While business decisions are often thought as being rational and numbers-based, LinkedIn has suggested that such decisions are much more emotionally led than people realise, as part of its insights into optimal B2B marketing strategies.
Speaking at Advertising Week APAC in Sydney last week, LinkedIn’s managing director of Australia and New Zealand, Matt Tindale, discussed the issue of marketing to a business-to-business (B2B) audience, and how businesses can derive the best returns from their marketing activities.
“B2C has really had its time in the sun... it’s about time that B2B [marketing] really came out, sometimes from the shadows, and took a very pre-eminent plan in marketing generally,” he said.
Mr Tindale said that “marketing has lost its way a little bit” in recent years and is “not living up to its potential”, citing figures from the predominantly UK-based Institute of Practitioners in Advertising suggesting that advertising effectiveness has been on the decline since around 2012.
LinkedIn, which boasts 650 million members worldwide, conducted research on the effectiveness of B2B marketing in driving business growth in partnership with researchers Les Binet and Peter Field, authors of the book The Long and the Short of It.
Outlining their findings, Mr Tindale said that maximising return on any form of marketing hinges on six key pillars, and the delicate balance between them:
- short term versus long term (short term focuses on lead and sales generation, or demand, while long term focuses on brand perception and awareness)
- perception versus awareness
- reason versus emotion
- micro-targeting versus macro-targeting
- customers versus non-customers
- volume versus price
“These are terms that we hear at LinkedIn in every single day from B2B marketers — incredibly, incredibly important,” he said.
Short term versus long term
While the LinkedIn boss said that the balance is never 50/50 and differs according to the type and maturity of a business, the research identified clear differences between how these factors play out when targeting consumers compared with targeting other businesses.
“It’s generally recognised that in the B2C world, the right combination, the right balance between brand and activation [demand] is 60/40 — you need to be investing more, 60 per cent, in your brand to really maximise your return on investment and your growth,” Mr Tindale said.
In B2B, however, this ideal split was found to be much more evenly balanced, but skewed slightly more towards demand.
“What they came up with was a very precise figure of 54 to 46 — let’s just call it 50/50 if you like,” he said.
“Business-to-business is a lot more complex, it takes a lot longer time, there’s more stakeholders.”
Volume versus price
Another key difference between the two customer markets emerged in terms of volume versus price.
According to Mr Tindale, raising prices can actually drive more growth for the business than simply increasing the volume of sales.
“If you increase price by 1 per cent, you will receive a 10 per cent lift in your profit,” he surmised from analysing separate research by Professor Mark Ritson.
“If you do the same with volume — a 1 per cent lift in sales volume — you’re only going to see about a 3 per cent lift.”
Mr Tindale added that cost-cutting could also not match the growth potential from raising prices. He said that a 1 per cent reduction in fixed costs only delivered a 2 per cent profitability lift, while achieving a 1 per cent cut in variable costs could boost profits by 6 per cent.
“Because of that, people like Warren Buffet — [an] incredibly successful investor of businesses, someone who is the business whisperer, really can spot them a mile away — says ‘the single most important decision in evaluating a business is pricing power’,” he said.
He said more premium prices tend to devote almost two-thirds (64 per cent) of their marketing on branding. On the flip side, cheaper prices devote proportionately more of their spend on demand-side marketing.
“I think the most obvious example of this is Apple. Arguably one of the most valuable and best-known brands in the world, [it] charges some would say an exorbitant premium for what arguably would be the same product as most of the competitors,” Mr Tindale said.
These comments echo those of accountant George Morice, who said on the My Business Podcast recently that having more customers does not necessarily equal higher profits.
Perception versus awareness
According to Mr Tindale, awareness simply revolves around whether the customer has heard of the brand, while perception is more about influencing and capturing what the customer thinks about the brand.
And in terms of B2B marketing, it seems that most businesses are getting it wrong.
“In B2B, not surprisingly, most marketers very much are in that perception territory and very little in the awareness territory,” he said.
“[But] what the study showed was when you looked at campaigns, when you looked at marketing strategies where their primary objectives were awareness, they delivered around about twice as much large business effects than when the campaigns solely looked at perception.”
Mirco versus macro-targeting
While personalisation is on the lips of many in the business world these days, micro-targeting to existing customers is not necessarily wise or even necessary, LinkedIn suggests.
Its research found businesses generate the best ROI on their marketing spend when they had broad reach across both new and existing customers.
The poorest business growth, meanwhile, was found from marketing that focused exclusively on driving loyalty among the existing customer base.
Reason versus emotion
This element of marketing revolves around decision-making, and whether decisions are made rationally or emotionally.
Perhaps unsurprisingly, consumers tended to respond better when marketing appealed to their emotions — despite tending to justify a purchase on rational factors.
But the same is also true for business customers, the research found.
“B2B purchases, everyone thinks, are mainly a rational decision. But very often, they are millions of dollars, even multimillion-dollar purchases, they take months of due diligence, they take multiple stakeholders... and that decision can literally make or break your career. [So], it is highly emotive,” Mr Tindale explained.
“When we look at emotional B2B campaigns compared to rational campaigns, we see it’s about a seven-to-one impact.
“Emotional connection in B2B is a clear driver in growth.”
Adam Zuchetti is the editor of My Business, and has steered the editorial direction of the publication since the beginning of 2016. Before joining My Business, he worked on fellow Momentum Media titles The Adviser and Mortgage Business.
The two-time Publish Awards finalist has an extensive journalistic career across business, property and finance, including a four-year stint in the UK. Adam has written across both consumer and business titles, including for News Corp Australia and Domain.