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What B2B Can Learn from B2C

Posted May 11, 2023

Valentin Radu, CEO & Founder of Omniconvert, joins our host, Camela Thompson, in this episode of the Revenue Marketing Report. Valentin shares his insights on what he’s seeing from his side of the business world, how to make the decision of who is your ideal target as a data-driven leader, and how the post-sale cycle is changing with an emphasis on increasing the customer lifetime value. 

Valentin is from Bucharest, Romania. He is extremely passionate about building companies. And in the last twelve years, he has become obsessed with customer lifetime value and how to optimize it and increase it for e-commerce and retailers.

What have you been seeing from your side of the business world?

I love it because this crosses over really well into B2B, which is the primary focus of this podcast. I’m always looking to B2C to help educate us since you all tend to be ahead of us by about a good five years. So let’s step back a little bit. I don’t know if you are all seeing this in the market, but particularly in B2B SaaS, we’ve had quite a downturn that’s sped up over the last half of the year. Things seem to be stabilizing a bit, knock on wood. But what we noticed was a lot of company leaders were switching their strategy to multi-year contracts and looking at how to move from monthly to annual and then trying to upsell into the existing customer base because they’re trying to cut costs on initial customer acquisition. 

At the start of this chat, Valentin talked about what he has been seeing in his side of the business world.

“So these strategies are alright. And they are coming from the assumption that you should be squeezing more from your customers so that you can secure future cash flows and they all make sense economically. But, of course, they make sense economically for one side of the story, which is for the company. I run a B2B company as well. When I’m looking for ways to secure cash flows and expand the customer lifetime value, these are the first tactics that come to mind.

“Of course, we’re seeing this in the B2C world too because we are in this subscription economy that’s not only emerging, but blooming now.  We are seeing many retailers that are trying to secure relationships with their customers in this manner. Now, what’s important to understand is that these tactics should make sense for the customer as well. So what’s in it for me should be the question of a customer since we’re consumers also and we’re paying for all sorts of stuff. 

“Therefore, if our telecom provider suddenly plays that, you know what? You need to pay upfront in order to talk on your phone or to have your data plan or you need a three-year contract. So how would this make us feel? Mainly, that is, of course, coming from a perspective where companies must secure their future cash flows and diminish churn.  

“However, in order to make sense for the customers too, they need to come up with a proper justification. Things like, in order to keep your current price for your subscription, you need to pay upfront.Because in two months we will raise the price by 25%. Therefore in this manner, you will see the value in that since you’re a valued customer, we’re giving you the option to freeze the price, but you need to make this upfront investment. So if you package it the right way, this works in B2C, and I think it would also work in B2B. It’s all about the framing, right? Therefore, how you frame the reality is more important than the reality itself in some cases.”

What has been interesting from my standpoint is I have been seeing and hearing people talk about balking from purchasing multi-year contracts in particular with early-stage companies.  So for example with Series A companies, people are balking a bit because the customer doesn’t want to assume the risk just in case that company doesn’t survive the downturn. So that’s been interesting.  Another trend I’ve been seeing in a lot of smaller companies is outsourcing procurement through vendors like vendor.com and they’ve been getting better at negotiating. I see less hesitation on the upfront or even multi-year contracts as long as the company is well-established. And they even kind of embrace it when they have a procurement team that can really haggle with you on the prices. Valentin agrees.

“Yeah. Exactly! And I guess this has a lot to do with, the uncertainty in the market.  Of course, in uncertain times, the companies that are most affected are the ones that are the smallest, right? So basically your chances for survival and driving are lower. But it is also an opportunity for these companies as well. 

“My perspective on this is that if you sort out your unit economics unless you’re struggling with something, there are lower chances that you’re going to make progress with that something. I see this as an opportunity because it’s forcing even small businesses (1,000 employees or less) to focus. Many companies are dying because they are drowning in opportunities. Therefore, they can’t decide on which ideal customer to focus on, ideal customer profiles A, B, or C. They’re trying to do too many things at the same time with scarce resources. And I guess if you can understand who your ideal customers are, economically speaking and also from the value impact that you bring to their lives, that’s going to allow you as a company not to trick some companies which don’t really get enough value from your brand to buy from.”

