Episode 19 Nov 19, 2020

From “Why?” to “How?”: eCommerce in B2B Manufacturing

SAP’s Jonathan Burdette joins host Barrett Thompson to dissect THE compelling event of 2020 for B2B manufacturers: a forced transition to digital commerce due to COVID-19. Whereas traditionally sales reps walked the factory floor to build relationships, understand what equipment is working and what isn’t, and how best to position new deals, selling has now fundamentally shifted to the digital realm. How do manufacturers adjust when most of their pricing processes are just as manual, with trillions of transaction dollars calculated in Excel? Listen to this lively conversation to learn how leading companies are designing exceptional eCommerce experiences featuring vetted, transparent prices to serve a new generation of buyers and salespeople. The discussion closes with some educated predictions for the future of eCommerce adoption for B2B manufacturers. (SPOILER ALERT: There’s no time left to waste!)

To access the joint whitepaper mentioned in the episode: Reimagine Commerce with Zilliant & SAP

Jonathan Burdette

Jonathan Burdette

Somebody out there knows what it feels like to make a monstrous spreadsheet to try and figure out how to prioritize inventory based on price in an overstock situation. Or how to prioritize inventory by profitability in a scarce inventory situation. Being able to automate things like that can help you focus on second- and third-tier strategic problems.
- Jonathan Burdette, SAP

Episode Transcript

Barrett Thompson: Hello everyone. My name is Barrett Thompson. I'm the general manager of commercial excellence at Zilliant, I'll be your host for our podcast. I'm joined today by Jonathan Burdette, CX go to market industry lead at SAP. Jonathan, welcome to B2B Reimagined.

Jonathan Burdette: Thanks for having me, Barrett,

Barrett Thompson: Jonathan, to get started, would you share a little bit about your background?

Jonathan Burdette: Sure. As you mentioned, I'm on the go to market team and lead a team of individuals who are all industry experts on the customer experience side of CX. The folks who worry about eCommerce, CRM and service platforms. They talk with large, midsize and even some smaller organizations about how they can have a more seamless front end to their business. Whether it's having an eCommerce website to sell their products or making their salespeople better able to sell with digital tools.

I've been there for four years. Before SAP, I worked at Philips on the healthcare side, the Dutch manufacturer. I was [00:01:00] in charge of their internet channel there, as well as worked on the marketing side with product ownership responsibilities along the way. Prior to that, I was actually in consumer products and B2B on the consumer product side at a couple of different companies, including what is now Kraft Heinz. I originally started my career out in consulting. All that background helping people with their front end and helping them sell more using digital tools and outpacing their competition.

Barrett Thompson: That's a powerful combination, and I respect that you've both been in the shoes and walked the mile, if you will, of delivering these kinds of systems or being responsible for those functions inside of B2B and other businesses, as well as the tools and capabilities to help others do that. This is a hot area. The things you were speaking to there - standing up eCommerce, getting better engaged with customers, activating other sales channels and capabilities, is very relevant to the B2B businesses that I talk to each week. So, let me begin first to get your worldview. [00:02:00] How does SAP approach eCommerce in that manufacturing context? What are you seeing? What are you recommending? What do you think are the best practices there?

Jonathan Burdette: In terms of what I'm seeing, obviously 2020 has created a compelling event for a lot of B2B manufacturers. Just having worked in B2B for a number of years, it's save money or make money. It's been a lot of personal relationships. A lot of in-person. You want to concentrate on the 20% of customers that drive 80% of your revenue. The problem with 2020 is you couldn't necessarily do that. Couldn't get into people's factories or in their locations to do a walk around and see what equipment's working, what's not, and what you can upgrade - that relationship building. So, it's been hard to get net new customers. It's been hard to drive consumption with existing customers. Prior to 2020, what I was talking about with B2B manufacturers is, what is the compelling event? Trying to find out is it competition? Is it a financial imperative? Your gross margins going down? or what have you. Now, it's been a forced trial of a lot of digital tools. It's gone from a question of why to a question of how [00:03:00] with B2B manufacturing customers of ours. So, I've spent a lot of my time globally, via zoom calls with people in different parts of the world, trying to help them.

