A Strong Brand Is Necessary For B2B Companies
By Wilson Chew
Principal Consultant, StrategiCom
19 Jun 2006

1. Introduction

1.1 What is a brand – Does it Exist for B2B Companies

A brand is nothing more than a perception in the mind. Let me make it explicit.
(See table 1.1.)

Table : 1.1 – A Brand and How It Is Perceived In the Minds of people

I could keep the list going but let’s just look at the brands above. They are NOT consumer brands. The perceptions (see right of table), which have been built over a
long period of time, are as strong as the perceptions of consumer brands. So the question, “Do brands exist for B2B Companies?” is irrelevant. The real question, then, would be “How should a strong B2B brand be built?”.

Smaller B2B companies spend more time trying to survive as opposed to building long term corporate efforts that would ensure sustainable growth. This is due to many factors, such as the lack of resources. The daily struggles of SMEs are real, considering Singapore’s small domestic market.

In the last 30 years, there has been an evolution of the enterprise. With schemes provided by the Government of Singapore and the collective efforts of various chambers of commerce, business and trade associations and representative federations; SMEs in Singapore are growing in size and expanding rapidly. The more successful ones have already gone public and global.

1.2 Is there a Need to Build a Business Brand?

While successful companies are prominent, the brand-building aspect of the SME poses a real and present struggle. Companies would first ask if their marketing budgets reap direct Returns-on-Investment (ROI); if it were to be unclear, they would rather invest funds for direct client spending because it cultivates relationships. That is indeed a fact and these efforts do have their merits. Would a customer make a huge purchase just because a few salesmen bought him “a few drinks”? Well, the customer could award contracts but it would be based commonly on 2 reasons:-

i. if the seller has a strong brand reputation;
ii. if the seller has a price lower than the market’s average.

Wining and dining has its place and role, but so does brand reputation. This paper is not intended to articulate the importance of business relationship building and its importance to a successful organisation. It is to articulate that one of the most critical factors is brand reputation and the worthy cause of building it strong.

2. The Risks Your Customers Deal With

2.1 Technical Risk

Every time your clients buy, they first think, evaluate and scrutinize before making a decision. Remember, you are not dealing with a can of coke which costs a mere 80 cents. Buying a B2B product or service could be a decision costing millions and EVEN MORE IF YOUR PRODUCT DOESN’T PERFORM. If your brand is ranked No.1 or No.2 in its category, your customers will buy from you even if the product is not perfect. Why is that so? Well, simply because even if it fails, it is still the recognised No.1 or No.2 brand. But if your brand is ranked No.10, even though you may have the most cutting-edge product, no customer will buy it. Why the irony? Well, simply because it’s not the No.1 or No.2. So truth doesn’t work, perception does.

When IBM created the OS/2 WARP operating system many years ago, it was viewed by technology experts around the world as an operating system far more superior than Microsoft OS. IBM, then, believed that a product superiority strategy would propel the growth of the company. Microsoft on the other hand went about building their brand in an effort to dominate the operating system category in the minds of PC users and manufacturers. The rest is history. While IBM may have had a far more superior product, the technical risk in buying OS2 WARP was viewed as significant because it would have been incompatible with most other Microsoft-driven systems. Take a minute and ask yourself:-

a. if your product can outdo the market leader in terms of technology and other unique selling propositions, why isn’t your brand No.1?; and
b. if you have to buy a product for your company, would you buy the
recognised leading brand?

Build your brand reputation and make it indispensable1 to an extent that if a customer buys from you, he deems it to be good technical risk management.

2.2 Financial Risk

One of the many considerations of a huge corporate buy is the level of investment, and financial loss if the product bought encounters malfunctions. Imagine a huge township developer or a government raising a request-for-proposal (RFP) for the construction of a huge power plant; one which would power 50,000 households and factories. One can also imagine the level of investment which the Client would be making and catastrophic effects in the event of a power failure. So the more confident the Client is towards a particular contractor in the knowledge that there would be minimal failure (taking into account experience, expertise and technology), the more likely the Client would award the contract to that particular contractor. What more if the contractor has a brand reputation of little or zero failures in previous projects? So, financial risks are often considerations of the corporate buying process.

