7 Reasons You Can’t Ignore B2i
If you’re a B2B marketer, these statements are probably true:
- You already have institutional customers.
- You’re participating in B2i without realizing it.
- You’re missing opportunities.
Institutions mirror your best B2B customers. They are such an important opportunity that they truly demand your time and attention.
Institutions aren’t businesses! They don’t buy like businesses, don’t act like businesses, and can’t be segmented like businesses. Many B2B marketers know that certain SIC segments—such as 8211 (Schools) and 8062 (Hospitals)—pull well for them. What they don’t realize is the rich opportunity they’re missing out on by treating these and other institutional segments like businesses.
1. Institutions are a big, big, big market
Institutions represent only a small fraction of SIC classifications yet account for one-third of the total spending in the U.S. (GDP). Institutions are represented by only 50 SIC codes, but account for 1/3 of Gross Domestic Product (GDP).
2. Institutions are bigger than businesses
The typical institution has 15.9 employees. The average business has just 7.4 employees (and that’s not including the 7 million plus sole proprietorships that don’t have any employees at all).
How are institutions different than businesses?
Under the business and institutional umbrellas, there are many vertical markets. Businesses such as magazine publishers, automobile dealers, and restaurants are all engaged in various types of profit-motivated commerce, while institutions such as schools, hospitals, and government offices are purpose-driven, non-commercial organizations developed to act in the public interest.
Like businesses, institutions share many common traits. The chart below shows the similarities in each category. Not every type of organization meets each test, but as you move down the list, almost every type falls predominately into one of the columns.
|Profit driven||Purpose driven|
|Come in under budget||Spend entire budget|
|Recession prone||Recession resistant|
|Pay taxes||Spend taxes|
|Have many competitors||Often are monopolies|
|Financially influenced||Politically influenced|
3. Institutions are more stable than businesses
Businesses close at nearly twice the rate of institutions. Marketing to businesses is like trying to hit a moving target, while constantly struggling to prospect for new customers to replace closed businesses. Think about the number of Fortune 500 businesses over the past 50 years that are no longer in existence today. And, how many restaurants have started up and failed in that one building down the street?
- Harvard University was established in 1636.
- New York Hospital was founded in 1771 and now has a multi-billion-dollar budget.
- Bethlehem Steel was ranked #12 on the Fortune 500 list in 1955, and is no longer in existence today.
- Enron first appeared on the Fortune 500 list in 1995 with revenues of $8.9 billion and filed for bankruptcy just 6 years later.
4. Institutions are growing faster
Over the past 50 years, institutions have grown twice as fast as businesses. The growth of employment in the institutional market has also outpaced the business sector, and is projected by the Bureau of Labor Statistics to continue on an upward swing through 2014.
5. Institutional buyers purchase differently
Most institutions are governed by different accounting standards than businesses, which function under private accounting rules familiar to most of us. Unlike businesses, most institutions have “use it or lose it” style budgets. In other words, the managers are incentivized to spend every dollar of their budgets. It can be very rewarding to time your marketing efforts to coincide with “clean-up spending” immediately prior to the end of the fiscal year.
6. Institutions have concentrated buying power
You can develop a highly effective campaign for less money by targeting the institutional market segment because you don’t need to market to as many places to reach purchase influencers and decision makers. This means higher sales with less marketing expense.
The Chattanooga Area Chamber of Commerce published a list of the area’s largest employers. In the chart below, six of the top ten employers fit the “institutional” definition, and those seven institutions employ 65% of the total employees in the top-ten list.
|1||Hamilton County Public Schools||5,865|
|2||BlueCross Blue Shield of Tennessee||4,514|
|3||The Tennessee Valley Authority||4,394|
|4||Erlanger Health System||3,865|
|5||Memorial Health Care System||3,708|
|6||McKee Foods Corp||2,950|
|8||Chattanooga Local Municipal Government||2,402|
|9||Hamilton County Government||1,985|
|10||Pilgrim’s Pride Corp||1,345|
7. Institutions generate higher lifetime value for you
When you roll reasons 2, 3, and 4 together, it adds up to significantly higher average lifetime value for institutional buyers. Every marketer knows: bigger, growing, and stable customers are the best kind!
With MCH as your data partner, you can overcome the challenges of marketing to institutions and develop a targeted strategy to reach decision makers responsible for spending millions of dollars.
Contact MCH Today to get started on your next Campaign