Yeah, a couple of things are jumping to my mind. One is the quote I have never heard a leader say that they regretted focusing too narrowly.  It’s always I tried to tackle too much. And then the other piece of that is being a data-driven leader and really learning how to focus on what your ideal customer profile is. One big mistake I see a lot of companies make is they look at the “whale” deals, the biggest deals.  The most ambitious things are where the company is made to stretch and maybe meet some requirements they don’t normally meet. Instead of their bread and butter. It fits perfectly. Don’t need to do a lot of optimization. That’s probably the one you should go after.

So as a data-driven leader, how do you make a decision on what your ideal target is?

“That’s a great question. From our perspective, we have criteria. This process started back in 2017 when we were targeting all targets, all markets, lots of products, and lots of unique value propositions. We looked at the cost to serve. We looked at the time to close. We looked at the average deal size and the churn and the net promoter score. So we’ve used these five components to see if there are some patterns.

“We identified that our best customers are using some components of our software and the features made them so happy about it. After that, it became clear that would be our direction. For instance, that allowed us to focus on customer value optimization for mid-sized retailers that have at least 200 employees. They have their omnichannel, they use it because they’re struggling with their heritage infrastructure and their business model might not make sense anymore due to the high customer acquisition costs. And that allowed us to articulate the problems we’re solving properly.  Maybe those criteria are different for different businesses out there. But my suggestion would be to make this type of analysis because without blending the qualitative data and quantitative data, you would be following some assumptions that might or might not be the right ones.”

I so agree with Valentin and I’m going to double down and restate some of those metrics he mentioned since they’re great. Time to sale. Cost of acquisition. He’s talking about retention rate or churn rate on the opposite side of that. And then he also talked about the cost of service and then I would say time to value as well because that can be much longer with some of the larger companies if you’re having to do a lot of customization or any changes in your system to support them. 

And then I really like what Valentin said is you’re focusing on the data points because humans are biased and we tend to remember something that was really, really positive or really, really negative. So those salespeople who are salivating after that really big deal that got them a lot of commission, that may not be the right audience to chase if the time to value and the cost of acquisition and all the other things he mentioned such as NPS score. All of those aren’t trending in the right direction. That’s fabulous! Valentin went on to talk about other important things on the data side.

“Another important thing would be to look at events since in the B2B environment, besides what happened in the past or who are your best customers according to this data, there might be some things which are happening which may be scanned or spotted thanks to the technology. And those are some of the buying signals. If the buying signals are changing, for example, we’re now providing one of our products with an AB testing tool and we’re now being flooded with demand from customers who are migrating from Google Optimize, which is sunsetting in September, this year. So we’ve got these types of signals already and we have prepared because we’ve noticed that from December, but their official announcement was at the beginning of February. So that gave us some 1 ½ months to prepare the comparison with our offer and to revisit our pricing and whatever. Therefore, that’s another important thing.

“I know another thing. When we were working with a partner, they identified that their best buying signal was around prospects that implemented Klaviyo, which was their email service provider. Yes, within two months after their activation of the service, they’ve been there for them. So mainly, there are some buying signals that might be changing and if all you’re doing is this text desktop research, you might be missing some opportunities out there. 

“Another example now that you’ve started me, one of our clients used our technology. He’s a B2B e-commerce and they’re selling office supplies. So they have identified by doing RFM segmentation that stands for reasons in frequency and monitoring value because they don’t have a subscription. There’s an asynchronous purchasing process there. You might have someone buying today and then two months, another one is six weeks or whatever. But they’ve identified that their best customers when it comes to how recently, frequently, and monetary, were companies that had this free domain of purchasing activity. Then, they focus their acquisition towards those types of customers since their lifetime value was the highest and their close rate was higher if they were coming from that domain. Moreover, they’ve activated a real-time analysis of the forms on their website when somebody was asking for an offer. And that time to first response was higher if they have got this type of free domain identified in that form. Therefore, this type of tweak might be good to look at right now.”

