B2B vs. B2C vs. B2X companies
Businesses can target different audiences. Their audience can be other businesses, consumers or a mix of both. Sometimes, borderlines are a bit blurry. B2B is a business model where business is done between companies, while B2C is a business model where a company sells goods directly to consumers. An example of a B2B business could be Shopify, platform for online sellers. Online sellers vary from small to large business which use Shoppify’s platform to sell their goods or services. On the other hand, those sellers are B2c businesses, they sell their goods and services to the end consumers. Another example is cloud storage services, let’s compare:
- Amazon S3, Amazon Glacier vs.
- Docker, MS One Drive, Flickr/Google Photos
If you are not deep into web development business you’ve probably never even heard of service like S3 and Glacier. That’s because they don’t target the regular consumer. Even though there may be many differences in the product solution approach, targeted audience, pricing etc. we should note the there are some similarities between B2C and B2B — users want an intuitive, easy to navigate product these days. Especially if they are consumers, but business people also appreciate good design and ease of use. Can a company be both B2C and B2B? Well, yes! Google, for instance, has both its standard search engine and services like Gmail targeting regular consumers. But, on the other hand it offers GSuite package of services(that includes Gmail) that’s meant for business use.
Now let’s talk about differences.
For start, let’s mention another typical example of an B2B business: MailChimp. You wouldn’t use it to send you personal emails. But it’s one of the best services out there for business to sell scheduled and send mass marketing emails, manage email campaigns etc. Creating your own mailing service, that doesn’t end up on ISP’s and mail providers’ blacklists, has good looking emails in all mail clients, and that offers insights and overview is extremely hard and time consuming job. If that’s not your primary goal as a company it’s next to impossible. That’s the reason most B2B companies specialise in solving such problems for other businesses and streamline complex operations for them.
B2B businesses work with fewer customers because the focus is often on professionals in a specific industry or with a specific problem. That alone limits the number of potential users. But at the same time each customer is worth much more than in a classic B2C business. B2B businesses make their money selling large deals to other businesses, providing them with the service, goods or platforms. Vey popular B2B model these days is selling a recurring software service, or renting a software infrastructure or platforms. Because there is a smaller number of customers, every customer counts. And this makes a churn rate(the rate at which customers abandon the service), important metric when optimising the sale and retention processes.
B2B products tend to come with a whole suite of features and that sometimes simply can’t look as simple and clean design wise as a typical consumer product/service. But the goal of the designers in both is to minimise the learning curve and maximise the useful actions a user can do in a given amount of time.
Some B2B products are meant to be used exclusively in-house and will never be available to the public. Those products might have a public website that only serves as a front for other businesses to find out the general feature set and schedule a meeting or a call with the companies representative to discuss integration, agreements, prices etc. Such products are usually designed to solve a specific problem like in-house employee, or inventory management. Some B2B products can serve other businesses as tools to reach customers, enable different sale channels or communication with their customers. In that case they can be publicly available for anyone. In other cases like enterprise solutions, only a small number of people could have access, if the product deals with the important and mission-critical aspect of their business.
Analysis of sales results is usually harder in a B2B business. The sales cycle is significantly longer, your point of first customer interaction may have occurred a year or more before they become a paying customer. This makes it more difficult to read results and quickly react to findings.
Sales cycles are much more complex and lengthy in B2B. Buying experience varies with industry, product, company size, and business type and scale. Main focus is on the relationship with business entities that are potential buyers and optimising the sales cycle. Company selling to another business can have a dedicated team of sales people that lead the whole process and nurture big clients through extended periods of time. Buyers are often sophisticated and want to know and confirm every detail. This can lead to a sales process taking months to even years through which a B2B company will need to intermittently be included and lead the way through multiple steps. Decision making groups can be formed from technical, business, financial, marketing and other departments, depending on a type of purchase and the area most affected in the purchasing company. The person initially selecting the product for a purchase may not even be authorised or have permission to execute the purchase or have the responsibility for making such a decision. Large purchases may require approval from several company leaders. Generally B2B buyers want to be well informed before making a final decision. Many B2B companies generate their first sales to other businesses owned by someone in the founder’s personal network. There is no impulse or emotional buying decisions. The sales relationship is many-to-many. Many people, many channels, many products, and many different contractual agreements.
Prices are much higher than in B2C business model. Even if the cost per unit of product is smaller, transaction sizes are still bigger than in B2C. Payments can require approval from multiple stakeholders and take some time until the money actually arrives. Pricing models are more complicated than in B2C and are usually adapted to a specific case, depending on the need of the client. Because of that reason many B2B websites don’t even list a product price or list only the price for the most basic cover-all case.
Payments are more complex than in B2C model. Customers sometimes don’t pay at the time of the order, but rather defer the payment or pay in multiple instalments within agreed upon terms. There are more ways a transaction can be made than that’s the case with B2C transactions.
Knowledge and capabilities of the B2B customer usually exceed those of the B2C customers. Company as a type of customer interested in a product designed for a particular industry can have a vast knowledge and experience in the subject. It’s much more likely that this type of customer will apply rational decision-making and objectively take all upsides and downsides into account before taking a step forward and initiating a purchase process. This means that the whole B2B purchase process is always a lot more complex than its B2C counterpart. It usually unrolls in a multiple stages like: finding out about the product, analysing its core features, personal interactions and doubling down on all the possible bottlenecks of the integration in existing business model, evaluating proposals, approvals from executive side, agreements and discussion about the pricing model, payment etc. Because of the complexity of the process, many companies employ a specific set of protocols and guidelines that must be followed. Everyone in the mentioned process chain needs as much information as possible to make a decision, and often times that information needs to be tailored for their specific perspective and context. Company leaders can be afraid to make a decision if it could affect the entire company in an uncertain way. That’s why it’s important to minimise the risk of transition/integration and make it as seamless as possible. On the other side B2B customers will harder transition to a competing product or service once the deal is made, because it might affect the whole team, company or its operations.
