Should my business sell B2B or B2C? What's the difference between B2B vs B2C? These are important questions for a business owner and an entrepreneur to consider, so they can make the best decisions for their business. We can help you make the decision between B2B and B2C, and we'll also teach you the B2B meaning.
What Is B2B and B2C?
B2B refers to a "business-to-business" company that provides services or products to other businesses. B2C refers to a "business-to-consumer" company that sells directly to individual consumers. They’re two separate business models that serve different types of customers, one being businesses and the other direct to consumer. The main difference between B2B and B2C is the audience or niche market for your marketing activities.
What Is B2B and B2C with Examples?
If the idea of B2B and B2C business models seems confusing, here is a simple example to help. Let's say you are a farmer who grows watermelons. You've harvested this year's crop and have 1,000 watermelons to sell. You need to decide if you'll choose to go the B2B or B2C route.
If you choose the B2B route, you need to find a retailer to buy your watermelons wholesale (see what is wholesale). This could be someone who owns or is opening a grocery store, opening a restaurant, or another farmer who needs additional watermelons. You will sell in bulk for a discounted price to another party who will then sell those watermelons in some form to consumers.
If you choose the go B2C, you would instead set up a farm stand. At this farm stand, you sell watermelons directly to customers as a DTC food business. This requires you to spend more of your time selling the watermelons, but you can sell them at a higher price.
The prices for B2B and B2C products may also vary. To learn more about this, explore wholesale vs retail price.
B2B vs B2C: Which Is Better?
Neither the B2B nor B2C business model is inherently better; they both have their own pros and cons. Most businesses are better suited for one model or the other. The model that best fits your business is determined by your goals, infrastructure, and industry. Here’s a quick overview of B2B vs. B2C to determine which strategy may suit your business:
If you run a business that makes products en masse and needs warehousing, B2B may be the right choice. This will allow you to participate in bulk shipping and grow relationships with businesses around the globe. You’ll need to learn about the differences between flat shipping, expedited shipping, and overnight shipping.
- You could alternatively offer dropshipping and handle the shipping operations for the businesses you sell to. Profits can be higher, but only if you sell enough product. Do some research to discover the best dropshipping products to offer customers. Once you learn how to dropship effectively, you can focus on achieving a solid profit margin.
- If you have smaller batches of products, or sell items with a limited shelf-life, B2C might be the answer. These businesses rely on a higher inventory turnover ratio. Keep in mind that a business owner can calculate turnover using the inventory turnover formula. Individual items have higher profits, but it takes more work to sell as many products. B2C may require spending money on additional staffing to meet sales goals and increased focus on implementing effective inventory management techniques.
Pros and Cons of B2B vs B2C
After we examined what are B2B and B2C, it’s time to see what are the different pros and cons in the B2B vs B2C debate.
Pros of B2B vs B2C
- Larger transactions. B2B has the potential to bring significant revenue streams.
- Reduced marketing costs. Marketing is an integral part of both B2B and B2C. The difference is that with B2B, the target audience is way smaller and well-defined.
- Long-term partnerships. Compared to B2C, B2B businesses have regular and repeat clients.
Cons of B2B vs B2C
- Limited market. Even though there are many opportunities for B2B companies, the market is somewhat limited. This might encourage companies to develop both B2B and B2C sales channels.
- Long sales cycle. A single B2B sale can include multiple decision-makes, contracts, and negotiations.
Pros of B2C vs B2B
- Easier market entry. A B2C business is much easier to start and requires less initial capital. They rarely require complex sales processes.
- Immediate feedback. B2C companies can easily adjust their products and services based on direct feedback from their clients.
Cons of B2C vs B2B
- Higher competition. Industries that work directly with customers are much more saturated with established companies.
- Lower transaction value. As B2C products and services involve small individual purchases, the potential to generate large revenue streams is much lower.
- Higher marketing costs. B2C businesses need to invest in marketing and ads constantly. Otherwise, they will lose market share to their competitors.
Difference Between B2B and B2C
The main difference between B2B and B2C businesses is their intended customers. B2B sells to businesses that resell the products while B2C sells directly to the end consumer. These products can be standard high demand products, food items, and more.
Key messaging for B2B zeroes in on what your product can deliver to their business. The net you cast to reach B2C customers is much wider than B2B. B2C marketing focuses on demographics, socioeconomic groups, and consumer taste.
In B2C marketing, tones of voice, communication channels, and purchasing incentives are likely to differ between products and services. This is a key difference between B2B and B2C marketing, as the target audience is usually more similar for B2B marketing.
Another big difference between B2B and B2C businesses is they also tend to operate differently and offer unique benefits. There are many nuances to offering the right incentives for buying from your business.
Compare and Contrast B2B and B2C eCommerce
B2B and B2C eCommerce businesses (see what is e commerce) have many shared qualities, but they also have a number of important differences. It’s important to learn, compare, and contrast the qualities of B2B and B2C eCommerce before venturing into business in either one.
Here are four of the biggest differences between B2B and B2C:
- Pricing models. This is the same regardless of whether you're an eCommerce or brick-and-mortar business. B2C businesses offer a single tier of pricing for all customers that are only affected by sales or discounts. B2B businesses usually offer multiple levels of discounted prices based on the quantities and frequency of orders. B2B payments are also more varied than B2C and are usually made via net 30 terms.
- Customer service vs account management. B2C eCommerce companies use customer support representatives to respond to common questions and issues. B2C businesses use account managers who bring in new wholesale customers and are regularly in contact with them to increase eCommerce sales and assist.
