Businesses seem like hyper-rational organizations. They obey the laws of economics and use strategists and metrics. Data-driven approaches made by logical actors govern them.
In short, marketing teams see selling to businesses and humans as wildly different prospects.
However, businesses and consumers have one major thing in common: the people who make decisions are human beings. And, as much as the business world doesn’t like to admit it, their logical decision-makers are still driven by human cognition.
The Objectivity Trap
There’s a famous Madison Avenue-based ad agency called Ogilvy. Their founder, David Ogilvy, is considered the “Father of Advertising.” He passed away in 1999, but the brand is still considered one of the most creative in the industry.
The current vice-chairman is Rory Sutherland, and it’s fair to say he’s a human behavior genius. He produced an excellent research paper called “The Objectivity Trap” that explores how advances in Behavioral Sciences are causing us to re-evaluate what we think we know about marketing.
Sutherland knows all about marketing to consumers. He has the pedigree and vast experience. He suggests that typical B2C marketing relies on emotion. On the other hand, B2B marketing takes a colder, more process-driven approach.
But he’s noticed something else about business – it’s not as rational as some believe.
How bias and irrationality affect business
In his excellent paper, Sutherland talks about how most discussions about bias and irrationality are targeted at the individual. However, organizations can also exhibit these shortcomings.
When institutional, collective, or corporate bias spreads through an organization, it happens at a larger scale. Breaking these patterns can be difficult. Once an idea has passed into received wisdom, it can influence decisions significantly.
For example, if a particular bias is part of the fabric of an organization:
- Thinking that is typical of these biases is widely accepted
- Thinking that runs counter to these biases can carry a lot of risk for the individual
What drives decisions in B2B and B2C?
For Sutherland, the biases and irrationalities in business should concern us. In particular, because they tend to compound. If one person believes something illogical, it’s not a huge problem. When a whole organization does, it tends to multiply.
The paper indicates that the processes behind B2C and B2B decisions are quite different.
If a consumer decides, we can assume that it aligns roughly with their self-interest. They have a problem they need to solve, and the product or service is the solution.
However, in a business, this process is more complex. Sutherland posits that fear of blame plays an outsized role. In the cut-throat world of business, the buck has to stop somewhere.
Products and services are chosen because the decision can be defended or justified. Similarly, solutions that deliver minor, tangible improvements are preferred over riskier options that can significantly benefit the organization.
What emotions affect B2B and B2C decisions
The Objectivity Trap suggests that consumers are driven by fear of regret. At the same time, businesses are driven by fear of failure. This concept is termed Defensive Decision Making.
Sutherland suggests that the reason why organizations are limited by Defensive Decision Making is to do with how decisions are judged. He asserts that the quality of the decision is seen as more important than the consequences. Bad outcomes happen, but you can be forgiven if you make a convincing case about why you chose the path.
For consumers, the result of a bad decision is felt individually. The product doesn’t solve the problem, resources are diminished, etc. For businesses, the effects are different.
Sutherland suggests that fear of judgment hinders businesses’ abilities to achieve better outcomes. He believes we can observe this at its worst when decision-makers’ interests aren’t aligned with the company.
For example, a risky but innovative solution that could give a considerable market advantage is preferred over something more traditional, primarily because the CEO worries that his reputation will be undermined if things go wrong.
How does this matter for your business?
The upside of all of this is that it presents an opening for B2B marketing. If your competitors are paralyzed by inefficient decision-making, you can gain an edge by breaking free of these limitations.
One of Sutherland’s central points is that more companies are B2B than they think. Even businesses like Google generate most of their revenues from businesses.
Additionally, he suggests that if B2B companies comprise around 50% of the economy, B2B marketing should get more attention than it currently does.
Targeting business-to-business decision-makers is highly lucrative. Consumers rarely make six-figure purchases, but for large organizations, this is commonplace. And while targeting these people may have been inefficient in the analog age, digital and social media marketing can be done cheaply, partly because it benefits from automation.
If most B2B marketing teams aren’t using behavioral science and psychology, the companies that do will be able to sell in these larger markets effectively. When marketing teams understand that business decisions aren’t rational, cost-benefit analysis, they can unlock these rewards.
Another thing to consider is how marketing is framed. In an economic sense, it’s seen as a cost. However, in truth, it’s more like value creation. The opportunity is there for whichever teams realize this first.
It’s easy to see B2B marketing operating with a different set of rules than B2C. However, the reasoning behind B2B decisions is not as economic and rational as it seems. Research, data, and cost evaluations do play a role. But decisions ultimately boil down to a decision-maker who doesn’t want to be blamed for making the wrong choice.
If emotions crowd the B2B space, then marketing teams should adopt a more psychological approach. The opportunities are massive.