I think the best case I can think of is an actual customer, who will remain nameless, but they're in the lighting business. During the pandemic, they were really challenged because they worked in-person for years. They'd send their salespeople out to warehouses with the ballast lights at the top of the ceiling, and then do a walk around and see what was burnt out and talk about how long something had been installed and didn't need to be replaced. They called us right when the pandemic started and said, "We've never not done our business in person. Help us. I know you've been talking with us for years. Help us get there."

So, we've been going from why should we do this to how do we do this? I think coming out of this, because everybody's sick about talking about the pandemic now, is a discussion about how these tools can have a specific role. They don't have to cannibalize how we do everything internally, but they can be a higher margin version of how we deal with a certain customer segment or certain [00:04:00] product segments. I think people have had to become fluent in them. I think it's only going to grow from there, personally.

Barrett Thompson: We're seeing the same. It's moved out of the "nice to have" into a necessity category. I can think back in prior years where someone who is running the eCommerce program might wave a flag of success that said we doubled our eCommerce last year. When you dig in, "We went from 2% to 4% of revenue on eCommerce." Now, they're recognizing that 30% or 40% that I'm off because I cannot do the in-person sell. I can't do the walk around order taking. It's a survival tactic to get those prices up and going. Are there some core obstacles that you've seen that people lack to get eCommerce up and going? What stands in the way, right? They've been thinking about it and maybe not making as much progress as hindsight says you should have. What are the things that stand in the way? Why doesn't everybody have a successful and robust eCommerce program with lots of revenue flowing through it?

Jonathan Burdette: I think it's a good question. I think in the before [00:05:00] times, launching an eCommerce site might've been a success. If they even wanted to do that because they had in-person salespeople providing a status quo that worked, frankly. In the disruption of that, I think that forces two things. One, to try an eCommerce platform, but two, force them to consider it as a part of a larger whole and a part of their business model and acting like other businesses. What I mean is not just launching an eCommerce site to sell a couple of odds and ends, but how do we connect that eCommerce site since we were forced to broaden how we use it. How do we connect it with our salespeople so that when a customer is having more activity on the eCommerce site, that a salesperson's notified and can give them a call and dig into what maybe other opportunities exist. Or how do we connect it to our service platforms when somebody is looking at manuals on a site. That triggers an action with the customer service team to maybe proactively follow up with that customer and saying, "Are you having problems with X, Y, Z machine, and can we help you with it?" That proactive differentiation is not necessarily [00:06:00] that challenging to do in certain cases in linking your eCommerce platform to other capabilities. I think pricing is one of those key factors because pricing is one of the primary ways during regular times that we communicate with customers, or my customers communicate with their customers. But something that is very important to you, the throttle forward or throttle back, have a sense of what kind of pricing is out there, and how you can communicate via that pricing in an effective and profitable way.

Barrett Thompson: I want to pick up on that linking point for a moment. I have been amazed how many businesses have said to us, "here's the first challenge I face for eCommerce. I price many of my customers through annual agreements. I'm giving them 15, 20, 30% off list, whatever is appropriate, for their size, competitive situation, and so on. I've got that locked away over on my order side. When the orders are placed, customers get priced correctly and all is good. But over on my eCommerce it's so new, it's [00:07:00] so nascent, I haven't yet integrated that customer agreement price. You know what happens if I say to my customer go place an order online. They're like, are you kidding me? I'm not going to pay that list price. That's the only price I can get if I place the order on list or maybe when eCommerce sends the order over to ERP, it gets priced correctly. But when you're sitting there in your shopping card, it's still showing list. It looks like you're going to overpay, and the customers don't like that. Nobody wants to push the submit button when when you think you're going to get charged 30% more than your agreed price. So, as basic as that sounds, I've seen that as one of the first challenges that customers face. Can you even take the prices you've already agreed to for your repeat customers and get those prices made visible in the new order channel where do you want them to go and place the order?