- Website structure. B2C sites need to have compelling landing pages built to attract customers and convert. Most consumers have a shorter average attention span than business clients, so short and snappy messaging is necessary to catch their attention. This requires investment and dedicated employees to keep the site up-to-date. They can also choose to use an online marketplace to avoid the costs of a headless eCommerce site. B2B sites are mainly used as dashboards for the businesses to easily access the products they want to purchase or access account information. These differences are the same if the company uses a B2B online marketplace. You're unlikely to find a line sheet or the use of hospitality software on a B2C site.
- Checkout structure. Even the steps in the checkout process are different between B2C and B2B eCommerce platforms. In B2C, the checkout process is streamlined to avoid customers abandoning their carts. Statistics show that eCommerce pages with slow loading speed have a higher cart abandonment rate. In B2B, the checkout often has additional steps including injecting human interaction options, adding multiple shipping addresses, or setting up an automatic reorder point. You can check out our eCommerce business guide for more tips.
Both the B2B and B2C Buying Processes Begin with...
Both the B2B and B2C buying processes begin with need recognition. This means that, regardless of the business you run, you first have to establish what your target customers need. This is the first step in developing effective B2C or B2B marketing strategies. You must learn as much information about your target audience as possible.
This can be done through surveys, research, or by considering the B2B sales meaning when looking at B2B sales leads. If you aren't meeting consumer needs, you can quickly run into issues with a backorder, find out dead stock meaning, or even risk business failure.
A good strategy for realizing who your consumers are is creating buyer personas. A buyer persona is a general description of the typical consumer in your target audience.
You can collect and organize information about your target demographics, including age, place of residence, type of work, and other qualities. It helps you organize your message to build a marketing campaign that has a higher possibility of reaching the people who are likely to purchase your products and services.
B2B vs B2C Buying Process
B2B and B2C consumers behave very differently and their buying processes reflect this.
Here are a few ways they differ:
- Buying cycle time. B2B consumers act more slowly and are better informed about their purchases. This is because their purchases are of a much larger quantity and their own business is greatly affected by their purchases. B2C consumers convert more quickly and are often less informed about product differences.
- Emotional investment. B2C consumers often make emotionally-driven purchasing decisions. They may be moved by advertising to associate your product with happiness, or they may be trying to alleviate some frustration. B2B consumers are much more calculating and driven by numbers. This means B2B marketing (see what is B2B marketing) is much more informational and DTC marketing is more entertaining.
- Parties involved. B2C consumers are individuals or small groups. They can easily communicate their wants and needs and are much easier to build a relationship with as a business. B2B consumers often involve multiple people and teams in their purchasing decisions. Rapport can still be built, but it will take longer and requires more investment by all parties.
B2B or Not B2B, That Is Your Question
Now that you know the main differences between B2B and B2C business models, you can make the right decisions for your business. Remember, both models are capable of providing a business with a large volume of sales and revenue. It’s just a matter of deciding which strategy is best for your business.
Your next move should be to look at the various inventory control methods available. This will help you keep costs low as you continue to grow your business.
Frequently Asked Questions About B2B vs. B2C
Now that you’re familiar with the basic differences between B2B and B2C, you probably have other questions about B2B vs B2C. Check out these common questions and answers below:
Is Amazon a B2B or B2C?
Amazon is both a business to business (B2B) and business to consumer (B2C) company. Given the breadth of products available on Amazon, more and more small businesses turn to the website for supplies.
AmazonSupply was replaced by Amazon Business in 2015, which is now the company’s dedicated channel for supporting small businesses. Companies can set up a store, control their pricing and fulfillment, and reach customers in several ways. Amazon’s B2B channel works well for dozens of industries, from construction and automotive to retail and information technology.
Of course, Amazon is best known for its B2C capacities. Businesses of almost every kind can sell products on Amazon, from shoes and furniture to tech gadgets and food. Amazon Prime is a popular feature offered by the company, which offers free shipping and other benefits for a low annual fee.
What Is Your Expertise, B2B or B2C?
The level of expertise a company or marketer will have in B2B or B2C depends on several factors. First, it depends on whether or not a company is reaching businesses or consumers. A company targeting other businesses has a different marketing and sales approach than one targeting customers.
Second, it depends on the professional background of marketing team members. An employee who spent 20 years in B2B sales has different skills than someone with 10 years of B2C marketing campaign experience.
The expertise you or your team have in any field depends on your experience, skills, and knowledge. If you’re looking to grow your expertise in a given area, it’s helpful to consult someone with more experience or hire them for your team.
What are the Disadvantages of B2C?
There are several disadvantages of B2C marketing and operations to be aware of:
- Lower order volume and frequency than B2B orders
- Difficult to retain customers over time
- Competition is increasingly steep in an already large market
- Numerous tech and website requirements that may intimidate newcomers
- Products must be noticeably different from others
What are Some B2B examples?
Four B2B examples include:
What are Some B2C examples?
Three B2C examples include:
- Coffee shops
- Grocery stores
Grow Your B2C Restaurant With Revolution Ordering
If you're a restaurant owner, you're likely selling B2C. When growing you're business, you may look into different online menu ordering options for your customers. A way to do this is through the Revolution Ordering platform.
Revolution Ordering is an off-premise solution for restaurants that requires no hardware and offers different integrations to work with your business. Book a demo to learn more about how the Revolution Ordering platform can help you grow your business.