Imagine you have a company that makes cars, which you then sell to end users, drivers. To make the cars, you need parts that you buy from other companies. We have just shown the main difference between the business models. While the first part of the example describes B2C, the second part represents a B2B business. Read on to find out what are the other specifics of B2B business.
What is B2B business
The acronym B2B stands for business-to-business and refers to a business relationship between two companies. It is therefore a business model in which services and products are sold by companies to other companies, not to end customers - this is already B2C (business-to-consumer).
The difference between B2B and B2C is the customer
B2B business is therefore about providing products and services to other businesses so that they can better operate and sell their goods and services. In B2B business, the end consumer is not directly the customer, but their needs drive the B2B business.
A typical example of a B2B business is the supply of raw materials from which the other firm creates a product to sell to the customer or which the firm needs to do its work, such as office supplies or toner for printers. It can also be outsourced services, such as promotion by a marketing agency, web design by a graphic design studio, provision of CRM, project management systems and other SaaS services.
B2B business has a smaller market and a greater risk of revenue shortfalls
The B2B market is generally smaller and companies have fewer clients than they do for B2C. However, when customers do choose to purchase goods or services, they are usually larger, higher value and regular orders. There is a difference between selling polystyrene in builders' merchants to insulate individual houses and supplying it on a regular basis to builders who insulate a number of larger buildings each month.
This is related to another specificity of B2B business, namely the greater uncertainty of a regular supply of funds and the complexity of cash flow planning. The company regularly delivers larger orders, and if payment for any of them is delayed, it is a shortfall in income in the order of tens or even hundreds of thousands.
Reaching clients in B2B trading
B2B business is usually associated with cold calling and arranging face-to-face meetings, which leads to sales. Alternatively, networking at events or social selling.
Companies also offer their products and services on e-shops. However, because B2B clients have different expectations, needs and habits than B2C customers, e-shops look different than what we are used to with B2C:
- They usually offer fewer products,
- they focus more on in-depth product descriptions and usage (they include case studies, product videos and video tutorials, articles, and have sophisticated customer support),
- prices are different for different buyers (affiliates, loyalty program,...),
- shipping and payment are also handled individually,
- the e-shop can only be opened to pre-registered companies, for which, for example, the reliability of VAT payers is verified.
Longer business process in B2B business
The client business is more challenging and takes longer in B2B business than in B2C. This is due to the fact that:
- contracts are larger and more expensive in B2B business,
- they require longer consideration and informed decision making,
- more people in the company are involved in the decision-making process.
Therefore, it is not an impulse purchase, the decision to buy a product is not emotionally based and immediate as in B2C business.
The basis of B2B business is building a relationship with the client
Salesmans need to reach out to decision makers in companies and convince them of the benefits of their products. That's why companies also need to constantly improve and innovate their products, making sure they are functional - there are fewer customers in the market and they can't afford to have them taken away by competitors.
If companies want to be successful in B2B business, they need to pay more attention to strong customer service than in B2C and put much more effort into devising a workable strategy for reaching clients and building customer loyalty.
You can store information about your B2B business clients clearly and in one place in our RAYNET CRM. You can see what stage of the business each customer is in, access their contacts and all the details of the mutual business.