How is the post-sale cycle changing now with the emphasis on increasing the customer lifetime value? What are some areas you suggest people focus on right now?

“The challenge right now is if you are selling commodities or if you’re not too differentiated in the market, then you are in trouble. And you’re also in trouble if the counterpart or the user of the product that you are selling to or the company itself isn’t overly satisfied with what you do. So basically if you have parity in terms of the product features, if you have parity in terms of price, if you have parity in terms of marketing or with the kinds of promises you’re making, then the last arena that you can fight on is the customer experience.  How you make them feel becomes  more important than what you sell. Therefore, that means you should be well aware of the fact it’s not about shipping the product itself. It’s about the product and the customer experience and fulfilling the promise you’ve made. 

“Another thing I realized, there are many tools out there. Many products are just a part of the end solution, right? So let us presume you’re selling a product that’s doing data and enrichment to generate leads.  It is just a part of helping me close more sales. In order to close more sales, you need enriched leads or better quality leads. And that is why you need the product. As long as you understand as a provider, as a product, that you’re just part of the whole sandwich. Bob Meyer who is one of my mentors, stated that you are just the master of the whole sandwich. 

“So if you understand that, if you help your customers make progress in other ways than just using your product and if you also onboard them properly on how to use, how to quickly get to the value that your product is delivering, then you will stand out against other competitors. Therefore, those are the touch-points that you should be leveraging in this type of relationship with newly acquired customers or people who are on a trial or if you’re talking about B2B software.”

Time to value is so critical along with overall satisfaction. I agree with Valentin because if you don’t focus on those things, they’re going to churn. The other person will focus on the price or something else that will be enticing to them and they won’t have enough incentives to stay. It’s also interesting that Valentin talked about being a part of the sandwich. There are some great tools out there that do a lot of things just “okay”. Then, there are some tools that do each thing very, very well. I’ve noticed that, especially as companies scale, the CFO is more and more attracted to the companies that do a lot of things. Because there’s more room to negotiate on overall price points. So it’s hard to advocate for a tool that one user likes when the cost is great.

“One important thing to analyze is we have this challenging environment right now where there’s still a lot of uncertainty. We have all sorts of signals that the economy is getting better. One idea that I want to share with our audience today is that in my experience as an entrepreneur. I’ve been building companies for 22 years now.  So what I want to share is the fact that you can make it. Basically, these cycles in the economy are coming and going and the whole idea is how you grow as an entrepreneur or a business leader or a professional, or as an expert.

“Because at the end of the day,  if you focus on growing, and for instance, if you listen to this podcast, you’re investing in your education. You are getting smarter. You are getting better. You’re getting some shortcuts from other people. So that’s kudos to you for doing this. Therefore, my message to everyone here is that you’re going to make it and while you’re here, that’s a good sign you are making it. 

“So continue to invest in your education. Be curious, be sure, and talk to yourself on good terms about what’s coming for you. Because doing this will change your mindset. Your mindset will attract different types of conversations and you will get into a position to make it no matter how hard you think it is. I’ve been there multiple times and I guess that’s not related to the post-purchase or to the data and to the customer value optimization. But it’s about being, becoming a better professional, being a better person. Because with this type of strategy, you won’t go wrong. You won’t go wrong if you invest in yourself. If you’re curious and if you’re also using a language that’s empowering you and it is making you produce more dopamine or serotonin rather than cortisol, because it’s the brain mechanics, right?  So you can change the chemistry of your brain by talking better to yourself. That’s a hack I’ve  applied and it allowed me to get through some very, very bad moments professionally.”

That is just so wise! I think the majority of people on this podcast who are doing really well, they have this flexible mindset where they view downturns and challenges as opportunities for growth rather than as potential for failure. Therefore, I encourage everybody out there to listen to or read Mindset by Carol Dweck on changing exactly what Valentin said about that chemistry in your brain because it’s totally possible.

For more expert interviews and advice, listen to the full Revenue Marketing Report episode at the top of the article or anywhere you podcast.