B2B (Business-to-Business) companies sell to other companies, and B2C (Business-to-Consumer) companies sell to consumers. Many businesses do both, running B2B and B2C models concurrently (sometimes referred to as Business-to-Many or B2M.)
B2B and B2C models have their strengths and weaknesses, depending on the products and services sold and a prospect’s position in the customer cycle. These are:
B2C purchase decisions are often made on the spur of the moment, while B2B businesses face a more significant time burden. B2B sales reps have to work harder and longer to get deals over the line and cultivate long-term relationships.
B2C companies usually deal with a single decision-maker, while B2B businesses face group decision-making. This process can be tricky to navigate, as a firm “no” from any single individual in the decision-making chain can end a hard-fought deal.
With B2C customers, the business relationship often ends at the point of purchase. B2B business relationships are more long-lived. It’s not unusual for B2B relationships to last for many years and require careful nurturing.
In the United States, there are 327 million individuals and 5.6 million businesses. The lead pool for B2B business customers is significantly smaller, making B2B relationship management crucial.
The average transaction value (ATV) of a B2B purchase is significantly higher than that of a B2C purchase, meaning B2B companies need fewer customers to sustain profitability.
B2B eCommerce is when one company sells goods or services to another company through an online sales portal. It’s steadily overtaking more traditional forms of B2B transactions. Forrester forecasts that U.S. B2B eCommerce will reach $1.8 trillion and account for 17% of all B2B sales in the U.S. by 202—a compound annual growth rate (CAGR) of 10%. That’s huge.
B2B2C is a slightly more sophisticated model. It’s also frequently misunderstood. B2B2C isn’t a simple channel partnership where a business wholesales its goods to another company, which in turn sells them to the end-consumer (or another enterprise).
With B2B2C sales, the first business (B1) reaches customers through the second business (B2) but interacts directly with the customer using its brand. Unlike a channel partnership, customers are fully aware that they are buying from B1, and, crucially, B1 retains the customers and data generated from every transaction.
For a B2B2C relationship to be successful, there needs to be justification and motivation on all sides. B1 has to be sure that B2B2C will be more profitable or strategically advantageous than going direct-to-consumer, which generally returns a higher margin per transaction. And, B2 has to be confident that by acting as a conduit for B1, it isn’t damaging sales of its products.
How Does a B2B2C Model Benefit B2?
How Does a B2B2C Model Benefit Customers?
While B2B2C can be hugely beneficial to all parties (hence the model’s rise in popularity), it’s not without risks. B1 risks having its customer base stolen. B2 can take what it’s learned from the relationship and make competing products. Furthermore, B1 has little control over the way B2 employees sell its products and whether or not the information is conveyed correctly.
On the flipside, B2 has to trust that B1 will deliver on its promises, giving B2 customers the level of service they expect. Any delays or errors will likely reflect more negatively on B2 than B1. B2 also needs to be sure that B1 products aren’t cannibalizing, directly or indirectly, sales of its products because that would render the relationship counter-productive.
Before getting started, you need to decide which model, if any, will fit your business. The global B2B eCommerce market, valued at U.S. $12.2 trillion in 2019, is over six times that of the B2C market. Quite simply, the B2B eCommerce opportunity is vast, and most companies would be foolish not to invest in this space.
But, of course, there are always exceptions. Companies fearful of revealing details of their products and prices to competitors (and customers) may want to think twice about the B2B eCommerce route, as will companies that cannot meet any higher demand.
The B2B2C model is a complex arrangement that takes much work from both sides. It works best when B1 wants to solve a customer problem but categorically does not want to be in the business B2 offers.
The next step for either one is a solid implementation plan that takes into account the needs and wants of all stakeholders and has established roles, budgets, and accountabilities for every target and proposed outcome.