Jonathan Burdette: Totally agree. If you cannot address the issue of, am I getting the price that I negotiated or am I getting the price that we discussed in our last meeting, then [00:08:00] all the other benefits, the customer is not interested in investigating, right? If you're differentiating based on commerce and service, or commerce and it's linked to Salesforce automation. If they're price isn't right, they don't want to talk to the site. They want to talk to a person when there's the person. It's a more manual process and defeats the purpose. So, I totally agree. You have to get that pricing part right.

Barrett Thompson: The other thing I think that used to be a standard on eCommerce sites a couple of years ago, which I hope more businesses will rapidly move away from, is you can go online and put a bunch of things in your cart. Then there's the big button "call for pricing." Who wants to do that? I want to push the submit button. I want to get a I want to get a great price served up to me on eCommerce. I want to push the make it so button. I don't want to call for price. I want to push for order. If you're the manufacturer, that's what you want too. You want to take that friction out? You want the ease of doing business to be much better. As you said, with the manuals, with the cross-reference data, any of that, just bringing it all together. Now, you also mentioned, Jonathan, an idea that [00:09:00] I think is worth bringing in. It's a pricing angle about the need for prices to keep up in real-time to things that are happening. I think that's an expectation whose time has come in B2B. It shouldn't, in all cases, be the situation that the price is sitting static and stale there for two years. Things are happening in the marketplace. We've been doing some work recently on real-time market pricing and being able to respond to triggers. Maybe that's coming from the plant. Its cost increases. Maybe it's coming from the market to competitors who just made a price move. We'll set aside whether that was a smarter or not smart price move, generally speaking, but they made one. What are you going to do? Are you seeing these things? Are you enabling these things with the kind of solutions that you're delivering?

Jonathan Burdette: Backing up for a second. I think the number one thing I've seen in the past eight months or so has been the sales, finance, business leadership, and 'product management leadership that I've talked with have felt a loss of control. I think to your [00:10:00] earlier point, the pricing aspect is the right price that I negotiated. Is it smart for us the manufacturer to offer that price? Everybody's holding their cards very close to their chest. When in reality, there are probably some opportunities out there to steal market share, right? You've got customers with problems, and you've got products that solve them. Price is one aspect, not the only, but one aspect to do that with. I think that the ability to read competitive market pricing and to incent and nudge customers with pricing based on their other purchases. I think there's a lot of opportunity there in a way that is automated, that you control centrally, but you don't have to give a walk line out to a lot of salespeople and hope that they will walk it. With walk line pricing, I think you can really control the levers very tightly with an eCommerce site. You just have to get it right on the front end and invest the work. Yes, in answer your question, I am seeing that. I'm seeing more people interested in that than I've probably seen in years, either on my business side experience or with SAP. I [00:11:00] think that is one of the big opportunities for people who have invested in the eCommerce side or are investing in the eCommerce side. Competitive differentiators getting that pricing right. Because once you do, you can really affect, not only your profitability, the top line revenue, you can do bundling, you can do lots of very creative things that are automated. It can address that long tail of customers.

Barrett Thompson: I'm seeing the same. A moment ago, I talked about people who are working on the basics. Can I get customer agreement pricing visible in the channel? People who are on the leading edge are doing these things that you described, Jonathan. They're using data intelligence, they're using AI engines, and other things to give a guided selling experience suggesting other products that ought to be purchased. They're giving that control back to the business leaders who want to steer the P&L. So, they're coming up to end of month close or end of quarter, or they're sitting on excess inventory or something. They're asking, how can I use the price lever to go drive a price volume response [00:12:00] in the market to achieve certain financial outcomes or certain investment outcomes that are the overall results of the business. Everyone knows that lever works in concept. You pull price, things happen on volume, and then all that flows through. They just haven't had a way to act on it.

Now they do. They have the back backend or the back-office intelligence to find the right prices, to understand what's happening, to find these recommended cross sell products, and so on. Now the front-end tools to deliver them. It used to be let me deliver these actions and insights to my sellers or out to the sales rep, who would walk in and be a genius on about all these things. Or led me deliver it to the inside sales team or who's sitting there in the tele center taking the order.

