Emily Alexander co-wrote this blog post with Jason Brown.
As the COVID-19 crisis unfolds, B-to-B organizations are wondering how demand will be affected going forward, both geographically and by business segment. Also, is their company’s performance consistent with the market, and when and how quickly will demand rebound?
Over the past several weeks, we’ve been collaborating with insurers who provide employee benefits to aggregate top-of-the-funnel prospect data (see more on this collaboration in the footnote). We can look at this data as a reasonable measure of B-to-B demand impact, since it spans industry and size and is a common but not necessary purchase for companies. Here are some early findings:
- Small business customer demand was impacted first and deepest (so far). In the three weeks ending April 4, new prospect demand from businesses with fewer than 100 employees was down 30% versus the same three weeks in 2019. And the first signs of weekly decline showed up by the week ending March 7—the earliest of any segment.
- Large business customer demand held through mid-March but is now falling rapidly. Through the week ending March 21, the insurers in our study were posting year-over-year gains in demand among businesses with 1,000 or more employees. But demand has fallen sharply during the most recent two weeks of our study, with this segment posting a decline of 36% in the week ending April 4—roughly on par with the trend in the small business segment.
- Surprisingly, there are no differences in demand trends by geography. We had expected to see demand drop faster in early action COVID states, but at least so far that has not been the case. As of now we see no correlation between weekly B-to-B demand and the rate of infection or pace of government lockdowns in each U.S. state. This bears watching as more data comes in, especially as states emerge from the crisis and reopen business activity.
Why are we seeing these trends?
The speed and magnitude of decline among small businesses is not surprising—many expect small businesses to be most impacted by the COVID crisis. But we believe the accelerated rate of decline among small businesses so far has more to do with the pace of the sales pipeline than any impact from closure or unemployment.
In the insurance sector, small businesses tend to follow shorter buying cycles than their larger counterparts and are thus more likely to reflect demand changes quickly. Small business purchasing is typically done by someone with multiple roles, such as the owner or HR and finance lead, who would likely be more distracted themselves. Further, small businesses are disproportionately represented by smaller, independent brokers, who themselves may be more adversely affected by COVID constraints as they are less well-resourced and may be less equipped to adapt to a remote operating model. Lastly, negative effects from business closure and unemployment are only starting to accumulate in April, whereas we saw a swift and steady decline among small business demand in early March.
The above only paints an increasingly bleak picture of demand for B-to-B sales organizations. If the demand changes thus far do not reflect unemployment or business closure, then there is likely a far deeper trough ahead. Further, in our data it appears that demand declines among large employers—who follow a longer, more lagged buying process—is rapidly catching up, suggesting we may see similar lows across all sectors. By one early ZS forecast, insurers in our study may see weekly new prospect demand fall to zero by mid-May.
Implications for insurers and B-to-B sellers
This early data has provided one important clarification: There is scant evidence (yet) for different impact models by U.S. state. Many of our insurance clients have been weighing forecasting, incentive and performance management decisions that would differ based on how a state was affected by COVID: for example, forecasting Washington state differently from Texas, or customizing quota relief by geography. But at least so far, such steps seem unnecessary as the crisis has quickly broadened and appears to be affecting B-to-B demand across the board.
The broader implications, though, relate to how to adapt to many more weeks of falling demand, while also being prepared to act when demand trends reverse. For our insurance clients, the second quarter is an especially important time for large employer sales—this quarter sees more demand initiation than any other. With that risk in mind, many insurers are collaborating with intermediary partners to keep the pipeline flowing, contemplating rate guarantees for employers, and working to synchronize their sales and operational capacity to demand, all while focusing on the long-term picture, which suggests that insurance products will be even more necessary as we emerge from this crisis.
The full impact of this COVID crisis on B-to-B sales is unknown for now. We’ll continue to track the implications on demand through our data consortium and provide insights as we have them. In the meantime, we hope you and your organizations are weathering the storm and staying safe.
More on the Activity Consortium
These findings were compiled using quoting data (requests from quotes from employers or brokers/distribution partners) from a number of insurance carriers that provide employee benefits. The data was submitted by week, indexed (compared against the carrier’s typical quotes) and averaged across companies to measure the average carrier impact.
While these results are limited to insurance, ZS is also starting to track other industries. If your organization is interested in participating in ZS’s free B-to-B demand study, email COVIDActivityTracker@zs.com to learn more.
For more ZS insights on the impact of COVID-19, visit zs.com/COVID19.