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McKinsey Survey: Chinese B2B decision maker response to COVID-19 crisis

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As governments and organizations continue to work toward containing COVID-19 and stem the growing humanitarian toll it is exacting, the economic effects are also beginning to be felt. We are tracking B2B decision maker sentiment to gauge how people’s expectations, incomes, spending, and behaviors are changing throughout the crisis across multiple countries over time. Please check back regularly for updates.

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McKinsey Survey: Chinese B2B decision maker response to COVID-19 crisis

  1. 1. McKinsey & Company 1 Optimism is relatively high and growing: Two-thirds are optimistic about the economy, up 12 percentage points from two weeks ago Confidence level on economic conditions after the COVID-19 situation1 % of respondents 5 2 39 29 56 68 April 6 April 27 Optimistic: The economy will rebound in 2–3 months and grow just as strong as or stronger than before COVID-19 Pessimistic: COVID-19 will have lasting impact on the economy and will show regression/fall into lengthy recession Neutral: The economy will be impacted for 6–12 months or longer and will stagnate or show slow growth thereafter 1Q: How is your overall confidence level on economic conditions after the COVID-19 situation? Figures may not sum to 100% because of rounding; a “prefer not to answer” option was given, but <1% of respondents filled it out in 2020. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #1 4/6–4/6/2020 (n = 400); McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)
  2. 2. McKinsey & Company 2 China is more optimistic compared to other regions, behind only India 12 11 9 12 18 12 10 41 13 12 10 43 47 47 50 49 50 29 19 48 58 51 41 45 42 43 37 33 39 68 71 10 30 37 50 ItalyFrance UKSpainAll countries Germany 2 China India Japan S. Korea Brazil US Confidence level on economic conditions after the COVID-19 situation1 % of respondents Optimistic: The economy will rebound in 2–3 months and grow just as strong as or stronger than before COVID-19 Pessimistic: COVID-19 will have lasting impact on the economy and will show regression/fall into lengthy recession Neutral: The economy will be impacted for 6–12 months or longer and will stagnate or show slow growth thereafter 1Q: How is your overall confidence level on economic conditions after the COVID-19 situation? Figures may not sum to 100% because of rounding; a “prefer not to answer” option was given, but <1% of respondents filled it out in 2020. Percentage- point change in optimism between April 1–9 surveys and April 20– 28 surveys Europe APAC 1% -9% 4% 7% 0% 0% 12% 3% 2% 8% -10% -5% Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/20–4/28/2020, (US n = 607), (France n = 219), (Spain n = 215), (Italy n = 407), (UK n = 218), (Germany n = 414), (China n = 443), (South Korea n = 200), (Japan n = 202), (India n = 411), (Brazil n = 419)
  3. 3. McKinsey & Company 3 China is decelerating its budget reductions more than APAC on average; near-term spend reductions are also decelerating 46 41 33 34 21 25 April 6 April 27 Company’s budget (changes already made)2 Expected in the next two weeks3 China APAC4 51 51 27 25 22 24 April 9 April 28 Spend shifts as a result of COVID-19 % of spend changes 31 23 41 41 28 37 April 6 April 27 43 40 31 29 26 31 April 9 April 28 1“About the same” refers to ±3% change in budget. 2Q: How has the coronavirus (COVID-19) situation affected your company’s budget for the following areas? Percentages may not add to 100 because of rounding. 3Q: How do you think spending on the following may change in the next two weeks? Percentages may not add to 100 because of rounding. 4Includes survey respondents from (China n = 443), (South Korea n = 200), (Japan n = 202), (India n = 411). Source: McKinsey COVID-19 B2B Decision-Maker Pulse #1 4/6–4/6/2020 (n = 400); McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443) IncreasedAbout the same1Reduced
  4. 4. McKinsey & Company 4 Respondents report downward budget shifts across all categories, with banking and insurance least affected to date 53 32 28 42 36 42 42 47 41 50 33 36 38 31 35 43 29 39 41 31 29 34 29 43 33 34 15 33 30 29 25 17 27 24 25 21 24 30 28 Processing supplies Distribution and transportation Software and telecom Packaging Banking and insurance Energy Specialty inputs Commodity inputs Finished goods Vehicles Capital equipment IT hardware Real estate Reduced About the same3 Increased Budget changes due to COVID-19 (changes already made)1 % of respondents Net intent2 Services Inputs Capex -38% 1% 2% -13% -11% -25% -16% -23% -16% -29% -9% -6% -11% 1Q: How has the coronavirus (COVID-19) situation affected your company’s budget for the following areas? Figures may not sum to 100% because of rounding. 2Net intent is calculated by subtracting the % of respondents stating they expect to decrease spending from the % of respondents stating they expect to increase spending. 3“About the same” refers to ±3% change in budget. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)
