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Why Digitization is Pivotal for US B2B Manufacturers

An evaluation of key strategies for industrial companies looking to grow revenue and cut costs through digitization. The digital transformation of the US B2B manufacturing market is already well underway. Manufacturers need to adapt to shifting customer demands or they risk falling behind their competition. 

Leonardo Calisse
23. Jun 2022
11 min read
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Digitization used to be little more than a buzzword for B2B manufacturers in the US. Now, it’s become a vital strategic priority for industrial companies both big and small. 

Although the B2C sector was the first to be swept by digital transformation, this set the standard for a digitization sprint from B2B manufacturers throughout the US and the world over. In the past few years, industrial business leaders have become acutely aware that e-commerce, data analytics, and other digital solutions will mutate almost every aspect of their business. 

However, for B2B manufacturers, digital commerce is about much more than just selling online. It also stands for the development of new business models, the upgrade of traditional sales channels, and a way to reduce the distance between B2B and B2C. 

Keep reading to learn more about why digitization is crucial for manufacturers that want to stay ahead of the curve. 

Digital commerce isn’t just arriving for B2B manufacturers, it’s already here 

As early as 2016, Mckinsey found that B2B digital commerce leaders were driving five times more revenue growth than their peers who hadn’t yet embraced new solutions. However, early B2B digitization efforts were more focused on the digitization of internal processes such as resource planning, back-office workflows, or IT infrastructure rather than customer experience or sales. In fact, B2B companies were routinely outpacing B2C companies in applying digital solutions to internal procedures, while they were severely lagging behind in terms of digitizing marketing and sales.

This gap is quickly narrowing. B2B leaders have now understood that the real growth opportunities are in customer-facing digital transformations. In 2020, a survey of 5,015 US B2B manufacturers by Alibaba revealed that 93% of industrial companies were already conducting some portion of their business online. Of those, 43% were employing e-commerce solutions. 

These figures suggest that digitalization has already made its mark on the manufacturing industry and that B2B companies need to adapt quickly. Nevertheless, there is still a lot of space to grow and innovate on the customer side of things. While industrial businesses have realized the importance of digitizing marketing and sales, a select few have executed large-scale or successful efforts in this direction.  

This can be partly attributed to the fact that B2C businesses have been perfecting their digital channels for years, while manufacturers and other B2B companies are relatively less experienced. With the onset of the pandemic, this discrepancy was made even more evident, as companies were forced to limit face-to-face interactions and swiftly adjust to online services. While a recent McKinsey survey showed that many B2B leaders expected to start meeting more with customers by early 2022, another study found that only 20% of B2B buyers actually hoped to return to in-person sales. 

What does this all mean? That B2B industrials and manufacturers in the US are under pressure to digitize – but it also means that they also have a colossal opportunity for growth that’s ripe for the picking. 

Digitization brings a myriad of benefits to US B2B manufacturers 

The movement towards digital commerce is already enabling manifold B2B companies to set ambitious goals to increase revenues, decrease costs, and digitize marketing and sales. As customers migrate online, a breadth of new opportunities have arisen for industrial companies. In this section, we’ll explore some of the biggest benefits awaiting industrials that aren’t afraid to take the leap.

Activating new sales opportunities 

You’ve probably heard it time and time again: as B2B customers convert to online, their buying patterns have started to increasingly resemble those of B2C consumers. While differences between the two sectors are often underestimated, this trend is still true in some capacity. 

For example, research suggests that the number of B2B customers using digital self-service channels to research and evaluate products rose from 20% in 2016 to 30% in 2019 across industries. In addition, new or repeat orders made through digital B2B channels swelled from 40% to 50% over the same period. This represents trillions of dollars in value while also signaling a clear shift towards a different kind of B2B buying behavior. 

Digital Commerce 360 also reported that B2B online sales on B2B e-commerce sites, log-in portals, and marketplaces increased by 17.8% in 2021. Conjointly, their research suggests that marketplaces are currently the fastest-growing B2B digital sales channel. According to the same source, in 2021, U.S. manufacturers grew their combined digital sales 12.9% to $4.104 trillion, up from $3.634 trillion in 2020. In addition, the growth rate for B2B e-commerce sales last year was 1.46 times greater than the growth in all manufacturing sales and 1.43 times bigger than the increase in all electronic sales. 

For the most part, the message is clear: B2B manufacturers that embrace these buzzing new sales channels are already growing their revenue to new heights by adjusting to modern customer preferences. 

More speed and flexibility

While many of the traditional channels and processes of B2B manufacturers score high in familiarity, they seldom do in terms of speed and adaptability. However, this is not the case for newer, more digitized approaches. For example, by implementing a direct-to-consumer (D2C) strategy, industrial companies can remove the need for middlemen in their sales processes.

This can drastically reduce time-to-market, thus making it much easier to test minimum viable products (MVPs), scale into new markets, launch new products in existing markets, or trial additional capabilities. Not only is the need for communication between third-party channels eliminated, but your income streams will also rely less on third parties such as Amazon Business or Alibaba. 

An industrial company that has its own e-commerce platform or marketplace will be more equipped to remain flexible during economic downturns. By completely owning the customer experience, you’ll have more transparency into the available/serviceable market, more communication with your clients, and be able to adjust your pricing more effectively to market trends. 

