When developing a B2B product, product managers have to think a bit differently than other PMs. From ideation to client interaction to pricing, many areas shift for this specific market. What are some areas PMs should focus on when working within the business-to-business realm? Ambient Photonics CEO Bates Marshall shares the ways B2B product management differs from direct to customer and some tips for product managers at B2B companies.
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On the Ideation Phase for a B2B Product
Bates explores how the criteria is different for B2B when thinking about what products a business will use. He brings up excellent questions to ask yourself while in the ideation phase of a product build.
“We can easily think about products that we buy, products that we consider every day. In the B2C world, people buy things for all kinds of reasons; they buy things because they need them. People need to buy food to eat, for example, you need to keep a roof over your head. You buy optional things, you buy different kinds of clothing to express yourself.
In the B2B world, the purchasing criteria are really different. Fundamentally, I think it always starts with an understanding of the way businesses make decisions, the way businesses allocate their capital, the mission of businesses in their space. You really have to ground yourself in the concept of the firm, or the concept of the business organization. If you have an understanding of the firm, generally, then you can think about the understanding of a particular set of firms or set of businesses in a market space. You really need to think from the standpoint of your consuming company here in B2B to understand what they care about, why they care about those things, how they’re deployed, how they make decisions. That’s the context for the application of your product. Are you thinking of something that they’re going to use themselves? Are you conceiving of an idea for something that will supplement a product that they sell to their market? You really need to be aware of the context in which your customer is operating.
It always kind of starts with an idea to test. Again, in B2B, you need to be attached to the idea of value generation in a way wherein B2B2C, you may not be so attached. Value generation means you have to be contributing in some way to make your customer’s product or make your customer’s enterprise better, or stronger, or more profitable, or more differentiated. You’re applying your innovation, you’re applying your idea to improve outcomes for your customer. The specificity of those ambitions is quite different than with B2C.
We can think about customers incorporating a product into their own product. If your customer is is like an OEM or an ODM and is incorporating your product into their business, or oftentimes you’re selling a product that’s going to be consumed by your customer, but in either case, you need to be quite specific and prescriptive about the application of that product within your customer’s enterprise. That imposes on the B2B product manager this kind of analysis that you can decompose the attributes of your product and help to quantitatively understand how those products are applied and used. Are you going to save your customers money? Are you going to improve the performance of their product? That’s a requirement that is not needed in the same ways in B2C. That’s kind of the beginning stage of ideation.”
On the Differences between B2B and B2C
There are defining differences between B2B and B2C markets, but what Bates points out is, you must have a foot in both worlds to be a great B2B product manager. Through these challenges, you are, in essence, training to be a CEO.
“The fundamental challenge of being a product manager is to think like a CEO. In fact, I always consider product management to be kind of a fantastic training ground for CEOs for general management. As a product manager, you have the unique challenge of having to think like a CEO, but not having a generally direct command and control over those resources. You have to influence through your ideas. You have to be adept at your own internal organization and understand how to be influential without having necessarily everyone on your team be direct reports, In a way, I liken it to being a hospital administrator, where your job is to make sure that the surgical outcomes are great, that the ER is functioning, that the ambulances are arriving on time, etc, but you’re doing that without having those functions directly report into you.
Thinking about the differences between a B2B and a B2C product manager, the B2B product manager really has to have a fantastic grounding in the conception of the firm: Understanding your customer’s business, what the structure is like, and how things work in the business. For that, I always recommend that B2B product managers spend a lot of time in the field, spend a lot of time with their customers, with their sales teams, being curious, being inquisitive, being thoughtful, and reflective, and really trying to understand what it’s like in their market. I can think back from my own experience, when I was just coming out of college, in my early 20s, I thought I had learned some things. I was thrown into the semiconductor market, and of course, the design and fabrication of semiconductors, of integrated circuits, of chips, these are some of the most sophisticated devices on the planet, and the manufacturing systems that bring these miracles to the light of day are unbelievably complex. The supply chains are global, and I just had opened the door by getting involved in semiconductors, into this vast pool in which I knew almost nothing. It was totally humbling. I then embarked upon my journey of trying to figure out how the semiconductor industry worked.
