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6 Ways to Measure ROI of Digital Change in B2B Manufacturing
How To Accurately Measure ROI From Digital Change Initiatives
- Article
- 7 MIN READ
- May 26, 2023
Head of Business Development and Partnerships EMEA
Summary
One of the biggest barriers to digital change in B2B manufacturing is proving the internal business case. Traditional sales models have served many of these companies well for decades — sometimes generations — and technology is often looked at as just something IT keeps running in the background. Yet the longer companies wait to make digital a key part of their revenue engine, the more they risk falling behind, with Gartner predicting that 80% of B2B sales interactions will occur in digital channels by 2025.
Gaining momentum for digital transformation, and buy-in for the investment, requires telling the technology story in a way that resonates with everyone in the organization. Instead of getting caught up in conversations about product features and performance, technology leaders need to be able to talk about the value of digital in the context of the challenges and needs of different stakeholders.
"It's no longer enough to go to the C-suite and pitch the high ROI and low TCO they’ll recognize from digital transformation,” says Michael Scholz, Vice President of Product & Customer Marketing, commercetools. "You need to show how what you are proposing will solve a problem — whether that’s low customer retention, abandoned shopping carts, or something else. If, right now, most of your IT budget is spent on maintaining your existing technology and your team is too busy fixing things to innovate, then you can’t deliver experiences that live up to the expectations of today’s B2B buyers."
Here are 6 ways to make the business case for digital change in manufacturing and how to measure the return on investment (ROI) in terms of revenue, profitability, and customer satisfaction.
1. Boost sales productivity
Free up sales teams from repetitive tasks and give them more time for high-value sales and consultations with connected data, automation, and self-service options.
The challenge: On average, B2B sales reps spend only 23% of their time on direct selling activities. Sales teams are bogged down with manual order processes, constant 10-minute phone calls answering the same basic questions, and hours spent hunting down information in disconnected systems and old email threads — this leaves them little time for the high-value activities they’re best at.
Digital solution: With a digital approach, sales teams can automate the most tedious parts of order fulfillment and connect data across business systems so that accurate product, pricing, order, and account information is always at their fingertips. Giving that information to customers in a self-service portal further frees up the sales team. In one case study, when customer service responsibilities were taken off the sales team’s plate the number of reps reaching quota jumped from 25% to 85% in a year.
How to measure: Sales Value Productivity = total revenue / total number of sales representatives
2. Remove technology debt
Reduce the cost of change by replacing hard-to-maintain legacy platforms with modern, easy-to-use tools for developers and business teams.
The challenge: In our experience, there are two common sources of tech debt in manufacturing. First, homegrown platforms that were built for early digital needs and are now incredibly complex to maintain, improve, and integrate with other tools. Second, technologies inherited through mergers and acquisitions cause high overhead to maintain and integrate, especially in situations with duplicate costs like using multiple legacy ERPs. In both cases, companies are stuck with tech stacks that are expensive to maintain, frustrating to use, and create a huge barrier to change.
Digital solution: Modern, Software-as-a-Service (SaaS) tools can help quickly ease the burden of legacy tech. Many of these SaaS solutions offer user-friendly features for both development and business teams and an API-based data structure that makes it possible to pull in data from other systems and work with it in a unified interface, allowing companies to gradually sunset legacy tools without disrupting business processes. In a case study conducted by Forrester, by going from a patchwork of content tools to a modern content management system (CMS) one company saw an 80% and 90% reduction in time spent on content development and publishing, respectively, which saved the company $2.5 million over 3 years.
How to measure: Productivity Savings = number of people working on task x average salary x percent of time spent on task with old technology x percent reduction in time spent using new technology 50% to estimate that half of the time saved will be captured as costs saved. (Example: 10 developers x $120,000 average salary x 50% of time spent maintaining old website x 80% less time needed to maintain new website x 50% savings captured = $240,000 Annual Productivity Savings)
“Composable DXP and headless strategies are now seen in manufacturing, capital equipment, and logistics just as much as they are in retail and FMCG. This developing B2B market is set to reap huge benefits from offering better digital experiences to customers and other stakeholders", said Preseetha Pettigrew, VP of Partnerships at Contentstack. "We at Contentstack are proud to partner with Apply Digital to help our clients create exceptional, compelling digital experiences that increase time to market by up to 99%.”
