The B2B Business Model: What Is It and How Does It Differ from B2C and B2B2C Models?
B2B is a business model that focuses on commerce between two businesses; this could be anything from selling products to being a manufacturer for other businesses.
You may already be familiar with B2C (Business-to-Customer) trading, which you’ll experience every day. But did you know that the process from production to reaching your hands still relies on the B2B model? So, what is B2B? How does it differ from other business models? Why is it important? This article has got it all covered. Let’s dive right in!
Table of Contents
What Is A B2B Business Model?
B2B stands for Business-to-Business. This business model involves commerce activities between two businesses. This could be producing goods or distributing products, for example.
What Are B2B Examples?
- Wholesale shops selling goods to other stores.
- Manufacturers and distributors of equipment selling machines to their business partners.
- The sale of software to other organisations, such as CRM systems.
The B2B business model doesn’t only involve the sale of products, but also services. This allows the organisation to focus their expertise better. Here are some B2B service examples:
- Logistics services
- Warehouse, cold storage, storage room, and office rental businesses
- Legal advisors
- Marketing and advertising agencies
- Tourism businesses that sell packages to organisations or agencies
- Security companies
B2B vs Other Business Models
B2C Business Model
B2C (Business-to-Customer) refers to commerce activities between businesses and consumers in which consumers can make purchases via both offline and online channels. For example, buying items from a minimart, ordering products from online stores, purchasing online courses, or applying for a monthly subscription to a phone app.
The Differences Between B2B & B2C
The most obvious difference between B2B and B2C is the target groups and trading volume and the consumer decision-making process and marketing. Let’s look a little closer at the differences:
- B2C consumers mostly make “small but often” purchases. They tend to buy as much as they need to use or as much as they fancy at the time. On the other hand, B2B consumers are often buyers; they don’t buy often, but they make big purchases and spend on high-value items when they do.
- B2C consumers don’t take long to decide to buy, whereas B2B consumers take longer as often organisations must compare the price of different suppliers. The B2B purchasing process is complicated and takes time because the organisation purchasing expects to benefit from it directly.
- B2B businesses usually sign long-term contracts if the relationship with their business partner is strong. Most of their buyers are not casual customers like B2C consumers.
- B2B marketing is completely different from B2C. The marketing strategy for B2C takes time to promote the products, focusing on great offers and easy purchasing to keep the consumer decision-making process as short as possible. B2B marketing, on the other hand, focuses on building company credibility, demonstrating knowledge, and being the “real deal”, as well as ensuring product quality so that the customer decides to sign the contract or trade with the company.
B2B2C Business Model
The B2B2C (Business-to-Business-to-Customer) combines B2B and B2C. The business model is often adopted because upstream manufacturers may not have the channels to distribute their products to smaller consumers. In contrast, business intermediaries have trading channels and a customer base but no products. Therefore, the B2B2C model facilitates more convenient selling and enables businesses to reach more customers.
Here are some well-known examples of B2B2C businesses:
- Makro, a wholesaler and retailer that connects its suppliers with grocery businesses
- Popular online marketplaces like Shopee, Lazada, JD Central, and NocNoc
- Fulfilment services (store-pack-ship) that numerous logistics companies have developed to meet the needs of online sellers in particular
The Differences Between B2B & B2B2C
As mentioned above, the main difference between B2B and B2B2C models is the customer base. The B2B model refers to trading between organisations, focusing on a small number of customers. Once B2B businesses want to expand their customer base to bigger customer groups – small businesses included – they move to the B2B2C model. The responsibility then falls on the upstream business to educate the end consumers on where they can purchase the products they want. And it is the challenge of B2B2C marketing to build platform credibility so that the products can be sold and yield sustainable profits.
Now you’ve got the whole picture of what B2B is and how it differs from B2C and B2B2C models. Despite it involving trading between organisations, you still need to focus on your marketing strategy to make sure your products or services are the clear option for decision-makers in organisations. Stay tuned for the next article!