Why the sudden disruption? Buyers are in the middle of a generational shift: millennials are replacing boomers as a dominant buying block, retail is transitioning from physical locations to digital experiences, and business models are changing from transactional to subscription services.
And from these changes, B2B marketers can learn key lessons so their companies can stay the course in today’s tumultuous business landscape.
How did it happen?
Millennials now drive 47% of the total US gross domestic product, spending more than $65bn each year and influencing upward of $1trn in total consumer spending, according to a study from Nielsen.
Plus, as the first digital-native generation, their expectations for customer experience have been set by brands who create compelling, frictionless digital experiences. If they can get it online, they’re not going to bother with brick and mortar.
Previously, making and distributing a product or service was a complex supply chain problem, and there were huge benefits to having channel relationships where you leveraged players like Walmart and Nordstrom to distribute.
But in a digital world, the cost of starting a business is drastically lower: all you need are a website and a shipping relationship, and you can engage directly with your buyer.
That’s how Bonobos and Warby Parker usurped traditional stores: by owning their customer data, they were able to personalize and recommend future buying and selling.
Generational shifts and digital transformation add up to a fundamental shift from transactional selling to sales based on ongoing relationships. The world of retail transactions is moving to subscriptions (Amazon Prime, Glossier, Dollar Shave Club, etc.). In fact, subscription businesses grew revenues about 8 times faster than S&P 500 company revenues, according to Zuora’s Subscription Economy Index.
So what can B2B marketers can learn from the disruption of consumer retail?
Even in the enterprise, your team must focus on building customer relationships. You have to figure out what you can sell as a subscription, manage customer journeys and capture all of your customer data in a way that’s actionable.
Leading companies are making the shift from transactional selling to subscription-based business. This is impacting every single vertical, of every enterprise. For example, Disney is taking all of its content off Netflix and building its own app to directly sell their own content. GE went from selling lightbulbs to selling power management services — a combination of software, data, and hardware.
Dollar Shave Club turned the idea of buying a razor into a subscription business worth over a billion dollars. Long-term success is no longer guaranteed; according to Innosight, corporations in the S&P 500 Index in 1965 stayed in the index for an average of 33 years. By 1990, average tenure in the S&P500 had narrowed to 20 years, fell to 18 years in 2012, and is forecast to shrink to 14 years by 2026.
The winners are all companies who are transforming themselves into subscription businesses (notable subscription S&P 500 companies include Adobe, Amazon, Citrix). Every enterprise must figure out how to do this.
Marketers are key in this shift from transactions to subscriptions: managing customer journeys is essential to building meaningful, ongoing customers and a healthy funnel. Marketers influence all the various touchpoints a customer has with a brand.
Understanding and optimizing that customer journey pays off by delivering better customer experience, and results in increased revenue. In fact, more than two-thirds of consumers (68%) would be willing to pay 15% more for the same product or service if they could be guaranteed a better experience. Additionally, this shift enlarges marketing’s purview from pure acquisition to customer retention and upsell/cross-sell.
All B2B companies need to aggressively embark upon or complete their digital transformation
That’s what millennials expect and because digital channels are a gold mine of customer data. Best-in-class subscription companies make collecting and acting on their customer data across all teams, systems and channels a core competency.
Often, this is achieved by building a customer data platform (CDP) and leveraging machine learning and segmentation to drive omnichannel personalization and revenue. This means that marketing teams need to both build strong digital skills and take ownership of their customer data to drive insights and optimization.
This is the time for visionaries. Enterprise marketing organizations that innovate around subscriptions and journey optimization while leveraging customer data to improve experience will differentiate from their competition and gain market share. Customer experience is the new competitive battleground for companies, and in the new generational shift, the winner takes all.
Michel Feaster is co-founder and chief executive at Usermind