Online contract conclusion in B2B - how can it work?

Online contract conclusion and online financing in B2B business? Many companies and financial service providers are still quite skeptical about this, as products and (financial) services are often not self-explanatory. This is one of the reasons why many companies are reluctant to digitize B2B-relevant sales processes, preferring to invest in the expansion of a qualified sales team - and leave the financing to the customer alone.

According to a recently published McKinsey study, companies will only be successful in B2B business if they combine a strong sales team with digital communication channels for the customer [1].

Therefore: B2B sales must become digital. After all, "customer centricity" is also increasingly determining business with commercial customers. Their purchasing behavior has changed radically in recent years. Like consumers, corporate customers are also using digital information and procurement options more and more consistently - to the point where they want to conclude contracts and financing agreements completely digitally. Particular attention is being paid to the topics of sales promotion and Retail Finance [2], especially as the effects of internal process optimization (both at the manufacturer or dealer and at the financial service provider) also increase the benefits of corresponding investments.

Dr. Lars Rüsberg has been concentrating on the topics of new business, business development and innovation management since 2013 - after more than 20 years of COO/CIO responsibility in a private bank - now with a focus on automotive & asset finance. In practice, he still encounters a lot of uncertainty in some projects with regard to digitalization and customer experience, especially when it comes to concrete implementation and technological challenges. The answer to this could be customer onboarding, a model for converting interested parties into satisfied customers. He was available for an interview on the topic of "Online contract conclusion in B2B business".

What are the similarities and differences between B2B and B2C business?

Not only consumers, but also business customers are increasingly shopping online today. Research, order processing and further interaction - all these steps are increasingly taking place digitally. Here too, the triad of "inform, compare, conclude" determines the requirements for digital sales processes. In addition, the challenge for providers in the corporate customer business is that customer loyalty is falling dramatically. Even long-standing partnerships no longer protect customers from switching providers. The increasing transparency of the digital world makes it relatively easy for corporate customers to find a comprehensive range of products - and alternatives. If I and my partners succeed in building an ecosystem in which my customer can act quickly and easily, I will retain my customers and win new ones. Convenience and process integration across the entire purchasing process are at the heart of this.

As corporate customers also act as consumers in their private lives, private purchasing behavior is increasingly shaping B2B business. The digital consumer behavior that has been learned increases the expectations of the customer journey in business. Buyers expect optimal customer orientation or an "experience" - even if they are buying office supplies (C-items) or - on a recurring basis - forklift trucks, for example. Simply having a company website with product information and a contact form is no longer state of the art; the focus is on interaction options. This starts with product configurators, presentation in customer-specific web stores, in which it is stored who can order what, etc. and extends to integrated financial calculators, also in connection with complex products, such as vehicles, machines, IT equipment, etc. Comparison portals are also finding their way into both the B2B product and financing business. After just a few details about the company, various financing offers are displayed that corporate customers can conclude immediately - although the conversion rates achieved are usually not disclosed, this business is apparently only slowly gaining momentum [2].

Irrespective of this, the first successful companies are adopting an omni-channel approach, i.e. the seamless integration of online and offline sales channels. Unlike in B2C business, however, the focus in B2B is less on the point of sale and more on online purchases from the workplace.

What do you think of the statement that B2B and B2C sales channels will merge in the future?

I wouldn't call it a fusion, but a clear convergence. Functionalities that have proven themselves in B2C business should also be examined for B2B business. The interests and requirements of a private car buyer and a fleet manager or an employee ordering a company car, for example, are largely comparable. However, the customer journey in B2B business is usually more extensive, certain regulations must be complied with - such as a car policy - or discounts or limitations from framework agreements must be observed. After all, what used to take place in two different business areas is now struggling "together" with unclear customer expectations, changing customer needs, declining customer loyalty and much more. It is therefore an advantage if one segment can learn from the other and transfer experience and possibly also tools.

Digital trends usually first become established in the consumer business before they also attract attention in the corporate customer business. This may be due to lower transaction numbers, greater complexity - even if this is only assumed - or a lack of separation between the business for self-directed investors and the advisory-intensive business. There are also cost-benefit aspects: digitalization must be relevant for the majority of customers.

If companies want to drive forward or digitalize their corporate client business, they are well advised to take inspiration from B2C retail, practice out-of-the-box thinking and explore all transfer options, perhaps even including the joint use of tools.

What does a possible implementation of online contract conclusion for business customers look like?

There is probably no simple, one-size-fits-all solution - not least because the corporate customer business is increasingly about usage concepts rather than ownership. In addition to traditional sales processes, payment and financing processes are equally important, often in the form of booking and billing additional services, perhaps even depending on the situation, such as insurance offers depending on the risk situation.