  5. 5. McKinsey & Company 5 The pharma and medical products industry is experiencing the most significant budget decline Budget net intent1 per category for each industry2 Overall industry net intent % where budget is about the same3 Advanced industries Technology, media, and telecom Global energy and materials Pharma and medical products Travel, transportation, and logistics Global finance, banking, and insurance Consumer/Retail Services Inputs Capex Specialty inputs Energy Processing supplies Packaging Commodity inputs Finished goods Software and telecom Banking and insurance Distribution and transportation Capital equipment IT hardware Vehicles Real estate 39 30 39 29 26 21 21 N/A4 Net intent: % of budget decreases subtracted from the % of budget increases Below -50 -50 to -25 -25 to 0 0 to 25 25 to 50 50+ 1Budget net intent is described as the % of budget decreases subtracted from the % of budget increases. 2Q: How has the coronavirus (COVID-19) situation affected your company’s budget for the following areas? 3“About the same” budget changes are those that are +/- 3%. 4Sample was insufficient. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443) N/A4 N/A4
  6. 6. McKinsey & Company 6 In the next two weeks, spending will likely increase across a majority of categories across industries Net intent: % of budget decreases subtracted from the % of budget increases Below -50 -50 to -25 -25 to 0 0 to 25 25 to 50 50+ Next two-week spending net intent1 per category for each industry2 Overall industry net intent % where budget is about the same3 Advanced industries Technology, media, and telecom Global energy and materials Pharma and medical products Travel, transportation, and logistics Global finance, banking, and insurance Consumer/Retail Services Inputs Capex Specialty inputs Energy Processing supplies Packaging Commodity inputs Finished goods Software and telecom Banking and insurance Distribution and transportation Capital equipment IT hardware Vehicles Real estate 42 41 44 36 32 29 41 1Net intent is described as the % of spending decreases subtracted from the % of spending increases. 2Q: How do you think spending on the following may change in the next two weeks? 3“About the same” spending changes are those that are +/- 3%. 4Sample was insufficient. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443) N/A4 N/A4 N/A4
  7. 7. McKinsey & Company 7 Global energy and materials Advanced industries Pharma and medical products Technology, media, telecom Travel, transportation, and logistics Global finance, banking, and insurance Consumer/retail All industries are shifting capacity down in light of tempered demand; advanced industries and travel seeing sharpest declines Flat -10% Demand for products/ services Operational capacity (eg, production)3 Flat-10% Impact of COVID-19 on demand and capacity1,2 % change due to COVID-193 1Q: How has the coronavirus (COVID-19) situation affected your company’s production (operation) capacity? Percentages may not add to 100 because of rounding. 2Q: How has the coronavirus (COVID-19) situation affected demand for your company’s products/services? Percentages may not add to 100 because of rounding. 3Weighted average uses following midpoints: “increased/reduced 25+%” is +/- 30%, “increased/reduced 11–25%” is +/- 18%, “increased/reduced 4–10%” is +/- 7%, “About the same (+/- 3%)” is 0%. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)
  8. 8. McKinsey & Company 8 Companies are reducing marketing spend in all regions; more than 60 percent of China B2B companies have reduced their marketing 62 63 58 56 68 71 62 69 65 71 58 57 18 19 21 23 18 14 19 8 26 20 16 20 20 18 21 21 14 15 19 24 8 10 26 23 SpainAll countries Germany ChinaFrance USItaly UK India S. KoreaJapan Brazil Europe APAC Marketing spend change1 % of responses 1Q: How has the coronavirus (COVID-19) situation affected your company’s marketing spend across all channels? Percentages may not add to 100 because of rounding. 2“About the same” refers to ±3% change in budget. IncreasedAbout the same2Reduced Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/20–4/28/2020, (US n = 607), (France n = 219), (Spain n = 215), (Italy n = 407), (UK n = 218), (Germany n = 414), (China n = 443), (South Korea n = 200), (Japan n = 202), (India n = 411), (Brazil n = 419)
