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Tearing Down Five Outdated B2B Brand Myths

September 6, 2018

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Business-to-business companies tend to underinvest in their brand due to misperceptions about the role brand can play in their business.

These organization often attribute their successes or failures to the parts of the business they believe to be more relevant to the customer purchasing decision. As a result, B2B companies frequently let their brands age to the point of obsolescence – and it costs them.

In my work as a Certified Brand Strategist, I have heard many of the misgivings B2B companies have about the role of brand in their business performance and have boiled them down to five key myths. There is plenty of research available to tear these myths down, but I chose to focus on studies that can apply to any B2B company – small or large, public or private – in any industry to keep it relevant to as many organizations as possible. If you work in B2B markets, you’ll likely nod your head in acknowledgement on a few of these.

Myth #1: B2B is All About the Sales Relationship

Until recently, the sales relationship was king. Buyers were largely reliant on suppliers for information, specifications and pricing to help them evaluate possible solutions. And the sales person controlled much of the process. The digital age has completely blown up that dynamic.

Today, the business-to-business buyer is going online to investigate solutions, develop a list of requirements, gather specifications, and narrow down their options without any involvement of a sales person. A 2012 survey by the CEB Marketing Leadership Council and Google shows that customers are more than halfway (57%) through the sales process before they engage a sales representative. This is regardless of the price point of the product or service.

So what are the buyers doing to get that far down the purchasing cycle on their own? They are learning about your brand online, investigating your brand reputation with third parties, connecting with peers about your brand through social media, and otherwise having a conversation about you – but without you.

This makes it vitally important for a B2B company to have a strong sense of its brand and know how to deliver the right experience through every available customer touchpoint. The prospect of today needs to understand the value of your brand before you even know who they are. Or you might never know who they are.

Myth #2: Brand is Not an Important Factor in Selecting a Vendor

A second major misconception that I frequently encounter is that brand is a minor consideration in the B2B decision-making process. This could not be further from the truth.

A 2012 McKinsey & Company survey shows business buyers consider the brand to be a central element in selecting a supplier, ranking slightly higher than the performance of the sales team. This is largely due to the fact the stakes are often high with B2B purchases, so confidence in the brand is critical and buyers will pay for peace of mind.

“Decision makers are willing to pay a premium for strong brands because they make their lives easier, primarily by aggregating information and reducing risk,” wrote McKinsey. When all of the analysis of a solution is done, it is often the strength of the brand that separates a company from its competitors to win the business.

Myth #3: Product Attributes are the Most Important Factor in the Purchasing Decision

To be fair, the McKinsey survey mentioned above shows price and product are the top two factors in the decision-making process – ranked just ahead of brand. But what happens when the competitive offerings are not that different in the eyes of the buyer? It happens more than you think.

A 2014 CEB survey of B2B buyers reveals only 14% of customers perceive enough of a difference in vendor offerings and value to be willing to pay for it. This means the other 86% of buyers view the offerings as commodities – not good news for margins and sales win ratios.

This is where the brand plays a huge role. The same survey shows the emotional and personal values of the buyer have significantly more impact (42.6%) on the purchasing decision than product values (21.4%). Decision-makers are buying what a company stands for more than they are buying the products or services it sells. People are buying the brand.

Myth #4: Building a Brand is an Expense that Decreases Profitability

When brand building is viewed only as marketing spend, this is probably perceived to be true because the brand is being undervalued. That is why the member agencies of the Brand Establishment advocate for using brand as a corporate strategy – not a marketing tactic – that drives the entire business and actually increases profitability.

Each year, McKinsey & Company examines the correlation of brand strength and financial performance in business-to-business companies –and it continues to find the difference to be statistically significant. For example, in 2012, companies with brands that were perceived as strong generated EBIT margins that were 20 percent higher than brands that were seen as weak.

The superior margins can be attributed to the impact a strong brand has on marketing performance, leads generation, close rates, average selling prices, lifetime customer value, customer satisfaction and a host of other metrics. Improvements in all of these areas go straight to the bottom line, which in turn, helps build a stronger brand.

Myth #5: Brand has Nothing to do with the Value of the Company

Not only does a strong brand improve profit margins, but it enhances the overall value of the company. The easiest place to see how this works is with public companies because the data is readily accessible, but the same concept applies to private companies.

Harvard Business Review studied 450 public B2B companies over a 16-year period to assess the relationship between brand perception and performance measures like revenue, profits and cash flow that are linked to stock performance. HBR determined corporate brand equity is responsible for an average of 7 percent of market capitalization in the 47 industries it follows. The leaders in each category were closer to 20 percent.

The same is true in private entities. A study published in the Journal of Marketing examined 133 mergers and acquisitions involving private companies. The study concluded that, on average, the brand value of the target company accounted for 7.3% of the transaction value. In some cases, that can be much higher.

Know the role of brand in your business.

The research debunking these five myths is solid, but as with anything there are exceptions. In the early stages of a company, the sales relationship and product attributes may very well be the primary drivers of the business. But, as the company grows, the brand becomes increasingly important to the sustainability of the business.

So the bottom line is every B2B company needs to understand the role brand plays in its business at each stage and plan for how it will evolve in the years to come. It’s a matter of becoming a market leader or one of many followers.

Author:

Grant Kimball
Certified Brand Strategist
Brand Incite
Portland, Oregon