Now, it's leapfrogged. Let's deliver these things right to the customer the self, as they're sitting in the shopping cart. Or we have some that are sending it out as very targeted and tailored promotional emails that go out to a customer with a product that they should be buying and a special price that's just been authorized. Guess what's at the [00:13:00] bottom of that email? A link that takes them right back to a pre-populated shopping cart sitting in the eCommerce system, so they can go ahead and buy that thing. I'm seeing some really creative actions out. I'm excited for what B2B can do in this arena.

Jonathan Burdette: Yeah, me too. I think that there is a perception sometimes in B2B that there's concern that some of these new capabilities would disrupt their business. I see some hesitancy sometimes even though some of these businesses are digitally transforming a little bit faster than they used to have to. But I think there's actually a kind of a glide path that these companies can follow along the lines of what you're saying.

I don't think you have to go from zero to 60 immediately. I think that you can, for example, do little experiments of what are we doing out in the field with this segment of customer to incent them with price, and let's try and automate just that one thing. A simple experiment of when people buy X product, offering them Y at some kind of simple discount, and doing these little experiments [00:14:00] and then working your way up to the AI assistant pricing experiments.

Because I think that there is some hesitancy of this is new for some companies. I work with household names in B2B, but they've got a lot of manual processes, a lot of spreadsheets running certain divisions of their business. That's more normal than a lot of people think, but there are very steppingstone activities you can do to get from A to B to C, to eventually a lot farther and really benefit your business. So, I just want to make sure that I underscored that people shouldn't be scared off by pricing automation. If anything, you're already doing a lot of this work. It's just manual.

Barrett Thompson: I see the same, and we think a lot about our customers ask us often. We have a tool that does this automation that allows them to get off of general-purpose desktop tools like Excel. I can acknowledge that Excel is perhaps still the number one B2B pricing tool on the planet, and that's shocking. It's shocking how many trillions of dollars of revenue [00:15:00] flow through B2B every week. It's reliant upon some Excel formula that was cut, pasted and maybe had a flaw in it. Nobody knows. Or they're wearing out V lookups. So, they're much better commercial tools to do that. Still giving people the control, they need this, self-determination of flexibility, but on a robust platform, a modern platform. We talked a bit here so far today about what's in it for the manufacturer, for the seller, in making these improvements. Let's look at the other side of the coin for a moment and talk about what's in it for the buyer. How are we or how should we think about enhancing that customer experience positively or negatively? What are some of the practices we would do there? What things would we be transparent about, or would we hide? What things could we add in, and how does that focus on customer experience help us in the long run?

Jonathan Burdette: I think the best companies that I've worked with, worked for, or seen in terms of pricing are the ones that have the most transparent pricing. I recognize how hard that is to do, right? You always say [00:16:00] eat healthy and exercise. Easier said than done sometimes, but it really is that fundamental. If your customers understand your pricing based on the segment that they're in or the type of customer that they are. And you have the ability to scalably set forth pricing that you are willing to commit to openly because you have vetted it and you have automated the ability to set it within your guardrails. That your customers stop being a negotiating opponent, as much as they become working towards the same issue. You've drawn the line, you're offering discounts when it makes sense for you, you're not creating the sense of unfairness in future discounts where they've bought X. Then six months later, they could buy X for half as much. That's what people don't like. I think what that enables you to do is, once you can build that platform of transparency and frankly trust, I think that's what makes it easier to transition to selling, not just products, but also services. Because they don't trust your pricing on your products, and they don't trust your pricing on your products or [00:17:00] services. So, selling the machines with service platform as a service programs and platforms with a built-in monthly expense or something like that. I think that makes it harder for manufacturers, which there are many, who are trying to get out of pure product selling and trying to get into subscriptions and things like that. I think that sets you up for growth with that transparency. The trick, from my point of view, is having tools that make it easy to do it because whatever's easy to do will be done well, consistently, and often.

