Exploring B2B & B2C
Business Structures and Marketing Strategies: Here's Why it Matters...
The Business-to-Business (B2B) and Business-to-Consumer (B2C) business models form the inevitable fork in a startup’s path. While the concept may seem straightforward, choosing the right model for a business is a vital determinant for success down the road. In this article, the traits of each of these models will be discussed, not to rank one above the other, but instead to act as a means to understand the structure of a business and how to market it accordingly. While B2B and B2C are somewhat self-explanatory, they are key to identifying the target customer, maximizing profit, and effectively marketing to the entire customer base.
A B2B model depicts a scenario where a business sells its products to other businesses while the alternate strategy involves selling the products to consumers. The B2B structure is known for having a lower customer base relative to B2C. This is because business relationships are strategic and planned as larger, higher value orders are placed over the course of a lengthy buying and selling cycle. B2C involves retail transactions where the company sells products to everyday consumers for profit. B2C includes, but is not limited to, D2C (Direct-to-Consumer) models that sell directly to individual consumers through e-commerce or other mediums. B2C models correlate with decreased volume per order, a higher customer count, a shorter sales cycle, and a shorter buyer-seller relationship. For example, if you want to buy a winter jacket, then you will go to a winter/ski apparel store and/or online retailer such as Patagonia or Columbia. You will most likely buy a single jacket, which would be a low value order of about $200-$300. You chose to buy from this company based on their branding, flashy ads depicting skiers in the mountains flying down the slopes, and the ability you believe that this product has to protect you against the elements. In a way, it’s emotional. This transaction is a B2C model between the retailer and the consumer. Now, let’s think about how that same jacket is also part of a B2B business model. The winter jacket company chooses to work with manufacturers that advertise advantageous logistics like production efficiency, cost-effectiveness, and most importantly profitability. These manufacturers who allow client companies to white label their products are selling the same product, but using a B2B business model. The same product is being advertised two different ways, which is why successful entities understand B2B and B2C marketing.
The Distribution Channel
B2B and B2C companies are reliant on one another to flourish because both structures are essential for wholesale distribution channel to exist. B2B wholesale manufacturers overcome the accessibility obstacle. If an end-consumer desired to forfeit the retail experience involving a third party, then he/she would have to pay for a bulk order as well as insurmountable shipping costs from manufacturers overseas. Without B2B wholesale, low quantities, affordable prices, proximate retailers, convenient e-commerce, and quick shipping would be unattainable.
A popular women’s athleticwear brand, Lululemon, is a prime example of how a successful B2C model relies on B2B manufacturers in the active apparel industry. The company’s list of suppliers as of December 2021, includes 90 suppliers with an additional 18 finished goods subcontractors for printing/washing and 19 top raw material providers accounting for 80% of the fabric mills. Mas Active Trading (Pvt) Ltd, a supplier based in Sri Lanka, is just one of the numerous B2B companies that make apparel for Lululemon while also working with other well-known industry names including Nike, Patagonia, and Hanes. See Figure 1:
Lululemon does not operate or own any of its own manufacturing facilities and its suppliers produce 44% of products in Southeast Asia, 28% in South Asia, 20% in China and 2% in North America. The company establishes long-term relationships with its manufacturers, which are upheld by sustainability practices and the vendor code of ethics. This has contributed to business relationships lasting more than a decade as well as increased transactions with this manufacturer over time. See Figure 2:
Marketing and Branding
Previously, the structural difference between the B2B and B2C models were used as a differentiator, but now the question is, why does it matter? Effective marketing strategy is dependent on the intended customer. A B2B buyer is concerned with a commercial agenda while a B2C consumer looks to fulfill an individual need. Therefore, marketing strategy must align with the goals, problems, and objectives of the customer.
Focus on ROI: A business that sells to another business will need to sell the return on investment rather than the actual product
Scalability: Ability to expand outreach and grow the company
Efficiency: Minimizing time and money spent to achieve a given outcome
Focus on product
Improves quality of life and solves a problem
The best way to understand the difference is to analyze a company that implements both B2B and B2C marketing strategy and how the strategy differs between two similar products with the same brand. Microsoft is the largest vendor of computer software in the world, and it offers a wide variety of products that includes video games, computer and gaming hardware, search and other online services. Let’s take a closer look at two software products: Microsoft 365 and Microsoft Dynamics 365.
Microsoft 365 is a subscription-based model that provides a series of apps to foster collaboration and productivity. The company utilizes both B2B and B2C marketing to expand its customer base. Microsoft 365 Home advertises solutions for people with packed schedules and busy lives. See Figure 3:
Microsoft’s B2C marketing strategy centers on the advantages of the product and how it solves problems to improve everyday life. It’s promoting personal photo storage, ad-free emails, high-quality reports, essays, and presentations. People are drawn to being connected with others and the convenience of having multiple features in one place. On the flipside, Microsoft for Business highlights the ways in which it can improve the logistics of the company using it. See Figure 4:
The focus shifts to generating revenue, maintaining efficiency and saving money, while making a return on investment as a result. Josh Clark, Director of Coffee at Clifton Coffee Roasters, attributes his increase in partnerships and customer outreach to Microsoft. See Figure 5:
By effectively employing both B2C and B2B marketing techniques, Microsoft 365 can be effectively sold to both individual consumers and corporate entities alike. Now, let’s look at the Microsoft product that is sold exclusively on a B2B model: Microsoft Dynamics 365. It’s enterprise resource planning (ERP) software is used to manage the logistics of a company to include financials, supply chain, operations, reporting, manufacturing, and human resources activities. Now, let’s see how the company advertises this software compared to Microsoft 365. See Figure 6:
The red underline depicts the B2B marketing exhibited by Microsoft 365 Dynamic. Productivity, streamline, data secure, less costly, and scale are all words and phrases that pertain to logistics and the end goals of generating revenue, maintaining efficiency and saving money. These goals are factors of ROI.
The H2H Perspective
You’ve heard of B2B and B2C, but what’s H2H? Human-to-Human marketing (H2H) recognizes the person behind the transaction. While the differences between B2B and B2C are key to marketing effectively, H2H is something that both models can benefit from. B2B and B2C are driven by selling the benefits of the service/product while H2H is about collaborative branding, described as relating your brand to the solution of a human problem and then finding a solution.
An example of H2H marketing is Patagonia’s 2011 “Don’t Buy This Jacket” advertisement in the New York Times which prompted a 30% increase in sales. By following its mission statement and promoting sustainability, people were connected to the human cause that the brand represented in its marketing strategy.
Despite having different driving forces behind them, the 3 marketing strategies described in this article share some noteworthy similarities.
Similarities Between B2B & B2C:
At the end of the day, running a successful business requires cultivating and nurturing relationships whether selling to another business or an individual consumer. Understanding the driving forces behind B2B and B2C, the intended customer, the interconnections that form the distribution channel, and the desire for human cause are key to the marketing strategy of any successful business.