Why B2B is a different game to B2C
Business to Business (B2B) or Business to Consumer (B2C) – not a binary choice.
Knowing who you’re going to sell to is, unsurprisingly, an important point to clarify when you’re setting out to start a business. Whilst ‘everyone’ is a popular choice, it unfortunately needs to be a bit more refined than that – most notably – will you sell to businesses or consumers?
The startup promise is an alluring one to the restless millennial – fast exits, lots of publicity and at least one defining cultural practice that etches your vision into the annuls of business lore. Many (most?) of the companies that make this dream tantalisingly attainable are B2C - we need only think of startups like Pinterest, Uber, Twitch, Twitter, AirBnB and SnapChat.
Whilst there is an obvious allure to B2C, B2B is home to some of the best and most consistent returns in the industry. Studies of tech startups from 2003-2013 revealed:
Enterprise-oriented unicorns have become worth more on average, and raised much less private capital, delivering a higher return on private investment.
Before you hang up your hoodies for Ermenegildo Zegna suits there are some important considerations to weigh up in the B2B vs B2C debate.
Selling in the B2B sphere has many distinct challenges namely:
- Costly sales process – involving multiple face to face meetings
- Longer decision making process – typically requiring the buy in of
- A smaller lead pool – there are millions of consumers to target, but quite often mere thousands or just hundreds of companies relevant to your product.
- Long running customer relationships with competitors – it’s costly to change supplier often.
These challenges are offset by higher value of contracts, longer term relationships (once you’ve beaten the competition) and more scope for upselling. B2C enjoys opposites to these negatives – quick decision making, low(ish) costs of acquisition and millions of potential targets.
From an HR perspective, your B2B team will need high levels of industry/product knowledge, be skilled in the art of (true) relationship building and not baulk at the sight of (very) large deals. On the surface it’s less glamourous and publicly visible than running a viral marketing campaign, but it’s powered by consistent and long term results.
Marketing and customer feedback
B2B marketing necessitates a much more feature and quantitative value driven approach. Given the number of stakeholders that need to be engaged and satisfied, emotional value takes lower priority over hard business return on investment. Logic is the marketers friend here. That’s not to say it’s a black hole of human consideration - Harvard Business Review identified the importance of personal motivation of key individuals in a prospective client are just as important as the tangible value of your solution.
Conversely, the B2C approach is much more emotionally driven, with customers being able to make much quicker decisions in a never-ending search for instant gratification. A strong effort is made to reinforce the connection between the brand and the customers’ sense of self.
B2B companies have a lower number of customers to engage with so whilst customer feedback can be detailed and high quality, there isn’t going to be a diverse range of it. This makes producing analytics a trickier affair than the B2C world where you can learn any number of important metrics from your thousands of users.
Market penetration is tough – whether you are B2C or B2B. Hence many B2B’s partner up with incumbent players (and other value add service players), to get to their first batch. Conversely B2C players can completely depend upon sheer brute force. A friend of mine started a B2C – in her efforts to build a user base, she literally stood next to a tube station, convincing people to try her BETA for 3 months. She then exited that and started a B2B - this time I found her partnering up with large organisations as an added bundle on top of their services.
Investment in B2B vs B2C
Approaching a fund for investment is fine but are they even the right people to talk to? Not everyone invests in everything.
- B2C is a different animal, normally we see 20 somethings (or 15!) having their finger on the pulse of a certain demographical need and nailing it.
- VCs sometimes cross pollinate investments especially if the B2B is a B2B2C and there are other B2C’s in their portfolio - but there is distinction between who does B2C and who does B2B investments. Why they lean towards it may be purely mathematical optimisation of the style of investor mode they chose to do.
Whichever way you look at it, going B2B or B2C is not binary choice. With so many competing factors and considerations, it’s a decision that is taken lightly at your peril!