Language and communication style can be very industry specific. A level of rational reasoning is required. Much more focus is on what the product can do for business to make if more efficient, profitable or agile. Industry jargon can freely be used in B2B marketing because it targets a narrow group of educated people. Public awareness of the brand does not play a big role in B2B. Rather, a brand value is created on basis of trust and relationship with business entities. Companies sometimes market to multiple stakeholders to make a single sale. Think about the decision-makers coming from the different company departments. Buyers tend to be more planned and logical with a return of investment in mind. Main thing that needs to be demonstrated is that by using THE product, company will be able to save money or time, or even both.
Customers will look for as much information about the product as possible. Customer will need to trust the website before even considering the product. Having a unique and stand-out design is less important than presenting the benefits and logical reasons a business might want to purchase the product. B2B websites often include multiple CTAs of different types and even a multiple choice to get in touch, like live chat, phone call, email… This is to accommodate for different types of people that may be included in the purchase process and that may come from different places of the product website. Content on the product website should include white-papers, testimonials, explainer videos, podcasts, FAQ’s, live or recorded product demos, compatibility and integration details, technical specs… Optimising user experience is a bit less important than having a functional product.
B2C business generally make money by selling to thousands if not millions of customers. The lifetime value of each customers is usually much lover than in B2B model. One typical example is Facebook with its social media platform which earned $19.81 per user in Q4 of 2016(adexchanger.com/platforms/facebook-made-alm..). Because the lifetime value of the customer is relatively low, B2C businesses need to make their customer acquisition as low as possible to end up being profitable. It’s simply too expensive to have dedicated sales people selling product to each customer like in the B2B business.
Sales process is much simpler and faster. Successful companies rely on many users and customers going through it fast. Primary focus is on a product that solves a problem for its customer, or makes his life easier. In this model, customers buy a product for a personal use. There is no risk involved that might affect other people’s work or to place the whole company at stake. Impulse buying is a thing, and is specifically optimised for in certain e-commerce platforms which brings in additional revenue upon the initial sale. Sales process can be as short as couple of minutes. Analysis of sales results is easier because there are much more data points to back it up and there are many tools to help in the process. Since sales cycle is short it’s easier to have a feedback loop and tweak the process based on current results. Companies are able to do frequent changes to marketing, pricing and product itself, followed by sales result analysis and tweaks to make sales process more successful.
Purchasing in this business model is much more straight forward, and can be based purely on customer’s emotions or the perceived brand value, which can play a big role in this type of purchases. This is why customers demand a convenient and smooth buying process which can be finished very quickly. For the customer there are usually more options to choose from in regards of competing products, so product needs to stand out among competition in some way. Prices are consistent and for web products it usually comes down to few pricing models being offered. Additionally, prices do not differ from customer to customer, unless there is some discount scheme involved. That also means, there are no specific per/customer offers and tweaks to the original product. In case of higher product prices, customers will demand more information to make a final decision, similar to purchases in B2B. Payments are simple and usually include credit or debit cards and payment processors.
B2C business target consumers more roughly and in some cases anybody could be a client. This affects the product’s design, development, marketing and sales processes. Customers are less loyal and transition to a competing product might cost them nothing(nothing to lose).
Mass media and social media(Facebook, Twitter, Reddit etc.) strategies are more likely to work with B2C than with B2B, because target customers fall into broad categories. But depending on a specific product, companies might target just a certain groups of users on a certain social media network. Also the cost of acquisition is lower alongside the fact that B2C companies rely on bigger scale of customers to be profitable. Communication is much more general and accessible to a common consumer. Good marketing can be based purely on emotions or brand power. Public awareness of the brand plays a big role, and advertising/promotions help create a brand value. Some companies have strong referral programs. An example is offering to invite people in exchange for partial or full coverage of a product price for the original user and a newcomer.
Companies market to a single consumer and can use emotional messaging. Buyers are more spontaneous and even buy things they may not need. Customers probably won’t be interested in a long marketing messages and will want to go straight to the point. Main reasons the product will make their life better, broken down and easy to understand.
The website of the product will need to be appealing with easy to understand messages relatable to problems a customer may have. Most user search for a short and simple explanation how the product will help them have a better life and how it differentiates from other products on the market. Minimal content and large images depicting the product or its usage in combination with testimonials are mostly used. With some unique design twist to stand out in the crowd. Design and user experience should follow trends and be updated accordingly. Payment process should be as easy and quick as possible. Since B2C customers are influenced by emotions, brand identity and reputation, mood, other people’s opinion etc. design elements can focus on those too. Design is more critical since customers often have more options to choose from and nothing to loose if they choose to switch.
There are other business models or combination of business models a company might employ. For example a combination of B2B and B2C, sometimes referred to as B2B2C. Example is Booking.com which operates with hotels as a service provider and with their guests as end consumers. B2B2Cs are like in the example of Booking.com complex platforms that work with a third-party businesses that connect them with end customers which can then also be served with the same platform. Specific industries might have many more specific variants of particular models. In tech sphere there is something called B2D — business to developer, where the target customer is specifically a developer or a group of developers. In such model businesses provide utilities, tooling, platforms and services to make a developer’s job easier and their work more productive. There are probably many more business models that target specific field or industry.