Category Management in B2B

Lately, I am seeing a lot of advertisements (and hearing a fair amount from recruiters) for category manager positions at business-to-business companies. There seem to be a shortage of these folks with the kind of B2B experience I have; rather, the applicants all come out of consumer packaged goods (CPG) companies. I think many business marketing organizations have finally realized that the product proliferation and price confusion is neither helping them increase sales nor helping their customers find the right solution. One need only look for products on Motorola's website to see how hard it is to find the right products among the category clutter...and this from one of the companies in our industry that has it organized well.

The main differences in my mind between CPG category management and B2B category management are as follows:

• Many B2B companies have multiple products that have to be sold as an integrated solution, making SKU rationalization more complicated;
• So many different B2B deployment environments (compared with relatively few different retail formats) require countless variations of what would otherwise be almost exactly the same SKUs;
• Configuration is de rigeur versus low configurability (except for private label goods) in CPG;
• Declaring "end-of-life" for products is harder, as the installed base for products from the distant past may continue to be sizable and upgradability for these customers can be difficult;

and last but certainly not least:

• Salespeople have much more influence over marketing than in CPG companies, in which marketing is general management.

This last point marks the crucial difference between the B2B category manager and the CPG category manager. The B2B category manager must constantly determine how to sell category changes to the distributors, systems integrators, channel partners, and even their own salesforce. In contrast, the CPG category manager largely relies on data from the retail channel and takes that data to the sales team to show them why they decided to make a change.

Ironically, both the lack of B2B end-user data and the relative power of the sales team means that B2B company category managers end up less focused on the actual end-user needs than in CPGs. Hopefully the emergence of demand for B2B category management experts indicates a change towards more end-user focus. I personally hope the rise of this group as a real discipline (already showing up years ago in industry leaders like W.W. Grainger and John Deere & Company) will mean that B2B product sets will become more user-friendly over time, which will be a real relief to those of us who have to order them, configure them, and use them on a daily basis.

The One P of Marketing

You remember the four P's of marketing: product, price, place, promotion. Increasingly, I believe that marketing will be about the one P of marketing: product. The increasing transparency of the Interwebs and such makes it much easier to find out, say, the top voice-directed distribution center company. And to find information about that product's benefits and downsides.

Witness my recent discovery of http://www.duckduckgo.com/, the completely private search engine that has benefited immensely from Google's questionable decision to reduce privacy protections. How hard will it be for millions of Google customers to find this option? And how many people, like me, will direct friends and colleagues to competitors when they don't like a product decision their company has made?

These observations all lead me to my product experience today with Google, a day prior to the vaunted privacy policy changes. Today, I searched for "Barack Obama" and got in my top results a post from my brother-in-law on G+ that said, "Yum." and had nothing at all to do with Barack Obama. [I clicked on it out of curiosity, probably making my future results worse since Google is tracking my responses.]

Basically, Google has begun to fail me in the exact area that caused me to abandon AltaVista in the first place so many years ago: superior product. In an instant, I lost respect for my favorite search engine and began to question whether they have, in a nutshell, begun to make their product spew chunks. I probably won't abandon Google search right away, but I'll begin looking at DuckDuckGo more often and maybe hunt around for some other options. This reaction is just the kind of adverse loyalty behavior every brand wants to avoid.

On a brighter note, I'm more excited than ever about a product Vocollect has coming out later this year. I got to try it out today, and I'm a real believer. I think it's a game changer. If it is, you will be hearing a lot more about it (especially if you're in the distribution center business) because in this day and age, customers talk. In this day and age, great products only sometimes catch on, but poor products... and great products turned bad by poor marketing decisions... almost always fail.

Benchmarking Performance (AKA Why Vocollect Rocks)

I spent the first five years of my career at a company that purports to do benchmarking and best practices. Really a lot of what they do is profile innovative case studies of leading companies and then help other companies (their clients) understand how to replicate these practices. Nevertheless, I also did some real benchmarking as well, and I can tell you: it's a gigantic pain.

There's the problem of getting consistent responses over time. There's the problem of different customers not measuring the same things. There's the problem of customers measuring the same things differently. There's the problem of accounting properly for exogenous variables, such as equipment depreciation cost. There's the problem of aggregating the data in a way that's meaningful for the customers who gave you the data in the first place while still hiding specific participants' performance.

Often I have found that benchmarking is extremely valuable despite all the problems. Back when I worked on bank operations benchmarking, for example, we found out that productivity at check processing operations starts to decline somewhere around 250 million checks per year, probably due to the dominance of the three evil C's of operations (chaos, confusion, congestion) after that volume. We also found no practical limit to cost improvement in ACH operations at any scale, explaining why Norwest Bank (later Wells Fargo) dominated the ACH processing business.

I mention this value because I found out this week how Vocollect's superior speech recognition for distribution centers has been effective in replacing our competitors in a number of installations in Australia. Although the engineering team has been resisting putting our speech engine up to a benchmark test versus the competition due to the difficulty of benchmarking, I believe it's time to do so. We are really the only speech recognition engine that works in a loud distribution center environment. Perhaps it's time to prove it despite the pain.

Nobody Knows Your Product Exists

Periodically, I am asked to find out how much prospective customers of the companies for which I'm working know about the company's products. I'm always amazed at how little they typically know. I am also typically astounded how much the executive team thinks our customers and prospects know about us.

After so many years, however, this knowledge chasm no longer surprises me. It's natural for us to imagine our market knows about us and follows our every move--after all, we spend all of our time thinking about our company. Why shouldn't the prospect or customer do so too?

