Comparing Business Models | B2B & B2C

Business to Consumer — B2C
We’ll begin with the business model most people are familiar with and are exposed to almost every day of their lives. Everyone is a consumer in one way or another; from the bed you sleep on to the food you eat. Unless you’re living completely off the grid, the products you consume have come from a business in one way or another. This is the B2C business model.
B2C is a transactional business model where money is exchanged for products and services. Something like a blog in most cases would not fall under this category if they were generating their income through ads.
This model often requires a lot of relationship building with the customer, especially in this day and age where another option is just a few clicks or a swipe away. You can notice how with the mass adoption of smartphones and easy internet access, many companies have had to innovate and adapt their business models to include some sort of loyalty program which rewards customers for staying and purchasing from them. In the last few years, we’ve seen these loyalty programs quickly adopted by almost every business who wants to stay relevant.

Another important aspect to consider is branding. When a person thinks about your company or product, what name and image do they visualise? Branding attempts to add value to the business by establishing further differentiation through everything from the name, imagery, advertisements and people used. When you buy a Harley Davidson you know what to expect. You bought it because you wanted a Harley. Not just any motorcycle. Many who do, don’t buy it just for the quality of the bike either but the brand image and cultural association that comes with owning one. By owning one, you’re effectively joining the “Harley Davidson tribe” and that separates you from everyone else.
Some brands are so strong that you can’t buy from them unless they give you permission. To get your hands on Ferrari’s new and more exclusive models you need a lot more than just money and fame.
Risks and Challenges
There are many risks and challenges associated with the B2C business model. It’s important to note that these risks and challenges aren’t static. As technology improves and social perceptions change, so will the risks and challenges of a company or business model.
A bad experience can go viral
I’m sure most of you still remember the United Airlines fiasco where a doctor was forcibly dragged off an overcrowded UA flight.
The result? United Airlines market cap plummeted by $770 million in a matter of days.
Hyper-awareness
We live in a hyperconnected world where information can be spread to millions of people in a matter of seconds. With this power comes a level of what I like to call “hyperawareness”. All of a sudden consumers had access to all sorts of company information such as ingredients used and methods to obtain them, outsourcing of work to sweatshops, animal testing on products, etc.
This meant that companies now had to not only have a loyalty program but also to change their business practices to be more ethical. As the world wars ended and life got better, peoples worries began to drift elsewhere from themselves and access to information was easier than ever with the rise of tech. It seems that the new “loyalty program” has become doing social good or having a good cause and many brands have popped up that do this pretty well such as Thank You and Zambrero. It won’t be long before we see business models being adapted again and organisations such as Pledge 1% have made it easier than ever for companies to join the ride.
Consumers have the power
We’re in the golden age of the consumer and business’ have to fight to hold on to them. It’s easier than ever for a consumer to be drawn away by another product as we’re constantly exposed to so much advertising and given so many options. This is why Coca-Cola still advertises hard despite being the king of soft drinks because to stay on top, they know they have to constantly be fighting for your mental space amongst other brands. When consumers have the power, it is up to us to decide the direction of these companies through our purchasing decisions. This can be a good and bad thing as there is also a lot of false information out there.
Business to Business — B2B

To give you an idea of market size, Forbes thinks that by 2020, the B2B ecommerce market size will be double that of B2C. That says a lot about what’s going on behind the scenes so let’s dig a little deeper into what makes B2B different to B2C.
Let’s get on the same wavelength. Business’ have a lot more money than the average consumer and are willing to spend it if it means more money later down the track or having to spend less somewhere else. In the B2B world, you only need to meet the needs of a handful of customers. Continue to meet these consistently as they change and software licenses and contracts will continue to renew. In the business world, you can price things according to the value they are adding. That means that if your innovative new app will save a company $100k in resources every year. That gives you a lot of wiggle room for pricing access to your app accordingly. This is the magic of business and entrepreneurship. It’s about finding gaps or opportunities in the market and filling them.
Business’ have a much longer decision making process as there are many stakeholders involved and a lot more things to consider as even the smallest change can have a large impact on something else. This is where strategy and planning becomes very important. As decisions carry a lot of weight and potential risk in the business world, they’re made with deliberation and this means that things move a little slower in the world of B2B. Need’s don’t change too often and demand is usually consistent and with a fixed price. There’s less customers available to you as each business is a lot more complex and has individualised needs in comparison to a consumer. Relationships are stronger and built over months and years instead of minutes. As a result, many companies form tight bonds and partnerships with one another built over long periods of doing business and these existing bonds can actually stifle innovation and complicate things because implementing something new often means letting something else go. In some cases, they might merge or acquire one another. This is a strategy in itself where companies seek to control as much of their supply chain as they can to maximise profits or even to deal with a potential threat by consuming them and adapting rather than waiting for them to grow and take over. The world of B2B is endlessly fascinating and there are many variables and influences that can cause disruption and change sometimes to create new markets or destroy existing ones.
- B2B purchases are based mostly on logic
- B2C purchases are based mostly on emotion
