COVID-19 has wreaked havoc across the economic landscape.
Organisations, industries and markets have had to adapt almost overnight to a completely new way of working. Our research shows that over 60% of business leaders believe their markets have changed permanently, and ~80% believe new propositions will be required.
Whilst much of the focus has been on reaching customers who aren’t physically in retail outlets, the shift has been just as real for B2B companies. We’ve identified some innovative ways that B2B companies have been adapting to the new normal.
New product offerings
One of the most common responses we have seen is B2B organisations offering new products to generate revenue in non-core ways. Early in the pandemic, this was mostly producing products to support the care system: AE Aerospace adapted manufacturing lines to make ventilators; BAE Systems manufactured face shields; Barbour began producing PPE. Since then, we’ve seen other organisations offering new products to their own markets. Here are a few from the automotive industry:
- MotoNovo, a finance provider, have become an accredited introducer for the Coronavirus Business Interruption Loan Scheme (CBILS), offering financial support to both vehicle dealers and corporate customers
- Moneypenny, the telephone answering service, have set up a bot which screens customers for COVID before they visit car showrooms
- AutoTrader have developed a home delivery option for car purchases, which is to be fulfilled by logistics companies that reverse-bid for the job
New commercial models
With capex now at a premium, a number of businesses are offering as-a-service commercial models for their customers. Whilst some of these are new since COVID, for many businesses, COVID has accelerated a move to this type of business model. We’re seeing businesses bundle in other services, like warranties, software, servicing costs and insurances. This helps buyers move capex costs to opex – a more palatable option in the current climate.
- Panasonic advanced marketing of “Toughbook-as-a-service”, where buyers receive new hardware, accessories, warranties, services, software and even end-of-life management bundled in
- Centrica Business Solutions has launched an energy-as-a-service bundle for customers installing their own power generation. Centrica design, install and maintain the asset and charge for energy supplied to the premises
- JLR have launched “Pivotal”, a subscription service for premium SUVs, allowing members to change vehicle every six months. The fee covers insurance, tax, servicing and repairs as well as the vehicles themselves. This is a move from B2B to B2C for JLR, skipping the dealer, and offering something new to customers who are less inclined to fork out in cash for a new car
New pricing models
In response to depressed demand, B2B customers are being offered lower and more flexible prices. Whilst this has been happening in a range of industries, we’ve been speaking to content marketing agencies to understand how they are changing their pricing structure
“Typically, agencies take a fee of the budget. With our customers being even more cautious than usual, we’re accepting more business on a cost-per-acquisition basis, where we are only paid if our marketing campaigns directly result in a sale. We’re also stripping out some other services to reduce costs, accepting more stringent KPIs, and generally accepting more risk than we usually do”
Key Account Manager, Content Marketing Agency
New market entry
For many companies, Q2 was all about battening down the hatches and keeping business running. However, some have already been looking to expansion, and using COVID-19 as the catalyst.
- Kreatize, a German mechanical engineering procurement platform, has expanded into Austria, citing opportunities in the rapid post-COVID manufacturing ramp-up
- Cosignor, a delivery management software, entered UK citing the fact that “the e-commerce industry is growing fast”
Change in positioning
Some organisations are using this time to facilitate a change in positioning in their market, none more so than oil & gas companies.
- BP are accelerating the transition away from fossil fuels as oil prices tank
- Wrote down $17.5bn from oil and gas assets
- Sold petrochemical division (see later section on M&A)
- Sold upstream business in Alaska
- CEO Bernard Looney says COVID has made the case for renewables stronger
- Shell also acknowledged the reduced value of oil assets in the beginning of a move away from fossil fuels
- Warned investors to expect a write-off of $15bn-$22bn in oil assets
- Cut dividends for the first time since the second world war
- Announced plans in April to become a net-zero emissions energy business, echoing BP’s statement from February
M&A is being used for a range of purposes.
Those with deep pockets are looking further into the future:
- Amazon bought Zoox, an autonomous car start-up, for $1.2bn on June 26th
- Google bought North, a manufacturer of augmented reality glasses, for $180m on June 30th
- Mastercard bought Finicity, an open banking and credit decisioning fintech company, for $1bn on 23rd June
Some are divesting to raise much-needed cash:
- BP sold their petrochemicals business to Ineos for $5bn on 29th June
- Softbank sold T-Mobile US for $14.8bn on 24th June
And some are buying undervalued assets from distressed competitors – a trend we expect to continue
- Mitie bought Interserve’s FM division for £271m on June 25th
April and May saw a 48% decline in public listings, as many companies pulled back from planned IPOs, including Finance Ireland and Cole Haan Inc. As it is, June saw a rebound, with many companies offering new shares to the market to raise vital cash at a difficult time:
- Dun & Bradstreet, a business analytics firm, raised $1.7bn on June 30th, aiming to use the cash to repay debt and employ more working capital
- ZoomInfo, a market intelligence platform for salespeople, raised over $900m on June 4th
How can you grow in times like this?
Undoubtedly, this is a time of great uncertainty for people and business alike. However, B2B companies in all industries are adapting, with both short- and long-term perspectives. Those that stand still will struggle.
If you are a decision maker in a B2B company, there are some things you can consider:
- How can we adapt our products to support my customers?
- How could new commercial models support them?
- Which new markets are we now well placed to enter?
- Is our positioning still optimal, given the change in the market?
- How can we use M&A or the stock market to our advantage?
- What do our customers want, and how can we achieve that?
At White Space, we are in constant conversation with all of our clients, and many other global businesses, about how to steer organisations through this period and into the future. With our evidence-based, bespoke market analysis methodologies, and our promise of actionable strategy plans, we can help support you to navigate these times.