If you’re a marketer, I guess you must know the terms B2B and B2C well. B2B and B2C are the common forms of business model. Although these terms are only one letter apart, they have completely different meanings and characteristics.
Meanwhile, there are still a lot of sellers who apply the same strategies for both B2B and B2C business models in attracting potential customers. In fact, the same strategies might be able to work on one model but not for both models. This is because there are still some major differences between these two business models even though they have certain similarities.
In this post, we are pleased to define and explain the key differences between these two business models. Read on to find out.
Definition of B2B
B2B stands for business-to-business. It refers to the business transactions that occur between two companies. In B2B, companies usually purchase the products in large quantities at a lower unit price.
Examples of B2B activities:
- Automobile manufacturers supplying car accessories to auto repair workshops
- Food manufacturers selling snacks or canned food to retailers
- Book authors selling their manuscripts to book publishers
Definition of B2C
B2C refers to business-to-customers. Business transactions take place between a company and a consumer (end-user). It is a form of business model in which the company sells their products and services directly to their consumers. Third parties like wholesalers, retailers and middlemen might be involved in the selling process.
Examples of B2C activities:
- End-users buying dairy products from retail stores
- Dropshipping websites selling clothes directly to end-users
- Café owners selling food and beverage and providing customer service to the patrons
Differences Between B2B and B2C
The table below summarizes the key differences between B2B and B2C. In the later part of this post, we will look into them further.
1. Target Market
The target audiences of B2B and B2C are different. B2B focuses mainly on companies, user groups or individuals who purchase the products and services for company usage. Their target audiences are manufacturers, wholesalers and retailers. Hence, B2B companies normally operate in a niche market to focus and study the demographic of the people who make purchases on behalf of or for their company.
Conversely, B2C aims mostly at individual buyers who buy the products for personal usage. They have more “general” and less “specific” needs and wants compared to B2B customers. So, B2C sellers target a mass market that has a wide range of potential customers. Most often than not, a lower marketing cost is required compared to B2B.
2. Factors That Influence Purchase Decisions
Monetary incentives, logical thinking and the rationale of the product or service are the driving forces for B2B customers to make a purchase. Before making a purchase, they will understand the features of the products and the background and industry experience of the company thoroughly. The majority of B2B customers only sign contracts with companies that can give them assurance, trust and benefits.
On the other hand, most B2C buyers tend to make purchases if they are emotionally satisfied with the products. For B2C buyers who are seeking relatability, they are driven by their own emotional attachment and personal fulfilment to buy the products. They believe their requirements and emotional needs can be attained through the purchase.
3. Buying Cycle
The buying cycle of B2B is much more complex compared to B2C. This is because before a B2B customer makes a purchase, the deciding process often involves different departments in the company, sometimes even the Director or the CEO. The company’s short term and long-term goals must be taken into consideration before a purchase is made.
In contrast, B2C customers tend to make a quick purchase decision as the buying process is often a single step. They can make purchase decisions on their own although sometimes they might get influenced by their family, friends or the people around them. So, it will be simpler to market your products to these B2C customers, who are often individuals. Call-to-action phrases that give a sense of urgency, such as “BUY 1 FREE 1 PROMOTION ENDS IN AN HOUR”, “70% DISCOUNT” and so on are proven effective to speed up their decision-making process.
4. Customer Lifecycle
The customer lifecycle of B2B is longer than B2C due to the contractually established loyalty. There is usually a contract between B2B sellers and customers and the contract typically lasts for months or even years. The contract is part of the logic-based decision as B2B buyers prefer to stick with the same supplier on a long-term basis in order to keep their expenses constant.
On the contrary, B2C customers often switch brands and this has shortened the customer lifecycle. This is due to the variety of choices they have compared to B2B customers. Thus, regardless of B2B or B2C sellers, to acquire and retain loyal customers, you must be able to increase the engagement between you and your customers to build a long-lasting customer relationship. This is to ensure that they keep your brand top of mind. When this happens, customers would make repeat purchases and even recommend your company and products to other customers.
5. Marketing Approach
Since B2B and B2C are different business models, they can’t be applied with the same marketing approach as their target audiences are different.
For B2B customers, their needs and wants are specified. They are looking for companies that are capable of meeting the requirements they set for the products or services. Once decisions are made, a long-term contract will be signed.
Thus, B2B sellers normally adopt a marketing approach that focuses on reliability. Educational and informative content that is able to deliver trust and confidence is usually used to attract B2B customers. It is one of the main factors that motivate the customers to make a purchase decision.
Unlike B2B, B2C sellers have to market themselves in a relatable approach. This is because most of the time, B2C customers tend to seek products that have a brand message that relates to their needs. If the messages delivered by the brand can trigger their excitement and relate to them emotionally, chances are they will purchase the products. Hence, emotional ads and personalised solution selling are highly workable here.
It is crucial to know the differences between these two business models in terms of the target market, factors that influence purchase decisions, buying cycle, customer lifecycle and marketing approach so that you can apply the right marketing strategy to your business.
Well. I believe you have found out the major differences between B2B and B2C. If you are looking to expand your business globally, B2B is the best business model as it offers significant growth potential through access to new markets. Imagine the world is your new market.
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**All information extracted from Alibaba’s Business Blogs: B2B vs B2C: 7 Key Differences You Should Know