B2B vs B2C – Why You Should Know the Difference

Aspiring entrepreneurs are sometimes given vague advice on what method of operation would be best suited to the product or service they wish to provide.

While the entrepreneur should ultimately be the one making this decision, the reality of it is that not every new entrepreneur has a detailed knowledge of such matters. Fortunately, we’ve gathered the information you need on B2B and B2C ventures and why you should put careful thought into deciding the path that’s ideal for your business.

The most effective way to understand each of these two business elements is by comparing them within their own space.

Sometimes referred to as E-Biz, B2B is simply an abbreviation for ‘Business to Business’. It’s a form of commercial transaction that involves the provision of products, services and/or information to other businesses. An example of a product-based B2B would be an automobile parts manufacturer providing the engines for a brand that deals in sports cars. A service based B2B would be a car dealer that hires guards from a security firm to guard their vehicles.

So what about advertising? Here’s a useful tip; if your prospective customers are businesses, it would be more profitable for your business to advertise in industry publications and business magazines rather than the general media.

B2B operations normally involve a smaller pool of prospective customers. Don’t be dismayed by that though; the advantage of a B2B operation is that it allows you to carefully tailor your sales efforts so that they can be more targeted, and you can also better determine exactly what your customers require.

Speaking of customer relationships, when operating a B2B venture it is necessary that you maintain a formal relationship with your clients. After all, your business will be associating with other businesses who will expect nothing less than cordial and professional behaviour when dealing with representatives of your business.

The first impression is absolutely crucial because generally, B2B relationships take longer to be established, compared to B2C relationships. Establishing a healthy connection would serve both your business and its clients well in the long run.

Another useful tip to bear in mind is that when you’re putting together your B2B plans, try to come up with your terms and conditions beforehand so that the negotiations between your business and the prospective client go smoothly and there are no misunderstandings.
B2C, on the other hand, stands for Business-to- Consumer. It is a process for selling products and services directly to consumers.

Now, you may be tempted to think that your business can ONLY be either B2B or B2C, but even in the world of business there are rules to be broken.

Think of book publishing; literary agencies market authors’ manuscripts to book publishers (both the literary agent and book publisher are in a B2B relationship) The publisher then prints and markets the books to both online and brick-and-mortar bookstores (this is also B2B). However, the bookstores sell the books to people who love to read. That is B2C.

Insurance companies also operate on both ends of the spectrum, or rather, in the middle. How about if a regional hotel wants to insure its tour buses so that tourists feel safe when they go sightseeing aboard the buses? To do this, the hotel would have to negotiate with an insurance company to cover a large number of its vehicles. This is B2B. If the average person needs to insure their brand new car, they also go to an insurance company and get the same result, but with different negotiations.

As an entrepreneur it is important that you know what sets B2C apart from B2B operations before committing to a particular business plan.

A key aspect of owning a successful B2C company is marketing. As mentioned earlier, marketing and advertising strategies for B2B are more effective when implemented within corporate circles. With a B2C however, your target audience is the individual customer. No matter how many customers you may have, the individual is still the one you reach out to.

For example, Amazon is primarily a B2C company because the vast majority of its products and services are sold to individual consumers. This means Amazon has a potential customer pool numbering in the millions; pretty much everyone with an internet connection.

Another example of a B2C company is an online travel service. Its prospective customers are predominantly individuals who pay the agency and receive a ticket to travel overseas to their business meeting or their next vacation.

Typically with B2C, the business-to-customer relationship is much shorter compared to B2B. However, operations within the B2C space should still be kept formal. The reason for this is that when you treat your customers professionally and with care and respect, they do your marketing for you, and help to spur your company’s growth.

Now that you’re up to speed on what both business models mean, it’s time to plan and set the path you want your business to follow.

 

 

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