Build your brand to a level where if a client decides against awarding a contract to you, the Client would perceivably face huge financial risks.

2.3 Service Risk

All customers want good service. There is a huge perception that if a brand is No.1, the service experience is also No.1. However, as we all know, that may not always be the case. Several years ago, I bought a laptop. The promise upon purchase was a one-day turnaround repair service should the machine break down. True enough, one day it did. I brought it to the service centre and they took 2 weeks; and even after 2 weeks, the problem wasn’t entirely solved. Following that grueling experience, the outcome was simple: I never again bought equipment from that particular brand; laptop or any other product. It’s been almost 10 years on and I now own an IBM notebook. Personally, the experience I’ve derived with the IBM laptop is two-fold:-

· the machine rarely stalls;
· the after-sales service is swift.

In the above personal experience, it involved a singular business user, a buying decision which involved no-more than $3000.00, the purchase of a business notebook and a PC manufacturer.

Now imagine a purchase of a server connecting thousands in a hospital or a system connecting petrol-stations across a country. Corporate buyers not only consider product superiority, they consider the service reaction standards too.The risk of poor service does not resonate well with corporate buyers.

Build a brand known for its service. Bad service kills a brand.

2.4 Professional Risk

In modern day management, systems and integration is critical to the success of an organisation. In some organisations, technology systems form the backbone of the entire organisation. Such examples include banks, airlines and even logistics. Failure of products, services and systems compromises the professional standing of your customers. In some cases, such systems may be deemed as the cause of malpractice on your customers’ part.

So here’s the catch, build a brand which would help build the professional standing of your customers because efforts to lower professional risk is good risk management.

2.5 Delivery Risk

One of the biggest and most common problems of renovation contractors in Singapore is delivery. When projects are not delivered on time, it prevents your customers from operating on schedule. Down time is always rendered as foregone profits. But greater is the loss of reputation than just mere profits. Profit loss can be recouped over time; but once a brand is tarnished, brand reputation is lost forever.

This is also the same reason why, especially in the home and office renovations industry, reputed brands who charge premium rates consistently win larger projects. Companies cannot afford for their business to be affected by the non-delivery of vendors. As a petroleum client once shared with me, “If our driller pumps a day late, we would lose almost $1 Million a day”.

Clients buy brands because they cannot afford to be late; and they will not even risk it.

3. You Reap What You Sow

Many business owners think that salesmanship and marketing are enough to succeed in business. That’s a sad business misconception!

Building a strong business brand is an integral part of your organisational strategy. It goes beyond how you interact with clients, prospects, vendors, employees, and anyone else with whom you come in contact. Branding creates a perception in the minds of your customers; as Robin Fisher Roffer points out in her excellent book, Make a Name for Yourself, "if you don't brand yourself, someone else will".

An excellent example of branding is an electrical contractor with whom I worked with recently while renovating the new office. Their main goal many years ago was to become known as the safest electricians in their field so they could work in the upper-paying customer segment. When the family of three started, they were tempted to work with a “just complete the project” attitude so that more contracts could be acquired at lower prices. They were trying to survive. This would have been inconsistent with their goal of being the safest-electricians, at that time; I encouraged them to avoid this tactic (even without being their appointed brand consultants).

It wasn't easy to lose bids to competitors who were using low-quality materials and skipping steps, but the family-enterprise stood firm. Eventually, it paid off and today, several years on, they are enjoying contracts which involve the setting up of electrical cabling projects for fairly large buildings. This company is also on the verge of being listed on the Singapore Exchange. They have achieved their goal, by remaining true to what they believe should propel their business, and by creating a strong brand.