The basis is therefore an inventory of the traditional contract conclusion processes for both the product and its financing. A digital capability check-up shows what digital maturity has already been achieved or is achievable. A greater distinction must be made between initial business with a new customer and follow-up business with an existing customer than in the private customer business.

However, simply adding digital business processes to proven sales processes is never enough - the two must be integrated, complement each other and enable cross-channel customer journeys. A positive return on investment also occurs more quickly if a corporate customer - independently of ongoing support - can initiate the simple business itself as a "self-directed investor" within the agreed framework, with ordering and financing.

From the start of a purchasing process to the conclusion of financing is already a challenge in the real world, as the process is characterized by interruptions, waiting and idle times, on-site appointments, the sending or subsequent submission of documents and, if necessary, going through an identification, approval or release procedure. This can be done better and faster digitally - the credit check in particular will become even more multifaceted and FinTechs will contribute new functionalities with a wow effect.

The aim is to accompany a potential corporate customer on their digital journey to concluding a contract in such a pleasant way that they successfully complete the process without abandoning it. Corporate customers expect sales channels in which they can process their desired transaction efficiently, smoothly and flexibly. In addition, artificial intelligence, individualized user guidance or augmented reality will open up product selection and extensive configuration options. However, a personalized approach based on the respective needs of the "buyer" is always crucial.

For the successful digitalization of quotation and sales processes in the corporate customer business, it is important on the one hand to understand the greater complexity of B2B transactions properly and legally, and on the other hand to create the necessary IT support. The key to success lies in hybrid IT. Tried and tested legacy systems are not replaced by innovative solutions, but rather supplemented. Modern services provide the much-needed agility and flexibility. This enables companies to implement new functionalities or services quickly and flexibly without having to completely rebuild their existing system structure. The only important thing is access to data or the importing of data into the systems. The modularity and flexibility of the solution approach is crucial, both with regard to the integration of financing or other partners and with regard to future changes in customer behavior.

In a typical process for online contract conclusion in B2B business with a new customer, for example, the following modules could become relevant: Customer Administration Management, Pre-Approval Check, Online Legitimation, Early-Scan Digitization and Electronic Signature. The process chain extends from the manufacturer, possibly via trading partners, to the financial service provider. This takes thinking in and with APIs to the next level.

From the financial services provider's point of view, the onboarding of a new commercial buyer - in this case for the case of Retail Finance of its corporate customer - is rarely conceivable in digital form alone in the case of an initial purchase due to regulatory requirements; after all, appropriate tools of the digital application routes can be used to establish the identity of the acting persons and submit documents.

A Customer Administration Management module is the link between the real economy and the financial sector. It serves the financial services provider as a repository for all the data of the ordering and financing corporate customers and all their relevant employees and also represents the legal portfolio, which is synchronized with the core banking or leasing system and all other data sources. This module corresponds to the scoring and decision steps that occur later in the process flow and, if all relevant data is available, enables an automatic decision to be made by the financial services provider's credit decision engine with feedback to the manufacturer for the purpose of production or delivery approval.

The pre-approval process is used in particular when a new corporate customer is involved and no information is yet available. The financial viability of an investment project is checked on the basis of a reduced set of data on the company and the customer as well as other specific, risk-oriented information. When the data is entered, it is validated in real time in the background, and a basic commitment - with or without conditions - is the result if the information is validated. In the event of a "red case", a quick rejection is issued and further cost-intensive activities are avoided.

Online legitimation is used to legally identify the applicant, for example with the help of video identification. Early scan digitization allows paper-based business processes to be digitized at the customer's premises and further internal steps to be automated. With the electronic signature, companies enable their corporate customers to sign digitally and with legal effect - regardless of office hours or the availability of their corporate customer advisor.

Automated processes for "simple" follow-up business free them up for more demanding activities, substantial advice, such as financial engineering - or further revenue-generating new customer business. Daily business can be handled more quickly and is less error-prone, as there are fewer manual steps. This makes it clear that the integration and automation of internal processes and the digitalization of quotation and sales processes will also be the right steps towards customer satisfaction in B2B business. The challenge for financial service providers is and remains to find the right toolset to optimally support their customers' diverse business models.

Dr. Rüsberg, thank you for the interview.

Sources

1 McKinsey&Company (2017). McKinsey B2B customer decision journey survey 2016. URL: www.mckinsey.com/business-functions/digital-mckinsey/our-insights/when-b2b-buyers-want-to-go-digital-and-when-they-dont

2 Tobias Baumgarten (2017). Open banking - rethinking the house bank with PSD2. www.der-bank-blog.de/open-banking-psd2-hausbank/digital-banking/24299/