Survey: B-to-b direct sales rise thanks to small business

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B-to-b direct sales revenue grew 9% last year, driven in large part by the small-business sector, according to the recently released "Abacus 2006 Business-to-Business Industry Insights" report.

The increase reflects a 13% rise in purchasing activity tempered by average buys that were slightly smaller than the previous year, dipping to $200 in 2005 from $207 in 2004.

The report was based on data provided by the company's 400 Abacus Alliance member businesses representing the buying activity of 75 million business contacts?figures the company claims provide a benchmark for industry trends and future guidance.

"I see a couple of benefits for companies reading this report," said Elisa Krause, VP-analytics at Abacus. "It's about understanding the trends in the industry and seeing how their own clients' trends compare with changes of online growth of sales. It begs some key strategies?for instance, [b-to-b marketers] need to have a look at lifetime value."

Highlighting the importance of a customer's lifetime value, small businesses again led the b-to-b sales sector in the report, with 81% of revenue and a 16% increase in Web sales coming from companies with fewer than 50 employees. Based on information from a sample set of "0-to-12-month multibuyers" from the company's database, the report concludes that 6.2 billion b-to-b contacts made 14 million purchases last year. About $566.0 million in revenue came from small businesses, which tend to make smaller but more frequent purchases than larger businesses, which spent $77.0 million. The smallest sector was midsize businesses, with $52.0 million in spending.

Stacey Hawes, VP at Abacus, said that from an average order perspective, she can see why many b-to-b marketers target large businesses but warned b-to-b marketers not to ignore the entire small-business segment.

Rhode Island-based b-to-b marketing consultant M.H. "Mac" McIntosh agreed: "So many marketers aim for the large companies because they figure it's the same amount of work to manage a large client as a small one, but small companies are underserved in the market and can become very loyal customers to the companies that serve them well and make their lives easier. If you aggregate small business, it's a huge opportunity."

Also significant is the report's finding that b-to-b customers make online purchases nearly 10% more than b-to-c customers, with 40% of 2005 b-to-b sales occurring over the Web, compared with 31% of consumer purchases. Abacus' report said the statistics highlight what most marketers already know: "Business purchases exhibit a different dynamic than consumer purchases."

"These are people that are finally migrating to a channel they prefer," said Hawes, noting that the b-to-b sector was slower to migrate to the Web than b-to-c and now is catching up.

Heavy industry?industrial, manufacturing and transportation companies?accounted for the highest spending: 39% of total sales.

With the exception of cards and stationery and agriculture, all product categories showed revenue increases.

"The main things that I would want a b-to-b marketer to look at [in this report] are the implication sections and where their opportunities are," Krause said. "Start thinking in terms of lifetime value, understanding path to purchase and ultimately come up with the best contact strategy and database architecture that they can."

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