The only advice I can give is to be curious, and to be open, learning, and reflective, and to ask questions. If you’ve got that kind of curious mindset, and you’re open to learning, and you’re unafraid to ask sometimes dumb questions, then you could really begin to gather a more holistic understanding. The B2B product manager needs to have a foot in headquarters, to push things forward with the team, and to relay this cohesive vision of the product, but also a foot in the field, that foot with the customer, and they really bring that sense of the market need and that sense of the customer and their wants, needs, and goals, and bring that back into HQ.”
On Determining Pricing for B2B Products
Pricing can be a tricky part, but it is a fundamental piece of the B2B puzzle. Once again, PMs need to keep in mind that of the business’s goals and that of the customer’s goals when setting a price.
“Pricing is obviously fundamental. One of the fundamental ideas of pricing is that a fair price is a price where the buyer and the seller agree that the price is fair. What’s the value of a service or good? It’s that price where the buyer and the seller agree. That’s the value by definition. From the standpoint of the buyer, in a transaction, the buyer is evaluating lots of different options. The buyer typically always has some kind of choice to make, whether it’s an obvious choice or a less-obvious choice, they have a choice to make. They’re weighing their options. The seller generally is maximizing profits. The seller is trying to maximize profit, but the seller is usually working in some kind of conception of their own business and has a target, let’s say gross margin for a particular product line that typically has to be achieved to make everything else work in the business.
When we think about setting a price, you know, taking it from the standpoint of the product manager or on the selling side, certainly we want the price to be at the level in which the business that is selling the product is targeting. No business can survive if you’re selling under the gross margin target. That’s not sustainable. The wheels will fall off, so to speak. At the same time from the seller’s side, the price has to be attractive to the buyer, it has to make sense for them. In tech B2B product management, usually it’s the innovation itself, which is generating sufficient value, so that the seller can make appropriate margin and that the buyer is able to accrue that value. Our breakthrough technology, our low-light energy-harvesting solar cells, are manufactured using an industrial printing process. We use inkjet printers, we use screen printers to deposit our material on low-cost glass substrates. Our breakthrough is in chemical engineering, the molecules that we print on the material, molecules of our own invention. So our production system is much less expensive than some of these more esoteric, semiconductor-derived vacuum processing systems that you see in high-power-density solar cells. Our production system is relatively low capital intensity. That means we can bring this high-power density at a fair price to our customers. That’s an example of a technological breakthrough that’s meeting the needs of both the buyer and the seller.
One other aspect is the business model. Some businesses are designed to be high-touch, some businesses are designed to be low-touch, and it depends on what your consumer values. We have to think about the strategy of the players in the market and whether the ambition is to be at the top of that market in terms of margins or bid pack or at the bottom of that market and structure the business accordingly. Pricing is vitally important. The analysis of a good price has to be grounded in the value generation for your customer, especially in B2B.”
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Nikki is a cloud and software product Director who works with a global team of talented engineers and architects in designing and implementing innovative solutions from product inception to production. After spending over a decade working in product engineering and management for multimillion dollar technology and start-up companies, Nikki believes what truly drives innovation is not only a commitment to technological breakthroughs but also people’s passion in improving everyday lives by building products that leave a lasting impact, disrupt the industry, and are vehicles of change, while providing the best user experience. When Nikki isn’t working on her next big product release or entrepreneurial endeavors she is spending much needed time with friends and family discussing the latest politics, or simply the meaning of life. She’s an adventurous traveler who also enjoys capturing moments through photography. Nikki also holds a B.S. in Computer Engineering , M.S. in Electrical Engineering and has a corporate innovation certificate as part of the LEAD program.