Commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.
Transactions Between Businesses
B2B, or business-to-business, describes commercial transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. The volume of B2B transactions is much higher than the volume of B2C transactions, because in a typical supply chain there will be many B2B transactions involving sub components or raw materials, and only one B2C transaction, specifically sale of the finished product to the end customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windscreens, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single B2C transaction.
While almost any B2C product or service could also be a B2B product, very few B2B products or services will be used by consumers. For example, toilet paper, a typical B2C product, is a B2B product when sold to hotels. However, few people will buy a forklift for their private use.
The main difference between B2B and B2C is who the buyer of a product or service is. The purchasing process is different in both cases. Below are some of the differences between the two types of purchase.
Buying one can of soft drink involves little money, and thus little risk. If the decision for a particular brand was not right, there are very few implications. The worst that could happen is that the consumer does not like the taste and discards the drink immediately. However, buying B2B products is much riskier. Purchasing the wrong product or service, the wrong quantity, the wrong quality, or agreeing to unfavorable payment terms may put an entire business at risk.
In international trade, delivery risks, exchange rate risks, and political risks exist and may affect the business relationship between buyer and seller. Strong brands imply lower risk of using them; buying unfamiliar brands implies financial risks. Products may not meet the requirements and may need to be replaced at high cost. There exists a performance risk, as there might be something wrong with an unfamiliar brand. When buying machinery or supplies for a company, peers may not approve the purchase of an unknown brand, thus posing a risk to a purchasing manager's reputation.
Buying behavior in a B2B environment
For consumer brands, the buyer is an individual. In B2B there are usually committees of people in an organization. Each of the members may have different attitudes towards any brand. In addition, each party involved may have different reasons for buying or not buying a particular brand. Since there are more people involved in the decision, and since technical details may have to be discussed in length, the decision-making process for B2B products is usually much longer than in B2C.
Companies seek long-term relationships, as any experiment with a different brand will have impacts on the entire business. Brand loyalty in B2B is therefore much higher than in consumer goods markets. While consumer goods usually cost little in comparison to B2B goods, the selling process involves high costs. Not only is it necessary to meet the buyer numerous times, but the buyer may ask for prototypes, samples, and mock-ups. Such detailed assessment serves the purpose of eliminating the risk of buying the wrong product or service.
B2B products are generally bought by a committee of buyers, and in many cases the purchases are specification driven. As a result, it is vital that brands are clearly defined and that they target the appropriate segment. Companies can use various strategies of differentiation, leveraging on the origin of the goods or the processes used in manufacturing them. Depending on the company's history, the competitive landscape, occupied spaces and white spaces, there could be one or many strategies a company could use. Ultimately, a strong B2B brand will reduce the perceived risk for the buyer and help sell the brand.
B2B promotions work differently from B2C brand promotions. The former avoid mass market broadcasts and generally use media that can be targeted at a specific business audience, such as direct marketing distributed online or in trade magazines. B2B companies are also present where their potential customers are, at trade shows, exhibitions, and other trade-related events.