Industry Insights

How Marketplaces Accelerate B2B Commerce Transformation

By Ideas @ AppDirect / January 12, 2021

Recently, AppDirect had a chance to sit down with guest speaker Joe Cicman, Sr. Analyst at Forrester, for a webinar to discuss how marketplaces are accelerating B2B Commerce Transformation. Afterwards, we had a Q&A session, which we are sharing here.

1. Why are so many B2B companies including digital marketplaces as part of their overall go-to-market strategy?

Despite taking inspiration from their B2C counterparts, B2B companies are still playing catch-up, particularly in more complex markets like large-scale enterprise software and hardware. With traditional channels or basic eCommerce still the norm, providers face two mission-critical issues:

• Poor visibility into demand. Many B2B merchants, especially those using older commerce technology, just don’t have the type of market insights that their consumer goods peers enjoy. Traditional value chains have a lot of moving parts. Add in new competitors and the role of influencers like consultants and industry associations along the purchase path, and the result is many blind spots.
• Wasted marketing spend. Retailer John Wanamaker famously stated, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” He made this statement in the predigital-media era, but it’s still the case in many areas of tech selling, even as B2B marketers aspire to boost the ROI/effectiveness of their efforts and increase the use of data and analytics. Yet without a digital feedback loop, it can be nearly impossible to track or measure attribution — the Holy Grail for marketers.

For example, with IT markets providers traditionally offered margin to the distributors to serve the long-tail of small and medium sized businesses. Those distributor firms invested in marketing and sales support to the smaller resellers. As subscription models like SaaS, and pay-as-you-go like IaaS are preferred by end customers providers, the channel need to shift and think about marketing spend and the visibility of demand in different ways.

These factors are driving many B2B companies to revisit their commerce strategies and look at digital marketplaces as a solution to:

• build better direct relationships with buyers
• offer complimentary product & services from other providers
• deliver an overall better buying experience for the more-demanding B2B Consumer

2. What are the key considerations a B2B company needs to consider when building a marketplace strategy?

B2B companies have to take a close look at their portfolio of products and services to determine which are fit for digital self-service selling. Companies that want to create their own marketplace should first experiment with selling a portion of their portfolio on either a general or emerging vertical marketplace. B2B companies can end up selling on some, none, or all of the marketplaces they try-out. That all depends on the marketplaces’ attributes, needs, and customers. Buyers’ adoption of marketplaces will require B2B companies to master new rules and competencies that their B2C and consumer packaged goods (CPG) counterparts have already mastered. When formulating your marketplace approach, consider that:

• You must evaluate items sold direct and via a channel for marketplace fit. Get started on marketplace selling by determining where you sell today, what type of products you sell, whom you’re selling to, and the frequency and size of the purchase. Ask yourself two questions: Can I associate a SKU with the item, and can I provision it online? If what you’re selling is SKU-worthy and can be described and configured online (and your buyers are using marketplaces!), then it’s likely marketplace ready.
• Marketplaces represent the continual digitization of traditional channels. Marketplaces sit at the intersection of traditional resell-based partners (some of which are launching their own marketplace offerings) and the world of ecosystem partners, such as alliances, affiliates, advocates, ambassadors, and affinity. The role of these non-reselling partners is amplified in marketplaces. Customers use this channel early in the buyer’s journey to explore and compare different offerings, reducing cost and complexity of working with traditional channel sales.
• Five rules will determine success or failure selling on a marketplace. How you master various skills will shape your success: Product marketing (and information) sets the stage; packaging sets you apart; pricing strategy sets up the economic story; and social proof drives conversions. Then, if you’re launching your own marketplace, you’ll need eCommerce and promotional expertise and outside helpers. Expect to build a mix of external agency and platform partners and internal teams across product, marketing, sales, and digital to execute these successfully.

3. How do organizations make that build vs. buy decision around marketplaces and next generation digital commerce?

Technology-wise, we see that framing the decision as “build vs buy” is outdated. That’s because today’s state-of-the-art in software development is radically different than when people either built or bought. It’s different because building isn't building from scratch, and it’s different because there are so many pre-built commercial components available. So, ultimately, you’re creating solutions and orchestrating with vendors that provide you powerful core components.

The new breed of headless commerce and content components allow B2B companies to create progressive web apps (PWAs) to deliver experiences that are frictionless, instantaneous, task-oriented, and personalized. When developed based on your journey map, PWA’s can be rapidly iterated to remove friction and capture opportunities to delight end-customers. IT or product teams focus effort on the experience and let vendors (headless commerce and content vendors) innovate for the core platform capabilities, keep the content flowing fast and the cart scaling.

