Since the turn of the century, some of the world’s most successful companies have increasingly focused on selling value to customers, rather than products or services. In other words, rather than simply developing new products or reducing their prices to remain competitive – companies have instead distilled and improved the value of their existing offering.
A large factor behind this shift has undoubtedly been the increased availability of data, which has given organizations unprecedented insight into customer behavior. By using this data, companies have been able to quantify how much money and time their customers save by using their products and have been able to fine-tune their offerings based on usage and feedback data.
Facebook’s business model, which charges advertisers for access to uniquely targeted and precise segments of its global consumer database, is the perfect example of this shift towards harnessing the power of a large, communal pool of data to provide customer value. Being able to target an incredibly specific segment within a larger pool of consumer data has allowed consumer-facing businesses to more fully understand their customers’ needs, and in turn to foster a more loyal and satisfied customer base.
Despite the exponential growth of tech behemoths using this model, and the success of consumer-facing companies that have adopted the granular, data-driven approach, we’re arguably yet to see B2B firms really capitalize on using data to deliver increased value.
Rob Bernshteyn, CEO of Business Spend Management software firm Coupa, and Author of Smarter Together: How Communities Are Shaping the Next Revolution in Business argues that those in the B2B space should be taking a leaf out of the tech giants’ playbook, and start looking more closely at using amalgamated customer data to deliver further value to their clients.
Coupa uses artificial intelligence to filter through its Big Data warehouse of nearly $2 trillion in business spending worldwide, and then aggregates the anonymized data it oversees to provide tailored insights to its customers. For example, the platform allows customers to benchmark themselves against their peers on things like average savings achieved, how efficient their financial processes are and how digitized their company is compared to others, by making that anonymized pool of data available to all who contribute to it.
Bernshteyn says: “More and more businesses are taking the approach of quantifying the value delivered against the price of what’s being paid. In an effort to deliver this, why wouldn’t companies begin to tap into the insights and data from their collective community of customers? This would ultimately be for the benefit of each individual customer, making each of us smarter together.”
As opposed to the traditional mindset of companies trying to protect and nurture their individual customer base, Bernshteyn argues that there is much more value to be found by combining those insights and looking at the market as a whole. From there, it would be possible to identify and target specific segments within that pool. Just as Facebook and the tech giants made it clear that casting a wide net and sharing the spoils works out better for everyone, Coupa is trying to bring the same collective approach to the B2B space.
When comparing the accessibility of consumer data with business data however, B2B companies are not so keen to spill the secrets of their customer base, without some kind of guaranteed reciprocal sharing from their competitors. But Bernshteyn does not believe that this is simply a zero-sum game where businesses are forgoing their USP for very little in return, and that the benefits of a much greater insight into your target market outweigh the risks of greater competition.
He says: “The side of this discussion that isn’t talked about enough is the value you generate from getting insights, which are distilled from aggregated data. In other words, why would a business choose to contribute unless the value outcome is greater than the cost of the associated risk?” The risk of sharing customer information and not receiving the same from your competitors is clearly an obstacle to the idea of B2B collaboration becoming a true reality. However, considering the success of this model in the consumer space, it is surely only a matter of time before B2B companies begin to pool their assets as well.
Though there is a caveat to having a single source of buyer information, however, which is the possibility that small businesses would lose out. It wouldn’t be unreasonable to think that an automated platform would push decision makers towards larger, more well-known suppliers (as has arguably been the case in the consumer space), creating an endless and more concentrated loop back towards fewer larger players. Bernshteyn insists that Coupa is taking measures to proactively mitigate this by providing data in such a way that buyers can slant their buying decisions towards, for example, suppliers from minority groups.
By incorporating this kind of algorithmic filter into their platform, Coupa ensures that an aggregated data pool does not become a free-for-all, with the largest companies simply muscling everyone else out. And, what’s more, that it creates suitable conditions under which individual market segments can be easily ruled out based on certain criteria – that way the smaller companies can hit their niche segment, and the big players can still access a more generic customer base.
The social and economic power of the buying community created by Coupa can be used to open up opportunities to young innovative companies, or, potentially, entrench monopolies. Bernshteyn is adamant that Coupa’s platform gives buyers the community intelligence to make more informed decisions and not to necessarily follow the crowd, but he does understand the danger. “If you put these decisions on autopilot, then people just take the path of least resistance and don’t necessarily make the most conscious decisions.” The question is, can we rely on individuals to avoid that path of least resistance, and, in turn, draw power away from the FAMGAs of this world?
When looking at the benefits of a shared pool of customer data, the proof is in the pudding when it comes to consumer-facing companies – they jumped on board and have reaped the rewards of more targeted advertising, as well as the ability to bring a more tailored offering closer to their customers. When it comes to the B2B space, with fiercely guarded secrets and intense competition for sales and customer loyalty, it might be harder to convince business leaders that their market share will not decrease, and in fact may become more solidified, by sharing their resources.
Coupa’s commitment to avoiding the monopoly-making mistakes of the FAMGAs of the world, and its focus on creating more value for customers, could well tip the balance and create a data-driven B2B marketplace. However, until then, businesses will be waiting with bated breath to see who is first to take the plunge.