systems such as those from SAP or Sage on the same level?

One thing is certain: there are indeed B2Bbrands. If we define the brand as a name with power, a name considered by industrial players as an indispensable reference in conjunction with a particular need, there are plenty of examples.

First, the B2B world has its product brands:for example, the building trade buys Giproc orPregipan plasterboards, Sikkens or Levi’paint, Agilia cement, Daikin air-conditioning, Le grand or Hager electrical equipment, Technal or Wiconaaluminium and so on.

The automobile sector, although under constant pressure on prices, is conscious of equipment brands such as Sekurit for windscreens andGefco for logistics requirements: the transport upstream and downstream of supply chains of industrial production. Note that these product brands are often names of former companies that, once acquired by a group, cease to be companies and become brand ranges in a catalogue. This is the case forGiproc – now owned by Saint Gobain – and Merlin Gerin at Schneider Electric. Of course these names alone do not ensure sales and loyalty generation, but they contribute strongly to it.

Next, studies also show the influence of corporate reputation. This is composed of awareness and the image of power, commercial dynamism, innovation and ethics. It influences the selection of accompany in weighty decisions – weighty because of both their financial total and the length of the commitment. There is a high degree of correlation between the recognition and image of a company and the readiness to‘strongly consider this company for any future tender’s, or even to refuse to do so.

Of course this does not mean that it is the only factor affecting the choice: in fact, in an industrial environment, consideration does not equal selection, and the tangible components of the tender and the price will of course weigh heavily. It does prove, however, that the name of these companies has acquired the power sofa brand as a result of the specific reputation they have built through their expertise and their skill in communicating it.

To be considered on the mental, or even the official, ‘shortlist’ is one of the major benefits of ab rand – that is, the reputation that is attached to it. When the brand no longer possesses this power, entire sectors fall to the principle of the lowest bidder, where only the price per kilo or per tonne counts. The function of a brand policy is precisely to avoid this.

Is there no difference, then, between B2Bbrands and B to B to C brands? In our view there is one essential difference: pressure on costs. B2B purchasing generally forms part of the cost price of another product. A truck or aset of tyros for an articulated lorry is part of the price of transport, which will consequently affect the sale price of products transported by road.

In fact, freighters are demanding ever lower prices from transporters, who increasingly view their truck or tyre purchases from an accounting, even financial, perspective. This leads to constant B2B pressure towards commoditisation.This difference has a major effect on three facets of the brand: the brand function, the brand weight, and the brand’s point of application.

Functions of the industrial brand

In our research on sensitivity to brands, with Professor G Laurent (Kapferer and Laurent, 1995), the brand’s role as a reducer of risk quickly became apparent. This is not enough in many mass consumption markets:consumers no longer see any risk there. InB2B, very often the products and services playa part in the composition of the products sold, making them components of customer satisfaction and therefore reputation.

The Lafarge signature is important for concrete, just as the word Sidemen is important for turbines. Of course, concrete could be considered commodity, where suppliers have shifted the competitive playing field towards services. In the choice of concrete, however, engineering consultancies issuing invitations to tender are sensitive to the risks linked to failures in building infrastructure. This may not be question of an individual suburban dwelling in Calcutta in India, but of a new council housing office, or a planned new skyscraper in Berlin.

In B2B, every ingredient forms an integral part of the offer that the purchasing company makes to its own clients. Its reputation depends on them. This is why car manufacturers, with their mechanical background, buy Borsch, the specialist in electrical equipment. They know that the weak link in today’s cars is not the mechanics, but the electronics.

The company ‘covers itself’ by buying from the top name in the sector for its clients downstream. Furthermore, nowadays it is the equipment makers that provide the innovations. Automobile brands are designers and builders. This is why in B2B it is so important for a brand to worry about the clients of its clients. This is where the big brand’s functions a guarantor of quality comes in.

This is its first, even its predominant function in B2B, as the level of perceived risk rises. However, this is not its only function:the B2B brand is also an instrument of pride.It can add an intangible dimension that also increases the brand’s potential to attract and earn loyalty. For example, the American company ITW (International Tool Works) has always spurned umbrella, multi-sector brands.