Put yourself in the customer's shoes for a moment. If you're reading this blog, you probably work at a company and perhaps have a say in some of the things that company buys. How much do you really know about any of your vendors? Does it come near to the amount you know about your own product or service?

Years ago, I worked at Dollar Bank, a regional bank with a fairly large customer base among small businesses. My boss talked about a particular small business owner who was also a private banking customer. He called his Relationship Manager one way to rail against us for not being available by phone on the weekends. He hadn't realized that we had phone banking, despite the fact that we had implemented weekend hours in the telephone banking center fifteen years earlier. And touted those hours on marketing materials. And on the website. And in every single bank statement. And in mailing inserts. And in TV commercials.

I believe that many companies think that if they have a great product, it will eventually sell itself the way Google and Facebook have done. I disagree. Google and Facebook are the exceptions that prove the rule: almost nobody knows your product exists. Proving the rule are companies like my current company Vocollect, which has a proven product that has saved money at almost every single one of the thousands of user sites where we have implemented and yet continues to face prospect skepticism. It's a proven solution that will boost productivity at any distribution center at least 10% and usually more like 20-30%, and yet I hear every day from prospects and even some current customers about objections to sale that are just plain wrong, as proven at the >80% of the top 75 US/Canada grocery retailers who are Vocollect customers.

I thought about this lack of prospect knowledge recently when I heard about Asana, the company former Facebook founder Dustin Moskovitz started. By all accounts, when I go to the Website, it looks like a pretty cool company. Whether it will be successful, I think, depends at least partly on whether anybody ever learns that it exists. Based on a cursory look at their staffing in the marketing area and from their apparent marketing efforts, I think they believe in the Google/Facebook non-model for marketing.

Good luck, Dustin.

Beware Vendor Metrics

I was reading about the end of the TV show House earlier today, and I saw this little tidbit in the article:

House‘s current eighth season ratings have remained solid, particularly for a drama airing at 8 p.m. The Monday night show averaged 9.8 million viewers and a 3.9 rating in the adult demo this season through early January when including seven days of DVR playback.

Since when should advertisers consider DVR playback? The DVR portion of the of audience adds only 16% to raw in-time viewing Gross Rating Points (GRP) according to this Nielsen study of DVR usage (as quoted in the New York Times). Let's say for the sake of argument that this particular show, like others, has 40% of the audience using a DVR. If that's the case, the real viewership was:

9.8 million * (1 - 40%) = 5.9 million * (1 + 16%) = 6.8 million

If (as an advertising buyer) you based your effective cost per thousand viewers (CPM) on the 9.8 million, you were over-paying by over 44%.

The misrepresentation probably stems from the network's presentation of their own overblown statistics. I have learned over the years to be highly skeptical of any vendor's own statistics, and in my own work for Vocollect, Inc. I try hard to provide our own customers an independent validation of statistics we quote on our truly superior products. The article mentioned above offers just one more reminder to smart market research analysts and marketing data consumers: examine the sources and rely on your own brain when using external data.

Don't Forget the Benefits

I'm weighing in with my favorite Super Bowl spot. I liked the Cars.com commercial featuring the car buyer with an extra head sprouted out of his back. "Sorry, that's my confidence. It's been coming out a lot lately ever since I compared prices on Cars.com."

There's not a lot of mumbo-jumbo here. Ability to compare cars and prices = greater confidence in the buying decision. The funny and catchy imagery (not to mention the singing head) get our attention, and the setup delivers the product benefit.

I can barely name the benefits in some of the other ads. Dependable Chevy trucks and... now I'm coming up short. It seems that many of the companies forgot either to make the ads memorable or to remind us of the chief product benefit.

I have seen lots of criticism of the Cars.com ad, which leads me to my main point: once you have an ad that delivers some audience attention and the product benefit, you're about halfway done. It may be tempting in the research to eliminate ads that score very high on positives but also very high on negatives, but these polarizing ideas in the market research are often the best in delivering outcomes. A salute to Cars.com for ignoring the potential detractors and delivering a commercial that makes me want to use Cars.com to shop for cars.

A last note: one key measure of an advertisement's success is its repeatability. Judging how much that annoying singing head's music got into my brain, the repeatability measure may be a problem here. I'll tell you in a few weeks whenever I stop hearing , "I wanna buy that car!" over and over in my head.

Romney Vs. Perry Vs. Santorum

It has been quite interesting following the Republican nomination contest in Iowa... from a marketing analytics perspective.

In marketing terms, Mitt Romney ran a traditional advertising campaign, which in politics involves local fieldwork, TV advertising, typical campaign stops and a focus on comparing yourself with the leading brand (in this case, President Obama). Rick Santorum ran a contrarian campaign, doing lots of local events and little organizing, spending very little on advertising, focusing on a highly differentiated message and generally avoiding the traditional political marketing. Rick Perry, I can only assume, ran my kind of campaign based on statistics and advanced analytics. (If Perry missed in Iowa, I will be interested to see if the lack of analytical rigor has anything to do with it.)

In my inexpert opinion, both the Romney and the Santorum approaches worked for exactly the reasons we would expect in marketing. In Romney's case, the #2 brand can benefit with a traditional approach if the focus is on beating down the #1 brand. In Santorum's case, a little-known brand can often benefit even more by going against the grain, making a spectacle in a very different style than the industry leaders and using more guerrilla-style tactics to gain advantage.

I'll be interested to see if Santorum can adapt to the #3 brand position quickly. And whether either the Romney or Santorum brands can withstand a Microsoft-like onslaught of money from the leading Obama brand.