When you first enter the entrepreneurial world, there are so many terms and acronyms you need to study that your head might spin. But one area where it’s important to get clarification is on the difference between B2B and B2C organizations. The distinction could make a big difference in how you position and market your business.
Breakdown: A business-to-business (B2B) organization focuses on selling products or services to another business or company that uses these in production or to serve their internal needs. However, a business-to-consumer (B2C) company sells products or services to people in the general public.
Many factors play into the decision of whether you should launch a B2C or B2B organization. The most common difference between the B2B and B2C business models is the type of buyer. However, if you plan and approach your prospects right, both business models can be very lucrative. Here are seven important considerations required for each business type that every entrepreneur must know.
B2B: May involve a large number of stakeholders.
Entrepreneurs may need to formally present their proposal or speak to multiple stakeholders of the company when pursuing a B2B partnership. Therefore, you should take the time to learn about the people involved in the purchasing process and personalize your pitch according to their needs.
The sales cycle of a B2B deal often takes longer since it needs approval from several people. Depending on your product or service, different decision-making members from technical, financial, and operational departments can influence the final decision.
B2C: Has a shorter sales cycle.
The decision-making process for B2C businesses is usually simpler and shorter than that in B2B. In B2C sales, customers make their buying decisions in the moment and depend less on other people while purchasing. Therefore, your marketing campaign is critical to catching your customers’ attention and generating immediate need or desire for your product.
Relationship With Customers
B2B: Establishes strong customer relationships.
Companies often take more time to build customer relationships than consumers. If you’re planning to sell B2B, frame the terms and conditions of a long-term deal before you meet with your potential buyer. A B2B customer is more likely to stay with you for long since it can be challenging and costly for companies to switch suppliers each month or year. Therefore, businesses try to find a reliable partner on which they can depend for the foreseeable future.
B2C: Build a short-term relationship.
In B2C sales, you usually have shorter relationships with customers, and they are also usually less loyal than in a B2B business. Customers who bought today from you can buy from another brand tomorrow. Therefore, B2C companies typically need to find new clients frequently or use subscription models to retain their customers.
B2B: Involves a smaller lead pool.
A B2B business model generally involves a smaller and better defined pool of prospects, so it's easy to find who you should tailor your sales pitch to. The B2B market is narrower than B2C, so it’s more competitive to generate leads in the B2B space. However, customers may sign a long-term deal if they are satisfied with your services or product quality. Therefore, businesses should prioritize their customers' retention and build long-term relations with them.
B2C: Provides a large pool of customers.
The audiences of B2C businesses are individual consumers who buy products and services for their personal use. They are end customers and do not purchase items for any other production or sale. A B2C business model has a huge market to cater to, and if you want to reach a large group of target customers, focus more on customer acquisition.
B2B: Requires sound technical knowledge.
Entrepreneurs may need to explain the technical aspects of their products or services to their business prospects. A thorough understanding of your products or services can help you discuss details with the finance, engineering, and sales teams before finalizing the deal.
B2C: Desire and motivation drive the purchase.
Most end consumers are subject to impulse buying and only consider the benefits and need for the product. So you only need to explain why your product is better than your competitors’ quickly to convince customers to buy your product.
B2B: Requires highly experienced sales representatives.
When your customers are other businesses, they are less likely to watch TV or listen to the radio to find their partners. B2B customers are more rational, planned, and logical than B2C customers. They think carefully about the return on investment (ROI) while purchasing a product. Therefore, it is crucial to deliver the required information effectively.
Many companies buy or outsource from major industry players, so building and maintaining your brand identity can take time. Businesses should utilize effective marketing strategies to get before their target customers and stay ahead of the competition.
B2C: The message should be emotional, and the content should be fun.
In B2C selling, it is often sufficient to advertise on television, radio or social media since customers spend time on these marketing channels. B2C companies should be creative in their marketing strategies and try to deliver an engaging message since emotional factors often influence their customers’ buying decisions.
B2B: Products are bought in large quantities.
The B2B and B2C business models deal with different order volumes. Because B2B businesses sell to other businesses, they mostly sell goods in higher volumes. In the B2B marketplace, companies deal with specific products or services and have a niche in their customer segment for meeting their needs.
B2C: Deals in smaller transactions.
In the B2C marketplace, companies deal with a broad market of consumer products, but end users buy the product based on their own needs, which can be pretty small compared to B2B.
Delivery and Pricing
B2B: Requires a consistent supply at specific times.
In the B2B marketplace, deliveries should meet the ongoing demands and production needs of the customers. Therefore, on-time delivery execution and assistance by the seller are essential. The pricing of a B2B product or service depends on the agreement between the company and the customer.
B2C: Demands fast delivery.
In a B2C business model, the delivery speed of a product to the customer plays a critical role in building a brand. The faster the speed, the better it will be for your brand reputation. In a B2C market, prices are fixed for every customer, although loyal or regular customers may get discounts.