Are you in a B2B or B2C market? Often when you have a product or service you can be in both.
What is B2B and B2C?
There are lots of business models but broadly they can be split into B2B vs B2C. Business to Business (B2B) is defined as businesses that market and sell to other businesses. Whereas, Business to Consumer (B2C) markets and sell to consumers.
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What is B2B?
B2B or business to business refers to businesses that develop products and services for other businesses. What makes B2B so different to B2C is often the complexity and scale of the products and services.
An example of a B2B platform business model is Alibaba.
What is B2C?
B2C or Business to Consumer refers to businesses that create, market and sell products or services to consumers (end-users) and individuals.
As a contrast to Alibaba – Amazon is primarily a B2C market. See the Amazon business model article and discover more.
How Do B2C vs B2B Compare?
There are some similarities and differences in how B2B and B2C compare. If you think about the complexity of an organization and how many different people are often involved in making decisions, it gives you a start point for understanding the differences.
However, there are some common threads – trust is needed across both B2B and B2C.
Similarities
- Both require trust for the sales and marketing process
- Both involve people making decisions
- Quality and value are important criteria for both.
- Both will often seek out information for high-value purchases before deciding.
- Both require market segmentation for marketing strategies to be effective.
Differences between B2C and B2B
| Business to Business (B2B) | Business to Consumer (B2C) | |
|---|---|---|
| Customer | • Businesses and Companies – SMB, SME, Enterprises and International Corporates | • Consumers – individuals/families |
| Offer | • High-value products • Complex high value services | • Low-value products • Low value services |
| Quantity | • Large deal sizes • Fewer purchases | • Small sales • Higher quantities |
| Buying decision | • Complex • Multiple stakeholders • Mixed expert groups • Long lead times • Often long-term contracts • Service Level Ageements | • Short time frame • Emotion based • Impulse decisions |
| Sales cycle | • Ranges from 1 – 12 months+ | • Minutes to days |
| Value | • Mid to high value | • Low to mid value (depending on product/service) |
| Primary focus | • Creating and maintaining relationships • Reliability and consistency • Partnerships | • Design and create product • Advertise and promote • Build loyalty |
| Examples | • IBM • Salesforce • Cisco • Alibaba • Rolls Royce • WeWork | • Netflix • Sptify • McDonalds • Amazon • Apple • Nike |
B2C Vs B2B eCommerce
Organizations have transformed to become more modular, integrated and adaptive through digital technologies. This, in turn, has led to the faster processes, reductions in costs, improved decision-making as well as easier integrations with other businesses.
As a result, B2B eCommerce has given rise to more services between companies. Antoerhj factor is the digitization of products and the subsequent data that is ‘servitized’ e.g. sensors monitor flow through pipes and also check for corrosion levels.
Historically the figures behind B2C eCommerce were thought to dwarf that of B2B. But that has now changed.
B2B eCommerce
- US B2B eCommerce will hit $1.8 Trillion by 2023 – Forrester.
However, a revised report by Forrester breaks out commerce figures for six channels of B2B online commerce that companies use to buy and sell with trading partners.
The revised global B2B online Commerce market is estimated to be worth $9 Trillion – Forrester
- Global business-to-business (B2B) eCommerce sales are predicted to reach over $6.6 trillion by 2020 – Frost & Sullivan.
B2C VS B2B varies according to the scale and type of eCommerce transactions. Think about shipping, logistics in general and how and when payments take place between companies.
B2C eCommerce
- Global B2C eCommerce is expected to grow to $6.54 Trillion by 2022 – Statista.
B2C VS B2B Business Models
The Internet of Things, Big Data, AI and platforms and other technologies are creating a new wave of disruption across many industries. Value chains are being unbundled and established B2B markets such as banking (Fintech) and logistics are being transformed. Digital technologies enable new ways to reconfigure how value is created in these industries.
Even low-tech industries are affected. Investments into early-stage startups in supply chain and logistics have created excitement amongst venture capital investors collectively raise approximately $15B in 2019.
Example of a B2B business model
B2B Pay is a German/Finnish startup which offers virtual bank accounts for companies that export into Europe or export from Europe to the rest of the world. The mission of B2B Pay is to make international business transactions as quick and as cheap as possible with complete transparency about costs.
B2C Business Models
Digital business models have led to the network effects associated with platforms. In B2C markets this has resulted in new business models such as Uber, which disrupted the taxi industry.
As technologies evolve there are ever new ways of creating businesses. B2B vs B2C vs B2B2C.
In the business world, the difference between B2B vs B2C businesses often seems clear and straightforward. However, there is a third kind of business model, primarily based on what might seem B2B strategy. However, the final aim is to build a B2C company over time.
This model is called B2B2C or business to business to consumer. The logic is the following. If a business can’t have direct access to consumers, it will gain it via a second business. Unlike B2B vs B2C, it is often not recognized or discussed much. I’ll cover the B2B2C business model in a following article.
B2B vs B2C Value Propositions
A key outcome of developing a business model is to produce a value proposition. Understanding the difference between value in B2B vs B2C is crucial when designing a business model.
B2B Value Pyramid
The b2b value pyramid has several differences vs B2C pyramid. Cultural fit, stability, expertise configurability are some of the important criteria that an organization will use to judge a potential supplier.
B2C Value Pyramid
B2B vs B2C Buying Process
B2B vs B2C Marketing
B2B businesses focus on building long term relationships with their clients and often across different levels of the company. As an example, board directors of companies that supply to a business will meet with their clients buying team annually or even quarterly to review key performance indicators and service level agreements.
Often contracts are much longer – in some cases up to ten years if there is heavy investment in infrastructure e.g. satellites in the broadcasting industry.
In B2C, the interaction between the business and the consumer is more dynamic and depends on the nature of the product. Even then, the interaction periods and the number of goods tend to be quite small on average.
B2B vs B2C Sales
| B2B Sales | B2C Sales |
|---|---|
| Longer lead-times | Short lead-times (except in cases of high value e.g.buying a car or house) |
| Complex – often involves multiple stakeholders | Usually individual |
| Assessed against buying criteria | Often emotional or impulsive |
| Requires consultancy approach | Requires good interpersonal skills and being able to pinpoint fit to a product. |
| See: B2B buyer persona | See persona canvas |