Barrett Thompson: Jonathan, you've said something there that I think I've underappreciated. It is not just transparency in the price value. But the logic behind or the justification behind why that price is what it is. Either temporarily or in a longer run. That's powerful. Two examples are coming to mind for me: One, I think is probably pretty common in B2B today anyway, and customers get it and expect it. If they come to you with a hundred-dollar order or quantity of a small thing, the price-per-unit might be fairly high. If they come with an order of a thousand quantity, they get the quantity break discount. [00:18:00] So, they understand this idea that the price can vary. It can vary from order to order, but that's not capriciousness or arbitrary, or my seller is not taking advantage of me on one order versus another. That's my order behavior driving a difference in my price. By the way, I think customers like that because they're in control of their behavior. So, if you want a different price, behave differently. But one of the other things that's come up to us recently is I have excess inventory, and I want to move it. So, maybe I offer a temporary price promotion. The thing I haven't really considered is, does that promotional price today, which then with no explanation of where that came. Today's order the price is different, when they order next week and the price goes back to normal, does that feel from a customer experience perspective like I've done them some wrong because I raised the price? To your point about transparency, I'm thinking we have the information. We could, if we chose to, explain temporary price reduction. Good for two weeks. Take advantage of the fact that I'm in an overstock condition, and [00:19:00] I want to pass along the savings to you. There might be some positioning around that value, under the umbrella of transparency, that prevents someone from having a bitter taste later when you go back to normal pricing. I think there's something there. I'm going to spend some more time thinking about that.

Jonathan Burdette: I agree. What I've seen some customers do, for example, is in the scenario you've mentioned before of a suddenly announced price discount that makes your previous purchases feel unfair. Let's say you have any eCommerce site. You've engaged Zilliant, for example. I have seen some customers where they've got excess inventory, and they segment their customers based on who's made large purchases of that kind of inventory that they've got. So, they're doing a targeted sale because they can get access to the data more easily. It's an eCommerce site. They practically can reach out to that customer with some guard rails and some automated tools Zilliant offers and say here's between X and Y. This is what we're willing to do. Here's the quantity breaks. We're going to offer a targeted promotion to just you, and they whittle down the inventory. Then they go to the next [00:20:00] customer in line who's maybe purchased a little bit less than that other customer and so on. What that does is it eliminates maybe a little bit of the mass discount. Like we've all experienced as consumers. I bought that three months ago, and now it's half the price. Every time I look at television prices online, I think I overpaid, and I only bought a TV like six months ago. So, you want to avoid that. But I think being able to have scalable tools that make a lot of the things that we used to assume in B2B were very hard to do, so we didn't try them. Making them a lot easier through an eCommerce site, targeting your customers based on their actual consumption through that e-commerce site, and then leveraging tools Zilliant has to offer targeted automated promotions between guidelines that you could easily throttle up, throttle back and target at the right customers. There's definitely something there that wasn't easy to execute. I probably would have taken 3, 4, or 10 people to achieve before these digital tools were widely available.

Barrett Thompson: You're so right. I think just like we observed Excel is used far too often quite frankly. These blunt instruments. These broad one size fits all price motions are really so endemic, but they [00:21:00] need not be, right? So much better surgical, precise, situational, circumstantially driven price can be done, and it's so beneficial to the business. Jonathan, let me give you a moment to share with us when you look forward and think about manufacturer selling online, whether it's next year or the next five years, what are some of the things you think are coming?

Jonathan Burdette: When I go in or meet virtually with customers now, I put it together as the past 20, 30 years have seen a significant change in how B2B manufacturers have automated their operations. Now, I think we're seeing, this year and even the previous five to 10 years, and it will continue in the future, an automation of the front end. How can I take the best pricing practices that my salespeople were doing and automate a portion of them for a part of the bell curve of my customers. The other 80% or maybe the long tail of my business. How can I make my product selling either online or even in person more [00:22:00] transparent, fair, and frequently executed without having a bunch of people in the process and throwing people at the problem and leveraging automation to an extent. I think what that does is it allows us to do things in B2B that used to involve a lot of people. People listening to this podcast, some somebody out there, knows what it feels like to make a monstrous spreadsheet, to try and figure out how to prioritize inventory based on price in an overstock situation. Or how to prioritize inventory by profitability in a scarce inventory situation. Being able to automate things like that can help you focus on second and third tier strategic problems.