3. Improve speed to market
Reuse content, functionality, and back-end technologies to quickly launch new experiences for web, mobile, marketplaces, and other front-end channels.
The challenge: The complexity of B2B sales means that many businesses need to provide a unique experience for customers in different verticals and regions, as well as for buyers purchasing on apps or B2B marketplaces. If a company has to rebuild their architecture or invest in a whole new set of technologies for each sales channel, it quickly becomes too expensive to keep up with the eCommerce demands of today’s B2B buyers.
Digital solution: Headless technologies separate back-end structure from front-end presentation so that the same data and functionality can be reused in different ways to create new experiences and support new sales channels. This allows companies to do things like spin up a regional site by reusing commerce logic, product data, and site structure and quickly localizing pricing and content. For example, Coca-Cola Embonor has taken a headless approach and now powers their B2B site, B2B app, and B2C site with the same back-end technologies and saw a 40% increase in revenue within a few months of launching these modern solutions.
How to measure: Speed to Market = calendar time or person – hours it takes to bring a project from first stakeholder engagement to launch
4. Optimize order flow
Maximize order margins by creating an efficient flow of data between systems in order to automate processes that lower distribution costs.
The challenge: A lot of cost gets lost in distribution when manufacturers don’t have the connected data to make sure that routes are optimized and trucks aren’t going out half empty. If data sits in silos, or is only shared once a day in large batch jobs, logistics systems struggle to efficiently balance cost reduction and delivery speed.
Digital solution: With a MACH approach to technology, companies can create an event-driven architecture where specific bits of data are shared in response to triggers like customer actions and system updates. Giving companies the real-time insights needed to automate ordering solutions that are a win-win for the customer and the business. For example, a customer places an order and the logistics intelligence flags that there is still space on the assigned truck. Pulling from warehouse inventory and customer preference data the system figures out what suitable products could fill that space and sends an automated email offering these to the customer at a discount.
How to measure: Average Order Margin = (total sales revenue – cost of goods – distribution costs) / total number of orders
5. Reach more customers
Make it easy for new customers to find you online by providing rich, up-to-date product content that accelerates buying decisions.
The challenge: 85% of B2B buyers say the brand manufacturer’s own site is the best source for product information and buying groups report spending more time researching online (27%) than speaking with potential suppliers (17%). If it’s not easy for business users to update site content, if product data is incomplete or out-of-date, or if content isn’t structured in a way that makes it easy to find via search, then a company is missing out on a major opportunity to reach new customers.
Digital solution: Accurate product attributes are essential for B2B buying decisions (product-specific information e.g. length, width, no. threads, material, etc). Having a single source of truth for product data and sharing it via APIs ensures that information is always up-to-date and consistent across the website, internal tools, and third-party marketplaces. It also makes it easier for product teams to maintain that data and for marketing teams to turn it into helpful content for buyers. When the global agricultural company, Ag Growth International (AGI), moved to a modern content solution they saw a 13% increase in page views and over 11K engagements with their 3D content in the first two months.
How to measure: Consumer Acquisition Cost = (marketing spend + sales and marketing personnel costs + associated software costs) / new customers gained in a specific time period
6. Keep customers happy
Give customers access to account information and self-service capabilities so they can place simple and repeat orders at their own convenience.
The challenge: Improving the customer experience is the cornerstone of digital transformation. Customer-obsessed B2B organizations expect more revenue, profits, and customer retention than their peers, and to become customer-obsessed you have to give customers what they want — and they want eCommerce. 83% of B2B buyers prefer ordering or paying digitally and 44% of millennial B2B buyers prefer no sales rep interaction at all. From our own interviews with B2B companies, we’ve heard of multiple cases where buyers were directly told by management to only choose suppliers that had an easy digital purchasing option.
Digital solution: Make ordering as easy as possible by giving customers a central place where they can find favorite products, account-specific pricing, order history, approval status, and more. Along with reducing customer service costs, this type of connected eCommerce experience gives businesses the opportunity for cross-sell, upsell, and to grow wallet share. When Coca-Cola Embonor added modern eCommerce to their site they saw a 75% increase in B2B repurchase rates.
How to measure: Customer Lifetime Value = (average order value x order frequency) / customer churn rate
While there are definitely challenges manufacturers have to overcome to move to modern technologies, there is incredible opportunity for businesses that do. If you’d like to chat about the value digital can bring to your organization, we welcome you to get in touch.
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