  9. 9. McKinsey & Company 9 The importance of digital sales has almost doubled over that of traditional sales interactions since the onset of COVID-19 Importance of digital vs traditional to B2B buyers themselves1,2 Points allocated out of 100 1Q: Prior to COVID-19, how important were each of these methods in delivering an overall outstanding sales experience? Please distribute 100 points across these two items, giving more points to the method that you believe is more important to you personally when interacting with your suppliers. 2Q: Now, thinking about the next two weeks given the environment with COVID-19, how important are each of these methods in delivering an overall outstanding sales experience? Please distribute 100 points across these two items, giving more points to the method that you believe is more important to you personally when interacting with your suppliers. 3Q: Prior to COVID-19, how important was each method in delivering an overall outstanding sales experience? Distribute 100 points across these items, giving more points to the method that you believe is more important to your customers. 4Q: Now, thinking about the next two weeks given the environment with COVID-19, how important are each of these methods in delivering an overall outstanding sales experience? Please distribute 100 points across these two items, giving more points to the method that you believe is more important to your customers. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #1 4/6–4/6/2020 (n = 400); McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443) Importance of digital vs traditional to B2B company customers3,4 Points allocated out of 100 48 63 52 37 Before COVID-19 April 27 +30% 46 63 54 37 Before COVID-19 April 6 +35% Traditional Digital
  10. 10. McKinsey & Company 10 Digital, self-serve channels are now seen as the most beneficial for researching suppliers; mobile app research has risen 400 percent 7 24 2 23 11 17 10 2 31 40 24 19 12 56 14 8 34 31 24 23 16 18 17 11 20 16 15 11 6 22 18 16 Google/ web search Call from sales rep Info on mobile app Direct mail from sales rep Supplier website Live chatOnline material from supplier Post on social media/online Email from sales rep Text from sales rep Referral from someone in my industry Customer referral Trade show Print material from supplier Industry publication Meeting sales rep in person 3% 633%423% 28% 1257% 1% 47% -61% 31% 94%-34% -60% -39% -41% -54% 1Q: What ways of interacting with a supplier would be most beneficial to you when researching/considering suppliers going forward? Rank up to 3 that would be most beneficial. A free-response option was given, but <1% of respondents filled it out in 2020; ~5% of respondents answer ‘None of these’ as one of their top three responses in 2020. 65% Source: McKinsey COVID-19 B2B Decision-Maker Pulse #1 4/6–4/6/2020 (n = 400), McKinsey Global Omnichannel B2B Sales Survey, 2019 (n = 400) % YoY changeX% 2019 2020Most beneficial supplier interactions for researching/considering suppliers1 % of respondents ranking in top 3 Digital Self-serve Directed Self-serve Directed Traditional
  11. 11. McKinsey & Company 11 Digital self-serve for order submission is now preferred significantly more; mobile app ordering has risen 170 percent 18 27 69 53 65 43 25 48 46 49 29 34 28 28 27 Using my company’s e-procurement portal Using call center/customer service Using a mobile app Emailing sales repUsing a supplier’s website Using my company’s procurement department Calling sales rep Ordering from sales rep in person -36%172% -58% -58%71% 6%N/A -36% Source: McKinsey COVID-19 B2B Decision-Maker Pulse #1 4/6–4/6/2020 (n = 400), McKinsey Global Omnichannel B2B Sales Survey, 2019 (n = 400) Self-serve Sales rep involvementInternal processes Most preferred method for ordering1 % of respondents ranking in top 3 1Q: Which of the following methods do you/would you most prefer to use when submitting your order? Please rank up to 3 that would be most beneficial. Results for top 1 responses are consistent with top 3. A free-response option was given, but <1% of respondents filled it out. 2Question was not asked in 2019. N/A2 % YoY changeX% 2019 2020
  12. 12. McKinsey & Company 12 60 46 55 57 0 25 45 70 63 0 Inside sales team (eg, interacting with customers on the phone) In-person/field sales team (eg, meeting with customers face to face) Online/web support (eg, chatting with customers via video/website/mobile app to support purchase) E-commerce (eg, products/services sold directly online with no sales rep involved) Other Before COVID-19 During COVID-19 Go-to-market sales model during COVID-191,2 % of respondents 98% shifted their GTM model3 during COVID-19 The majority of companies that serve other businesses have shifted their go-to-market model in response to the COVID-19 crisis 1Q: In what ways was your company’s product or service sold before COVID-19? 2Q: Now today, in what ways is your company’s product or service sold during COVID-19? 3Q: Which of the following statements best describe the changes your company has made to its commercial and go-to-market model during COVID-19? Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)