So, you're not working with hand tools anymore. You're working with power tools. I think that's where this is going to the point where, the analogy I use with some customers, is you used to be in movies. They would have a cast of thousands. You look at older movies like Ben Hur and the 10 Commandments, and they have this enormous cast. I think what we'll have in the future is more like a Marvel [00:23:00] movie. I think you'll have a lot of digital tools that make a really cool movie. But probably involve people who are more specialized, more able to focus and are enabled by tools. Aren't competing with them but using them to do things that used to be highly difficult, complex manual, and you were worried that you'd had a mistake in it.

Barrett Thompson: For sure. It's a great summary. I'll add two things that I've seen. The first is that B2B has a lot to learn from B2C. In many instances, B2C appears to be ahead a few years. Things that they're doing, ways they're engaging with customers. They set expectations, if you will, for things like how an engaging online experience might actually go. Coupled with that, and I hear about this so often from the customers I work with, they already understand and are experiencing this generational change that is coming that they thought about at first with their own sellers. Hey, I'm hiring in new sellers as my guys with the pocket protectors shift out of the business. They retire out. I'm bringing in the new guy [00:24:00] who expects to have digital tools that tell him and coach him. They grew up with Siri. They trust the tools and the algorithm, and they don't just lean exclusively on their own personal experience. Now that transformation is happening with the buyers. The buyers expect to be able to flip through and have a phone app, pick out what they want, push the button, and have it show up. That is more and more the case, even with B2B buyers. They expect that kind of experience. It's a generational thing and businesses need to get ready now, or they will find themselves having great product, but not great experience or not great engagement mechanisms for the buyers. That's going to be a hindrance to them, I believe.

Jonathan Burdette: Yeah, I would agree. I think sometimes when I have this conversation, because I've managed a team of people in other industries, I see a lot of similarities with B2B manufacturing. I see a lot of similarities with two kinds of consumer product categories specifically. One would be durable goods. So, buying a dishwasher, buying an air conditioning unit for your house, you actually have more of a B2B relationship with those. You don't want to [00:25:00] replace an air conditioning unit every time it breaks in your house, right? You have a service kind of relationship with that.

You want ed something that has a good warranty. You want the aftermarket part to come in quickly because you want your air conditioning up in the middle of July. The other category I think is luxury consumer goods - the Rolls-Royces or the Louis Vuitton. There's not a lot of buyers of those types of brands, right? I forget the number of Rolls-Royces that are sold in the world, but you can basically fit all those people in a stadium or very small stadium at Wimbledon or something. So, I think the the ability to retain information, to engage with essentially a small number of buyers through digital channels, allows you to keep and retain more than information.

Use it to remarket to them, to market to them, to offer them new products, combinations, or add-ons or whatever in a way that is scalable. And to have a very close way to monitor and gain insights from your customer base. As a former B2B P&L holder, I [00:26:00] think you have a lot of folks telling you need to be more like B2C.

I think there's those two specific kinds of B2C B2B can really learn from, leverage, and dig in whether it's Harvard case studies or what have you to really find something that's directly applicable. Then, you're totally right, there's a whole universe of B2C executions that some of them can be leveraged and cherry picked.

Barrett Thompson: That's a valuable refinement. I appreciate you offering that. Jonathan, this has been a great conversation today. You've given us many wonderful ideas to consider as we strive to improve our eCommerce experience for customers, our pricing practices, and the financial success of our B2B businesses. So, thank you for sharing your perspectives.

Jonathan Burdette: Appreciate it. Thanks for having me, Barrett.

Barrett Thompson: I want to thank each of our podcast listeners for being with us today. Please see the show notes for a link to a joint whitepaper we've developed around these topics. The title is Reimagined Commerce with Zilliant and SAP. We're committed to your success, and if you need any assistance, please don't hesitate to reach out to us at Zilliant and SAP.

This [00:27:00] concludes our podcast. Until next time, have a great day.

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