It sells equipment and tools to carpenters, electricians and plumbers, taking care to offer them a brand for each trade. Thus Stihl is dedicated to carpenters alone. This differentiation makes it possible to capitalize on each profession’s conviction that it is different, and its desire to mark that difference: tool brands either help or hinder this.

One of the problems causing the fall in sales of Black & Decker – a multi-market umbrella brand – is that it sells both to the general public, through major stores, and also to professionals, forgetting the brand’s intangible function as an instrument of sleepers professionals. In the same way that wearing Nike is a source of comfort, but also of a symbolic association with the world of Olympic or baseball heroes, buying Stihl isa way of saying, ‘I am with the carpenters, the professionals.’ Black & Decker has destroyed part of its intangible value by extending the umbrella so far, lumping the professionals together with the general public. It is reacting, but too late, by launching a new brand dedicated to professionals alone, De Walt.

When the IBM PC was the best-selling PC, everyone was in agreement that the product was average, or in any case far from being the best. However, in 1981 it was reassuring to company IT directors who were uncomfortable with this new market (of personal computing), since it came from their supplier of larger systems: the giant IBM. For users, the IBM seal offered them the satisfaction of saying to themselves (mentalisation) or communicating to others (self-reflection) that they must be serious executives, since they had an IBM.

The recent transfer of IBM to Le Novo (a Chinese company) reflects how much the PC market has been commoditised. The perceived risk in the purchase has shifted from the assembler of the PC to the components themselves (Intel, AMD), which now become parameters of choice, and the operating system (Windows Vista). Hence the struggle for component manufacturers to build themselves up as brands: that is, as major choice criteria. They do this through co-branding and major financial involvement in the communications budgets of their partner assembly brands.

The weight of the industrial brand

An enduring suspicion regarding the real weight of the brand in industry decisions relates to the questioning methods used in the sector – surveys with direct questions are used. Thus, during a study on the factors involved in the choice of a maritime transporter for major shippers (such as the industrialists Saint Gobain for glass, and Michelin for tyres), the five main criteria given by logistics directors were price, dates and times, reliability, capacity for last-minute delivery, and the availability of information throughout the journey.

The brand is the last criterion named. In contrast, when an indirect questioning method is used, of identifying choice factors – by varying the parameters of maritime companie’s offers and examining the impact on the shipper’schoices – we see that reputation (or in other words, the brand) becomes a key factor, if not the principal factor.

There is nothing irrational in this, as too many people in the industrial sector experience it or say it. How, in fact, can one knowing advance whether everything will go well before and during maritime transport? None of us are soothsayers. We must therefore make hypotheses: a well-known brand is not well known by accident. It carries in itself the quasi-certainty – subjective but based on experience – that everything will go well, or better than it otherwise would.

It would be wrong to suggest that reputation(and therefore the power of the brand)is the number one criterion in all B2B selling.Guil bert, the office furnishings distributor, delivering direct to companies, owes its profitability to its product policy. Guilbert sells first and foremost its remarkable service to companies. Products come second, withholder attempting as far as possible to substitute its own products for branded products: in fact, the latter are now in minority. It retains only a few Scotch products, for example, and not all of them: it offers adhesive tape under its own Incendiary.

Of course, it is sometimes still obliged to offer Stabilo Boss, Bic Crystal and Post-Its, and the Dymo label printer, but that is all.And yet all the brands deleted from its catalogue are well known. Today, however, this is not enough. The end users – secretaries, managers or employees – do not even notice that the product they find on their desks is not the true Post-It, but a cheaper distributor’brand copy. A strong brand is a brand with indispensable products or with strong intangible added value (reassurance or pride).

What makes a product indispensable? The patents that protect it, the communication that makes its name the key reference in the category among users themselves (downstream, therefore the professional buyers) and prescribers (upstream), and of course the innovation that maintains this status as the key reference and gives it an advantage over distributor’s copies and low-cost Asian products imported by the distributors. This innovation may relate to the products, but also to the services provided to intermediaries, installers and distributors. A brand is more than a timely product. It is a mutual, long term dedication of one business to another.