Specifically what we see around marketplaces is that more digitally advanced organizations have opted to launch their own marketplace as part of their transition to becoming a true “platform business,” with the support of tools from vendors like AppDirect. Not all companies have the tools to be a platform business, which requires the agile approach and API-first mindset of modern software companies. When done well, the economics and market advantage can be compelling, even if it may take several years to move from launching an eCommerce experience to recruiting third-party suppliers (and tracking their satisfaction), and to ratcheting up supply and demand to become a fully mature multi sided platform. The work is significant and finding a vendor to partner with that can jumpstart your marketplace development efforts vs. starting entirely from scratch can be a major advantage.

4. What does success look like for a marketplace initiative and what are the key factors that make organizations successful with marketplaces (change management, metrics, product fit, etc)?

There are multiple factors that are at play in driving marketplace initiative success. First, successful marketplace initiatives are based on customer insights. B2B companies need to understand their customers’ buying teams, it’s often not a single individual. Forrester has identified three key adoption factors that will inform you if your buyers are ready en masse to make the leap to marketplaces:

• The buyer's persona. Is your buyer a "dinosaur" who has an antiquated sourcing process and isn't open to a marketplace because of the risk (for the company or them personally)?
• Their company culture. Is the buyer in an adaptive culture or one that's slow to modernize? Is she in an industry or region with a lot of regulations, which may make it difficult to source from a marketplace?
• The purchase scenario. How complex is the product or solution? Is there an existing SKU? And how much education is needed to advance the sale?

5. How do you see the anything-as-a-service/subscription model playing out with marketplaces, and what are the unique challenges that come into play when using a marketplace for subscription commerce?

Second, B2B companies need strong executive support at the C-suite level. Building marketplaces and the related ecosystems that surround them is complex, you need C-suite sponsorship to drive the necessary change and encourage alignment among all the leaders that will be involved - Product, Sales, Marketing, Finance, Business Development, etc. You need to plan for the long-term investment required and prepare for set-backs and lots of learning, instead of being surprised by it.

Third, a cultural shift is often required – and too often overlooked. B2B companies need to embrace a customer-centric mindset. They need to understand and delight customers with an “unexpectedly superior experience.” That culture shift means a focus on continuous improvement – and to abandon “one-and-done” project-centric thinking. Shorter product life cycles and rising customer expectations mean that B2B companies can’t afford to wait months or even weeks to fix broken systems or processes. Fixes need to happen in days or even hours. Organizations need to push for persistent iteration with frequent customer feedback loops (such as frequent meetings to discuss problematic ratings and reviews). Additionally, B2B companies need to break down efforts into manageable chunks of innovation.

We see several firms in the IT sector embracing subscription model - with both software companies and large resellers (Telcos, Distributors and larger MSPs/VARs) creating SaaS and IaaS marketplaces. Vodafone is a great example of a very large Telco building a strong IT marketplace strategy in key markets around the globe where they’re reselling Microsoft, Google and other SaaS products to their core connectivity and wireless customers.

These models are also playing-out as software companies are transforming themselves into platform companies. Major software firms like Microsoft, Amazon Web Services, Salesforce, and others have created SaaS & IaaS marketplaces as well as ecosystems, where developers build complementary solutions with the platforms’ APIs. We expect more software companies - even in the mid-market - will pursue platform strategies that leverage subscription-based marketplaces.

Emerging opportunities are even more interesting as we move into other sectors like manufacturing. Let’s take the long view of anything-as-a-service and consider the hypothetical of Cold-Air-as-a-Service. We believe a manufacturer with a strong brand would offer it. The service would be bundled into rent, homeowner association fees, or a builder’s package. It would include an HVAC unit with sensors and IoT devices connecting to the cloud for remote diagnostics. It would be accessorized with thermostats from any of the smart home platforms. And it would be installed, serviced, and maintained by local technicians working in a gig economy fashion. Behind the scenes the logistics, fulfillment, and credit facilities could similarly be sourced-out to providers – all rated by SLAs and end customer feedback. We see instructive and promising investments from firms like ABB, Honeywell and others to enable these types of anything-as-a-service scenarios.

The brands that provide these anything-as-a-service offerings will use marketplaces to package and control the presentation of the value chain to the customer.

For a deeper exploration of these ideas, read the following Forrester reports:

• Out Of The Shadows: How Marketplaces Will Disrupt Tech Buying
• Think SKUs, Not SOWs: How Marketplaces Will Shake Up Tech Selling
• Research Overview: Online Marketplaces
• Create A B2B eCommerce Plan That Wins Over Customers, Partners, And Colleagues
• Join The Progressive Web App Movement
• New Tech: Marketplace Development Platforms And Tools, Q4 2020