The seeds of ‘lower number of contracts and quality work’ harvested ‘higher number of high value contracts’ today. Remember, you reap what you sow. If you sow the seeds of ‘my product is superior and will sell itself’ then you will harvest ‘low margin’ fruits.

4. How Corporate Brand Positioning can influence The Corporate Decision

Table 1.1 clearly showed that you can build a brand to a level where it is synonymous with a category. However, I am often asked, “How can the expense of brand building be measured to returns?” In short, there are two answers, the “financial” answer and the “influence” answer.

In the interest of this paper, we shall deal only with the “influence” aspect.
The process of a corporate buy is broadly segregated into 4 parts:-
· Finding the Right Fit
· Request-for-Proposal (RFP)
· Selection
· Governance

4.1 Finding the Right Fit

Every outsourcing vendor (and I am sure you do too) promises cost savings, but what is critical for your customers is VALUE; defined by how their goals are best met. But what has this to do with your brand? Well, if you had a reputable brand which communicates the promises of how best their needs and goals are met, the battle is half won.

4.2. Request-for-Proposal (RFP)

An RFP is more than a request for a proposal; it is a request for PARTNERSHIP. At this stage, your proposal must not only meet the technical specifications of the RFP; your people must represent the (product or corporate) brand when delivering or presenting the bid. Your brand must represent the quality of the final deal. The stronger the value propositions of the brand, the higher the probability of winning.

4.3 Vendor Selection

It is reflected in most procurement and outsourcing textbooks that buyers will traditionally consider the following at this stage:-

· industry expertise;
· demonstration of reliability;
· a good track record;
· Flexibility;
· “Just plain old TRUST”

But wait! Don’t they consider cost? Well, some market research scientists will tell you that the more critical the project, the lesser the cost consideration. In short, customers will pay top dollar for best-of-class expectations. Note also that all 5 points above are critical components to brand building. Remember, a brand is a perception driven by values and performance; it is NOT merely a logo.

4.4 Governance

Buyers do spend time and resources in managing an outsourcing relationship, some argue as high as 8% of total contract costs. Such costs are incurred for performance measurement, process or technology improvements, and transitional assistance. So governance has a tangible cost.

According to Linder, the associate director for Accenture's Institute for High Performance Business, “ongoing Governance and associated costs can be managed effectively if buyers have metrics and incentives in place. To be sure, metrics force executives and employees to focus on the details”2. In short, the customer has to set aside resources to keep time while the seller has to live up to its brand promise and project deliverables.
When companies manage the governance measures set in place by buyers, they are sub-consciously building brand reputation. A customer’s testimony to compliance far outweighs any form of advertising.

5. Conclusion - A Strong Brand Is Necessary For B2B Companies

In this paper, we have argued two points:-

· when a customer buys, a customer considers risks and the brand which provides good risk management as part of its brand values and promises, wins;
· there is brand influence in the process of a corporate buy. The higher the value of the buy, the higher the influence of the brand.

At the annual Consumer Electronics Show in Las Vegas early this year, Intel officially unveiled its new logo. It dropped the 'e' logo and 'Intel Inside' tagline. The new logo embodies a slightly more digital looking 'Intel' and the new motto 'Leap Ahead'. This is the first time it has changed since the company began some 37 years ago.

According to Business Week’s Top 100 Global Brands Scoreboard3, Intel is also rated as the world's fifth most recognisable brand and the new look reflects the new position of Intel as a leading-edge platform developer rather than just a manufacturer of processors. The decision to implement a change in marketing follows the just under a year ago. This move had, in turn, been prompted by the success of the Centrino mobile platform for wireless notebooks.

This example is a very clear reason why business-to-business companies must focus on building strong brands. It is the baseline and propeller of business direction and sustainability.

If you have any questions or comments about this article, please e-mail me at wilson.chew@strategicom.com. I would be most happy to discuss them with you.