b2b-vs-b2c

B2B Vs. B2C Business Models In Nutshell

B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.

While this might seem a trivial distinction instead that is a fundamental shift in how your business will look like. From internal processes to product development, sales, distribution, and marketing.

Depending on whether your business is a B2B or B2C might change the physiognomy of your business. Let’s then consider the primary differences in B2B vs. B2C by looking at three key aspects:

RelatedWhat Is A B2B2C Business Model? B2B2C Business Model In A Nutshell

B2B vs. B2C: target customers

A first primary difference between B2B and B2C is based on who’s your target customer. In B2B you’ll sell directly to another business. While in B2C you’ll sell directly to consumers.

Keeping this simple distinction in mind is extremely important because you will also need to understand the different purchasing intents of each of those segments.

For instance, if you sell a software as a service, and you sell it to another business, the reasons why those businesses, which are your customers are buying from you, are entirely different from the reasons why consumers might buy from you.

This will also fundamentally change your distribution strategy and the way you think about your product.

B2B vs. B2C: distribution strategy

marketing-vs-sales

In marketing vs. sales, I dissected how to identify what kind of marketing mix your organization will need. This distinction can help you also understand what type of distribution strategy is better suited for a B2B rather than a B2C.

Indeed, in the former case, your final customer will be more sophisticated and usually will also require a different kind of support, assistance, besides needing your service or product in bulk.

This will allow you to sell a product at higher prices and in some circumstances at higher margins. You might also need a complex salesforce able to tailor the offering to the specific business clients’ need.

This means you will thrive with a highly diversified and tailored product, that requires more support and assistance from dedicated accounts that follow the client.

Yet it is important not to confuse a simple and complex sales based on how high is the price of the final product. For that, another key element to understand B2B vs. B2C is the type of transaction involved.

B2B vs. B2C: complex vs. simple sales

Prada is an Italian luxury brand which sells a high priced product. As a luxury brand, it sells mostly directly to consumers via its retail stores. However, its products are quite expensive and not affordable for anyone.

This might make you think the sale is a complex sale, yet it’s not – I argue. Even though Prada spends massive resources (45.8% of its revenues) in selling costs compared to adverting and communication costs.

prada-sales-expenses

Source: Prada 2017 Annual Report

My argument is that those selling costs incurred are more as a marketing expense. When a salesperson deals with a customer to sell her a high priced bag worth a few thousand dollars, that is still a sale to a consumer (even though a wealthy one).

In this scenario, Prada engages in simple high-end sales rather than complex sales. Instead, a company like Salesforce which primarily runs a SaaS business model that sells to other businesses.

Its primary selling strategy will be based on hiring skilled salespeople able to support business clients throughout the whole process.

For instance, in 2017 Salesforce spent over $3.9 billion in sales and marketing, a good chunk through a direct sales force, which is comprised of:

  • telephone sales personnel based in Salesforce regional hubs
  • and field sales personnel based in territories close to the customers

Sales representatives support the telephone sales and field sales personnel, to bring leads across a process of qualification and closing.

A complex sale might imply multiple touchpoints and a sales force able to identify what are the key contact points to close the deal are a critical resource for B2B business success.

B2B vs. B2C: product development

As B2C sales processes take a completely different turn. They also imply a different product development schedule. Indeed, in a B2C sale, you can pretty much sell the same standardized product or service to most of your customers.

Even though B2C has changed in the era of tech giants like the FAANG, there are still some fundamental truths that differentiate it from B2B product development.

Think for instance at how Netflix has changed the way people consume content by offering a personalized and customized list of content to consume. This also applies to Spotify in the music industry.

In this scenario, most of the resources for those organizations will be spent in two areas: technology and original content. Those two resources are meant to shape the way the service is provided.

With original content, those B2C companies are quite competitive. And with a significant investment in technologies, they can deliver a customized experience to millions of people across the world.

When it comes to product and service development Netflix ad Shopify are thinking in terms “what’s the content millions of consumers around the world would love?”

Welcome in the era of B2All

In an article entitled “The End of B2B and B2C Sales: Why It’s Now B2All” Colleen Francis points out:

Selling used to fall into one of two groups: B2B (business-to-business) and B2C (business-to-consumer). Each had its own set of rules. Selling to businesses took place in a fact-driven, risk-averse environment. Selling to consumers was a much more impulsive, emotionally driven exercise.

Today, B2C is having a major influence on B2B. And vice versa. It’s creating the democratization of the marketplace, or as I like to call it, B2All (business-to-all). Everyone is equal in this new way of selling, whether you’re a business or a customer.

The article opens up a few critical points. With the digitalization of the business world, it has become harder to keep a rigid distinction between B2B and B2C.

Therefore, an organization that can tap into a few key ingredients can both access businesses and consumers. This can happen especially if the organization focuses on three aspects:

  • use product development as a marketing tool: when your product has built-in features that allow it to leverage on virality and network effect, all of a sudden also a B2B can tap into consumers. We saw that with the freemium business model. Also, if you’ve focused on improving the product based on customers’ feedbacks that will make it successful both as a B2B than B2C. Indeed, your enterprise client might be the best suited to allow you to create an excellent product, quickly
  • make your brand irresistible: if consumers hear about your product and service over and over again, they will be the first promoters of it. Thus even if another business might be an intermediary between you and your final consumer, it will be the same consumer suggesting the business to provide your service
  • have a multichannel approach: in a digitalized world it becomes critical to be able to tap into several channels to connect with both businesses and consumers

RelatedWhat Is A B2B2C Business Model? B2B2C Business Model In A Nutshell

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which he brought to reach about a million business students, professionals, and entrepreneurs in 2019 alone | Gennaro is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate and become profitable | Gennaro is an International MBA with emphasis on Corporate Finance | Subscribe to the FourWeekMBA Newsletter | Or Get in touch with Gennaro here

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