Skip to main content

Behaviorial Psychology

The Power of Brands in B2B Decision-Making

TL;DR: People choose well-known brands in high-stakes decision-making as a risk reduction heuristic, even when the brand is inferior in quality, features, and/or services.

How do buyers make decisions in complex B2B sales, where large sums of money and critical business outcomes are at stake? A recent study sheds new light on this question, revealing brands' surprising and significant role in B2B purchasing behavior.

The study challenges the conventional wisdom that B2B buying is an entirely rational process driven solely by objective factors like product specifications, price, and measurable ROI. Instead, the researchers found that brand perceptions and trust are crucial factors shaping decision-making, especially in high-risk or high-uncertainty situations.

Brand sensitivity is U-shaped

One of the study's key findings is that buyers' sensitivity to brand influence follows a U-shaped pattern relative to the perceived risk of the purchase decision.

When the stakes are low, brand matters. Buyers default to choosing a well-known or trusted brand as a choice-simplification heuristic. For example, think of shopping at a grocery and facing a wall of toothpaste options – relying on a well-known brand reduces the effort required to decide.

As the risk level rises from low to moderate, buyers tend to evaluate their options more rationally and systematically. They scrutinize product features, compare prices, and assess total cost of ownership. Brand perceptions are secondary to these more objective criteria.

As risk levels climb into the high range, an interesting shift occurs. Faced with the complexity and uncertainty of a high-stakes decision, buyers again turn to brand—this time as a risk-reduction heuristic. An established brand's trusted reputation and proven track record can provide assurance and mitigate the perceived risk of the decision.

The so-called IBM effect (i.e., the “you won’t get fired for buying IBM” principle) provides a well-accepted, contemporary example of how buyers weigh subjective factors relative to objective factors. For decades, IBM established itself as the enterprise systems market leader despite lacking superior systems, functionality, or pricing.
(From the study)

Brand dominance is self-sustaining

Once a brand achieves a certain level of recognition and trust, it can enter a virtuous cycle that continually strengthens its position in the market. Here's how this virtuous cycle plays out:

  • As a brand becomes more widely recognized and trusted, more buyers choose it as a risk-reduction heuristic, especially in high-stakes situations.
  • These choices lead to more successful customer experiences, which in turn generate positive word-of-mouth, testimonials, and case studies.
  • This additional social proof and evidence of the brand's value further enhances its reputation and trustworthiness, making it an even more appealing choice for risk-averse buyers.
  • As more buyers continue to choose the brand, its market share and revenue grow, enabling greater investment in marketing, product development, and customer support.
  • These investments help to maintain and extend the brand's recognition, perceived value, and trust levels, attracting even more customers and reinforcing the cycle.

Over time, this self-reinforcing loop can create a significant advantage for the leading brand, making it increasingly difficult for lesser-known brands to gain traction, even if they offer comparable or superior products or services.

Challenger brands must focus on building recognition and trust

While competing a dominant player's brand recognition may be difficult, challenger brands can still gain traction by relentlessly building trust with their target customers. How? Well, you might want to check out the 6 laws of growing brand. High level:

Build recognition

A challenger brand trying to gain recognition against a well-known brand should consider reducing the "surface area" of its market. For example, a challenger brand might focus on marketing to specific accounts (ABM), a specific geographic region, a specific vertical, or some combination. Doing this makes it easier for the challenger brand to build a more substantial share of voice relative to the better-known brand.

For example, challenger brands like Snowflake (cloud data warehousing) and Databricks (data analytics) have successfully employed vertical-specific strategies. They focused on healthcare, financial services, and retail sectors, where their solutions offer unique value. By building deep expertise and a strong reputation within these verticals, these brands have been able to compete effectively against larger, more established players.

Build trust

Social proof should be integral to the brand experience, woven throughout the marketing and sales journey. By consistently showcasing the positive experiences of real customers, brands can build a sense of trust and validation that can help overcome buyer objections.

This means using customer testimonials and quotes on the website and in marketing collateral, case studies that showcase specific customer successes and ROI, customer reference programs that allow prospects to speak directly with satisfied clients, third-party reviews and ratings on industry-specific review sites or platforms, customer advocacy programs that encourage clients to spread positive word-of-mouth, etc.

In complex sales, trust is the currency of success.

Brand matters

CROs are often skeptical of investing in brand, preferring to invest primarily – or only – in growth marketing. This focus makes a lot of sense – companies either grow or they die. However, there's a good case that for complex B2B, brands are more than just names or logos. They are mental shortcuts, risk-reduction heuristics, and repositories of trust that can shape buyer behavior. For B2B marketers and salespeople, understanding and leveraging the power of brand at different levels of decision risk is not just a matter of aesthetic —it's a matter of business success.