Furthermore, with increasing global competition in the B2B manufacturing space, there is a greater assortment and complexity of products as well as shorter product life cycles. This means that US B2B companies whose sales activities are not prepared for this dynamic pace may be overtaken by international manufacturers. 

Increasing efficiency 

Digitization has helped B2B manufacturers all over the US to escalate efficiency to new heights. One of the clearest examples of this is with quoting. Quotes are a key part of most manufacturing businesses, and many B2B companies rely heavily on manual quoting. 

However, manual quoting often involves a complex approval process shared across multiple stakeholders. This can be costly and time-consuming while making it exceedingly difficult to scale the business. In parallel, it can be challenging to manage manual processes on both the buyer and seller sides and to adopt online customers who expect self-service solutions. Industrial businesses running a manual system can also face a lack of data transparency as pricing information is often stored in systems that are disconnected from commerce applications. 

With digitized quoting, there is more seamless communication between stakeholders, pricing cycles are faster, and costs can be reduced due to the lack of manual interactions. Even more importantly, convenience is vastly improved for customers: quotes can be created quickly and converted easily to carts, reordering processes are easier, and self-service quotes can be effortlessly transferred into digital orders. All of this can lead to stronger business relationships and higher opportunities for cross-selling and upselling. Bulk orders can also be stimulated via volume pricing to increase profits. 

Digital tools can also help B2B manufacturers simplify their product and/or service offerings. They can then drive operational efficiencies by focusing efforts on the products and solutions that are most vital for their customers. Deals can also be sped up through the removal of manual touchpoints and administrative tasks. 

In general, maintaining all go-to-market routes via one digital platform enables manufacturers to create a leaner system which leads to significantly lower costs. 

Upgrading the user experience

Research has shown that the B2B shift to digital is not a temporary trend, nor a reaction to the pandemic – instead, it’s the paradigm that will govern industrial businesses moving forward. With B2B buyers becoming more and more accustomed to purchasing online, they are starting to expect the same level of service as their B2C counterparts. 

Online services such as being able to research a product, self-service purchasing, remote interactions, and package tracking are going from nice-to-haves to must-haves for industrial B2B customers. For example, digitization can empower industrial companies to standardize lead times and make them more transparent – this improves visibility and increases customer experience as lack of order tracking is one of the most-cited pain points in the industrial market. 

To put it in numbers, over three-quarters of B2B buyers and sellers now say they prefer digital self-serve and remote human engagement over face-to-face interactions, and most expect this to be the norm going forward. Automation can enable you to streamline customer service while simultaneously making it easier for customers to get answers to their queries. Chatbots can be available 24/7, and while a staple at B2C companies, they haven’t yet caught on in the industrial sector. Through the combination of both in-person and online interactions, customers will be able to choose the contact option that is best for them.

On top of that, by implementing digital commerce solutions such as e-commerce or marketplaces, you can unlock direct access to your own customer base. This thereby allows the activation of more customer touchpoints, incremental sales opportunities, increased personalization, tailored pricing, and the ability to shape your own brand voice entirely. 

This clears the way to improve the end-to-end customer journey, stay on top of current trends, meet new customer demands and achieve higher customer satisfaction. Instead of a long process that involves ceaseless paperwork and manual credit approvals, customers can create accounts instantly, receive instant approval, and scan online catalogs with personalized recommendations through videos, webchats, and video calls. 

With digital B2B commerce platforms, you will also be able to control your own customer service. This ensures you don’t lose any customers due to wholesaler mistakes that are out of your hands. 

As a whole, the combination of all the aforementioned factors leads to higher customer loyalty and retention, which amounts to exponentially more profits.

Harnessing the power of data

One of the main benefits of digital commerce is the endless amount of data that can be gathered. By applying digital solutions to sales, resource planning, marketing, and many other areas of B2B manufacturing, a mind-blowing array of insights can be obtained and applied. 

For example, industrial businesses using an e-commerce solution can use data and analytics to identify accounts that generate little revenue but have the potential for strong growth. Focusing marketing and sales campaigns on these segments can then help produce better results in comparison to less targeted approaches.

A wealth of customer insights can be collected through digital commerce processes – these in turn can be used to customize pricing for different market segments and products, or to test new pricing for existing customers. With the help of automated tools and data from customer surveys or data management systems, new buyer personas or customer segments can be derived and sales processes will be tailored more effectively. 

These new data-driven strategies also enable companies to reallocate resources that would normally be used for manual pricing or process management toward growth initiatives. Additionally, through effective data governance and enrichment, the value of digital solutions and data-rich applications or software can be further maximized. 

Internal and external data sources can be combined to produce a holistic view of the market and to guide the digitization of the customer journey and other processes.

Digitization is of the essence, but it’s not a silver bullet 

While digitization seems to be the clear path forward for B2B industrials in the US, it can be easier said than done. 

Manufacturers often hastily implement digital solutions in an effort to keep up with the competition, without properly considering the resources that will be required. Digital tools are not a cure-all, and the potential challenges for industrial companies can be many – especially when considering the relative digital inexperience permeating this sector. 

Industrial businesses that want to win big by going digital, need to consider all angles and ensure they have the necessary expertise required to avoid common hazards. By forming partnerships with other businesses or vendors, B2B manufacturers can employ external expertise and solutions to ensure their vision is carried out successfully. If digitization is a relevant topic for your business, feel free to check out these B2B manufacturing use cases that prove how helpful these types of partnerships can be when undertaking a digital transformation. 

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