  13. 13. McKinsey & Company 13 E-commerce revenue is up 20 percent since the onset of COVID-19 Percent of company revenue driven by e-commerce before and during COVID-19 (among companies that sell online)1,2 Average % of total revenue 44 52 During COVID-19Before COVID-19 +20% 1Q: Approximately what percentage of your company’s revenue before COVID-19 was driven by…Figures may not sum to 100% because of rounding. 2Q: Approximately what percentage of your company’s revenue during COVID-19 is now driven by…Figures may not sum to 100% because of rounding. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)
  14. 14. McKinsey & Company 14 E-commerce share of overall B2B company revenue is up in all countries, most notably Brazil and Italy Percent of company revenue driven by e-commerce before and during COVID-19 (among companies that sell online)1,2 Average % of total revenue 45 56 51 47 46 47 44 42 47 61 42 40 56 65 56 64 51 57 52 47 53 68 62 52 All countries IndiaFrance JapanUKGermany SpainItaly China S. Korea Brazil US 1Q: Approximately what percentage of your company’s revenue before COVID-19 was driven by…Figures may not sum to 100% because of rounding. 2Q: Approximately what percentage of your company’s revenue during COVID-19 is now driven by…Figures may not sum to 100% because of rounding. Before COVID-19 During COVID-19 Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/20–4/28/2020, (US n = 607), (France n = 219), (Spain n = 215), (Italy n = 407), (UK n = 218), (Germany n = 414), (China n = 443), (South Korea n = 200), (Japan n = 202), (India n = 411), (Brazil n = 419) Europe APAC 23% 16% 11% 21%36% 20% 12%13% 11% 46% 29%12% X% % change
  15. 15. McKinsey & Company 15 5 25 21 43 6 Somewhat less effective April 6 As effective as before Much less effective Somewhat more effective Much more effective 100 1Q: How effective is your company’s new sales model at reaching and serving customers? Figures may not sum to 100% because of rounding. 70% of B2B decision makers believe the new sales model is as effective or more than prior to COVID-19 (up from 51% in early April) Effectiveness of new sales model in reaching and serving customers1 % of respondents 7 40 23 28 2 April 27 100 51% as effective or more so compared to prior to COVID-19 70% as effective or more so compared to prior to COVID-19 Source: McKinsey COVID-19 B2B Decision-Maker Pulse #1 4/6–4/6/2020 (n = 400); McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)
  16. 16. McKinsey & Company 16 Companies are likely to keep their new sales model for more than 12 months after the onset of the COVID-19 crisis 30 61 8 2 Very likely to sustain 12+ months after Somewhat likely to sustain 12 months after Unlikely to sustain 12 months after N/A, made no go-to-market changes 91% are “very likely” or “somewhat likely” to sustain these shifts 12+ months after COVID-19 Staying power of new sales models1 % of respondents 1Q: Which of the following statements best describe the changes your company has made to its commercial and go-to-market model during COVID-19? Figures may not sum to 100% because of rounding. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)
  17. 17. McKinsey & Company 17 More than 90 percent of B2B companies have adjusted incentives in response to the effects of COVID-19 53 30 22 21 14 6 Short-term bonuses/incentives Lower quotas Higher quotas No change More variable incentives More fixed incentives Sales team incentive structure changes in response to COVID-191 % of respondents 1Q: To what extent has your company made changes to the incentive structure of your sales team in light of COVID-19? Figures may not sum to 100% because of rounding. Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)
  18. 18. McKinsey & Company 18 28 28 16 11 10 4 3 Consumer/Retail Advanced industries Global energy and materials Technology, media, and telecom Global finance, banking, and insurance Travel, transportation, and logistics Pharma and medical products 9 19 19 19 19 14 $500M to < $1B $1M to < $25M $100M to < $500M $25M to < $100M $1B to < $10B $10B+ 1 2 13 37 36 9 2 2 100–499 500–999 <50 50–99 1,000–9,999 50,000–99,999 10,000–49,999 100,000+ 1Percentages may not sum to 100 because of rounding. Survey respondents by no. of employees of company % of respondents1 Survey respondents by role in company % of respondents1 Survey respondents by industry % of respondents1 Survey respondents by annual revenue of company % of respondents1 19 18 16 16 12 10 5 2 2 Top management Operations Sales R&D/Innovation/Product design Marketing IT/computer services Purchasing Engineering Shipping/logistics B2B Pulse Decision-Maker Pulse #2: Respondent Overview Pulse #1 closed on April 6, 2020 Pulse #2 closed on April 27, 2020 Source: McKinsey COVID-19 B2B Decision-Maker Pulse #2 4/23–4/27/2020 (n = 443)

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