e-Brands Slow to Take Off

Accenture blames low marketing spending for slow online B2B adoption

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New York  May 10, 2001  Despite the hype, businesses are not flocking to purchase goods online, in part because suppliers have invested too little in marketing their online goods and services offerings, according to a new study from consulting firm Accenture.

Fewer than half of all businesses are purchasing goods online, and of those that do, 45 percent devote less than 5 percent of their spend to online purchases, Accenture reports in the study titled Was it an illusion? Putting more B in B2B. The study addressed online purchasing decision-makers' preferences, myths, marketing lessons and mistakes.

Of those businesses that do buy online, 69 percent have been purchasing through this channel for less than two years. Accenture concluded that purchases tend to grow (rapidly) as buyers become familiar with the online medium and sellers' offerings, suggesting that the online market could still be huge.

Mark Wolfe, a partner in Accenture's customer relationship management practice, attributed the slow rate of B2B online adoption to the low levels of spending that suppliers are devoting to marketing their B2B e-commerce offerings as compared to spending on business-to-consumer (B2C) marketing. "Imagine if industrial marketers spent half as much effort as their B2C counterparts in creating a rewarding online experience for their customers," Wolfe said. "The adoption rate of e-commerce in B2B would skyrocket."

The study also points out a key factor in the failure of many B2B e-marketplaces to draw large numbers of buyers. While the early e-marketplaces frequently touted their ability to deliver lower prices, only 21 percent of buyers in the study identified price as their top priority in making purchases, with a lower priority for brand reputation and privacy issues.

A full 28 percent of buyers are so brand-sensitive that brand reputation and familiarity overwhelm any other factor in the scale of values, accounting for almost one-quarter of a brand's value online. Nearly 18 percent of buyers consider brand tenure the single most important factor, with brand familiarity a close second.

A further 23 percent cite customer service as the single most important value factor for them. This group was the least price-sensitive B2B offering that buyers identified in the study, ranking price level dead last in importance behind all other factors. The study found that just 11 percent of buyers value supplier variety and category selection highly, making them a natural target for online exchanges and e-marketplaces.

The findings in our study were counter-intuitive to what we would believe to be the case in B2B, which is that price matters first, said Stephen Dull, a partner at Accenture and author of the study. "You can't compete in B2B if your only differentiator is price or any of the four Ps of marketing for they are mere commodities (price, product, promotion and place of distribution). Focusing your attention on the customer is where companies will rise above the noise.

Further, the study reported that the level of customer satisfaction online is lower in B2B than in B2C, which Accenture attributes to a failure on the part of online sellers to identify and respond to the real demands of the market. According to the study, fewer than half of B2B customers say they are very satisfied with their online purchasing experience, compared to 52 percent of B2C buyers.

Other findings in the study included:

e-Business has not proved to be the facilitator for global e-commerce that it was cracked up to be. The study reported that 19 percent of companies operating in more than five countries do 25 percent or more of their purchases online, while 34 percent of companies operating in fewer than five countries do 25 percent or more of their purchases online.

Nor has the Internet created the level playing field for large and small companies to come together to buy and sell as equals. Large companies conduct more of their purchasing online than do small and mid-size companies, Accenture reported. Of the roughly half of companies purchasing online, 23 percent of large companies conduct over a quarter of their purchases online, compared to 18 percent of small and mid-size companies.

Moreover, only 34 percent of small to mid-size companies are very satisfied with their providers, whereas 52 percent of large companies are very satisfied. Accenture speculated that few B2B providers may be meeting the needs of small companies.

The study was conceived by Accenture's convergence marketing practice and conducted jointly with Online Insight, a technology company that provides customer insight solutions. The study addressed the impact of online branding tools across eight B2B industry segments (computer hardware, energy services, paperboard, industrial chemicals, asset management, cash management, health care insurance and services, and communications hardware and services).