This shows us that among industrial distributors, and now in B2B, there is a nob session with substituting brands, as Carrefour has done since 1967 in the massmarket. A study among wholesalers of electric heating indicated that they had in stock three electric water heaters: the first because‘everyone asks for it’, the second because‘ people ask for it’, and the third for its price. Saying that ‘people ask for it’ clearly reveals that in the industrial sector, the brand is a prescription.

All of the brand’s B2B marketing should focus on the distributor’s clients, orthe professional buyer’s clients within the company. If this prescription is not created, for example through a dedicated sales force, then the brand enters into a downward spiral through the distributor and the buyer, who only thinks about the price. Legrand’s great strength is that it has understood this: Legrand has made its brand such a ‘must’ for electricians that to Le grand, wholesalers are merely stockist's. It needs them only for this stock function.

The corporate and the brand

One of the characteristic traits of the B2Bbrand is that it has a double nature. It may bethel company itself, or the products and ranges, or a combination of the two. However, the level of risk is such that the reputation of the source and of the company is most often called into play.

At Air Liquid, the brand is the c for the sale of commodities with little differentiation: the prestige attached to this leading company cannot overcome a price handicap, but where prices are the same, it will add its guarantee of seriousness and regularity of provision. It may even be enough to justify a small price difference. In order to move away from the ‘commoditie’s market, Air Liquid has developed and concreted lines, together with its clients, such as for example the gas brand Ali gal, intended for the preservation of fresh produce in plastic packaging.

These innovations carry name that refers back to the corporate name through its prefix (Al) and specifies the destinationmarket. At Gaza de France, the range of prices and associated services has been promoted under the Prevails name, in order to de-commodities it.

Industrial B2B companies often believe that they can manage without the corporate brand reputation, and that only the product reputation matters. This is an error that passesunnoticed until the day that financial analysts signal undervaluing on the stock exchange arising specifically from the absence of ab rand. This is the case with Sage. Sage is rather like Europe: an economic giant, but a political dwarf. Sage is one of the giants of management software for companies, but it is not recognized as such. It is true that the company has grown through external growth, buying companies that became product names within its product portfolio (of management software).

With a turnover ofs1.4 billion, Sage is an expert in marketing products and remarkably successful at selling them. Its competitors in this market are SAP, which turns over s8 billion, Oracle, which turns over s4 billion, and Microsoft, which turns over only s0.7 billion but has the highest growth rate in the software market foursomes. These figures suggest to the stock market that a consolidation is on the cards: it awaits a takeover bid for Sage, which appears to show a lack of dynamism, due to its low recognition as the key actor in the sector. The stock market wants Sage to demonstrate that it has the capacity for organic growth.

Divided by market, Sage allows its divisions to run their own autonomous communications: the largest divisions therefore communicate the most. These are the ones that are active on the historically best-known major markets (accounting, pay and human resources). They therefore drag Sage’s image down, to the detriment of the new markets, which show promise for future organic growth, but where sales are still small. The failure to take into account the reputation needs of the parent brand itself, Sage, makes Kita weak brand. It is a portfolio of products and clients, but not a brand. For any development of legislation or regulations relating to the SME, governments consult Microsoft or SAP, not Sage: Sage is not perceived as a genuine actor in its sector.

Its reputation is less than that of its products. Significantly, there are only 200links leading to its web site, whereas it has more than 300 licensed distributors – a sign that to them, Sage is not a necessary reference.It appears that, having neglected toboggans themselves and to invest in order to create a reputed and recognized crossover brand, companies suffer the consequences at given point in their growth. Organization byproduct and by market creates sales, but also silos: worried about the figures in their annual evaluations, nobody works on the collective reputation, which costs money without bringing short-term benefit.

The activation points of the B2B bran dare different

The B2B brand is a relational brand. Other than in commodities markets, people do not buy a product, but rather a supplier, with view to durable joint development. Wholesalers themselves do not just stock ab rand  – they represent it, and are thus committed to it. They therefore expect it to behave like a brand, with a guarantee, innovation, services with added value, development of markets through communication, and activation of networks. The carriers of the brand are both products and the consultation of commercial delegates, their reactions and the quality of their follow-up and service.

Facom’s reputation was built on a fleet of trucks that visited garages, not to sell, but to explain the products and listen to the garage mechanics, their comments and requests, from 7 am when the workshop opened. This is how the spread of lowest-bidder tenders, where the only things that matter are the price and the regularity of provision, can be avoided. In contrast, by going ever further, to China, Vietnam or Bangladesh, in search of the unknown supplier who can offer an even lower price, buyers reject the concept of the brand, which represents safety. Here, the first consideration is how to produce more cheaply, even to the point of taking risks for the downstream client. By chartering dubious transporters, petroleum companies expose the coasts of Brittany to the serious risks with which we are all familiar.

The B2B brand is a prescription

Lastly, the B2B brand focuses on prescribers.The decision to buy within a company always involves not one, but several people. The brand is therefore built up through identifying the key prescribes: the architect, the research offices, the consultancies, the technical departments and so on, all the way to the final client. Thus Le grand does without wholesalers, except for logistics, since it carries out permanent promotional campaigns among electricians and the general public, to let them know about innovations so that they can demand them from their electrician.

All the success of Elyria, the brand stateroom generic Eastman, consisted of working first of all with those who acted as guides and opinion leaders for the entire textile sector: the luxury and premium brands. When they developed common applications, the innovations made were noticed by the entire sector. In the meantime, Elyria had acquired a precious aura to justify a price much higher than generic fibres. Tact el followed the same approach to constructing its brand, through co-creation and the decision to target leaders with strong prescriptive power.

Multi-brand groups specialize their brands according to their business model, which is linked to prescription. The Norwegian Nourish group, a leader in aluminum applications, has three brands in Europe formalism profiles intended for construction:Icon, Techno and Do mal. The first misaimed at large projects, and therefore capitalizes on the prescriptions of architects, design offices and engineering consultants uses the final customer as the lever of prescription on the installers themselves.Do mal aims at small companies directly.

Moving away from a commodities

The risk of commodities is the sword of Damocles for B2B. Of course there are niches where the level of perceived risk ensures positional income, as with companies specializing in the analysis of aviation fuel quality, but these are exceptions. For the world leader in industrial paints, Kazoo Nobel, the brands have single objective: to bring value to the client in order to move away from competition on price. Therefore it pursues a policy of global brands, each dedicated to a target, according to a global segmentation built on painter’s expectations.

A market is commodities when the actor shave not worked hard enough on it. The brand is not a miraculous answer, but the name that takes a genuine marketing approach of creating value for a dedicated target. It is therefore necessary first of all toenails the clients, to understand them – togo beyond the machine-gun volleys of surveys that show the client only cares about price. All markets are segmented, even the low-cost markets. Everything depends on what is offered alongside the price.

Thus any chemical company will claim that the silicones market is a purely commodities. In reality, as with many other industrial markets, there are four segments:

those clients who want innovation in order to be able to innovate themselves for their clients;those clients who want to improve their efficiency and productivity;those clients who want to reduce the total production cost;those clients who want the lowest possible price.

Three segments here are sensitive to price, and would probably put this criterion in first place in an opinion poll with direct questions. However, a more in-depth investigation might show the client’s problem with its own client, downstream: this is where we find fertile soil for the added value that must be created. If we consider the fourth segment lost, it is necessary to concentrate on segments two and three.This is what Dow does: it has created business known as Diameter, separate from Dow’s core business, aimed at the constricted. Then began the work on the value curve of the Diameter offer.

It is necessary in fact to stop talking about the product, but to envisage the delivery of silicones as the creation of value for the client. If you wish to offer a low price, but also value alongside it, it is important to analyses the facets that the client is likely to neglect (and therefore reduce them to zero) in order domains those of which the client expects most. This innovation, known as ‘value innovation’since it redefines an attractive value curve previously unseen in the sector, make sit possible to innovate in the price segment. Of course, in the case of Diameter, everything was carried out via the internet, which made it possible to set prices according to stock levels, rather like yield management of prices in ai rand TGV travel.