Over the last six months, I started a research project in conjunction with a B2B accelerator, 9Mile Labs, to understand what factors lead to entrepreneurial success. A key part of the research method was to use video ethnography to capture a record of the many kinds of interactions of companies within the accelerator.
Spending several hundred hours behind a video camera was beyond boring. Evaluating those hundreds of hours of video is cruel and unusual punishment. Yet, through observing without intervening, my pattern recognition brain had to find something to do.
Most of my professional life is spent in business to business product development and new venture generation. Through forty years of experience, most of my understanding of this space is deeply tacit. Through watching nine new ventures struggle with the development of B2B companies, I saw something that I’d completely missed in how I think about B2B business.
B2B businesses are no longer B2B, they are really B2B2C. Ok, Skip, enough with the acronym city. What are you talking about?
With one exception, all of the accelerator companies were building a product to be used by consumers or end users. Their relationship with the businesses who were their customers was as a distribution channel.
Let’s step back and look at some definitions:
B2B – Business-to-Business
Business-to-business (B2B) describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. Contrasting terms are business-to-consumer (B2C) and business-to-government (B2G). B2B branding is a term used in marketing.
B2B is also used in the context of communication and collaboration. Many businesses are now using social media to connect with their consumers (B2C); however, they are now using similar tools within the business so employees can connect with one another. When communication is taking place amongst employees, this can be referred to as “B2B” communication.
The terms B2B and B2C are short forms for Business-to-Business (B2B) and Business-to-Consumer (B2C). Both describe the nature and selling process of goods and services. While B2B products and services are sold from one company to another, B2C products are sold from a company to the end user.
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, can be seen as a B2B product if it is bought in larger quantities by a hotel for their restrooms and guestrooms. However, few people will buy an excavator for their private use.
Most B2B products are purchased by companies to be used in their own manufacturing, producing goods and services to be sold on. The value added product can then be either sold to yet another company; or to the consumer.
B2C – Business to Consumer
Business-to-customer marketing refers to the tactics and best practices used to promote products and services among consumers.
Like most forms of marketing, technology has greatly expanded the number of channels B2C marketers must use in their campaigns. However, it has also provided companies with the ability to use different techniques across multiple channels based on which demographics are most likely to access them.
The most popular or effective channels for a business will differ according to its unique demographic, but the web is becoming universal in consumers’ shopping research. According to a report from Pew, 33 percent of adults aged 18 to 39 turn to the internet first when looking for information on local businesses, while 26 percent of older adults rely primarily on the web for researching nearby companies.
Additionally, the web is the starting point for research in a number of B2C businesses, such as restaurants and bars, by adults of all age groups.
“When looking at the difference between B2B and B2C e-commerce, often times people assume the most obvious difference – B2B is businesses selling to other businesses online, and B2C is businesses selling to consumers online. Sure, that’s true. But that’s not all.
Let’s look at a few other differences.
The purpose of B2C e-commerce is not only to sell products and services online, but also to drive traffic, increase and strengthen brand awareness, and educate customers on catalogues and promotions. Generally, there is equal focus on customer retention and bringing in new ones.
In B2B e-commerce, the purpose is to increase and strengthen existing business relationships overtime, and cut costs of searching and dealing with new vendors. B2B e-commerce involves lower traffic, but higher AOV.
In B2C e-commerce, the purchase process is much less complex. The buyer is usually also the decision maker. Purchase power is often influenced by brand loyalty, consumer recommendations and reviews, and consumer preference and taste.
The purchase process in B2B goes much beyond a single buyer and one decision maker. Purchase processes in this type of commerce generally involves a number of highly knowledgeable buyers that consult numerous executive decision makers. Orders are made based on the needs of the company such as raw materials for a manufacturer.
B2C e-commerce systems generally have a simplified structure that communicates a paralleled brand message and product catalogues across the same group of customers.
In B2B e-commerce, this requires a more advanced system in which products and prices are customized to different groups of customers. A high degree of personalization creates streamlined process flows, eliminating browsing for the needed product catalogue for order.
B2C transactions are done at the point of sale on the B2B web store via credit or debit cards, or even customer gift cards.
In B2B transactions, payment processes are set up on account-basis. Consumers place their orders electronically on the web store, and receive the invoice for the purchase to process the payment.
B2B2C – Business to Business to Consumer
“Business to Business to Consumer (B2B2C) is an emerging e-commerce model that combines Business to Business (B2B) and Business to Consumer (B2C) for a complete product or service transaction. B2B2C is a collaboration process that, in theory, creates mutually beneficial service and product delivery channels.”
So that’s the definitional background. But a funny thing happened on the way to observing the product pitches. All of their product presentations looked like a B2C company product pitch. What was going on?
Slowly, it dawned on me that most of the B2B businesses were really B2C companies and they were just selling to a “business” as a distribution method. B2B2C was a better description of what these companies were really doing.
If we take Comr.se as an example, they figured out how to do an eCommerce transaction directly in Facebook or Twitter without providing a pointer back to a brand’s eCommerce site. All of their product development work is aimed at how to interact with a consumer directly in these social media channels. Their interaction with a business is for the business to “distribute” the Comr.se software through the brand’s social media customer relationships. By relieving the brands of any additional website or eCommerce development, Comr.se hosts these transaction so they are also getting direct access to the customer information.
The businesses (brands) that Comr.se works with (like Dita Eyewear) are excited about this approach as it removes one more transactional friction from the customer (reduce the number of clicks to order something) as well as potentially provide them with some increased margin. Comr.se follows the key business strategy recommended by Mack Hanan of creating “growth partners.”
“How can you grow your business?
“You can only grow someone else’s business. His business growth will be the source of your growth. By growing, he will force growth back upon you because he will want you to grow him again.
“The businesses you can grow have a name. They are called your major customers. Their growth must be the objective of your business. The capabilities you require to grow them must be your asset base.
“Growth requires a partner. A growth partner is a special kind of customer. He is a customer whose costs you can significantly reduce or whose profitable sales volume you can significantly increase. In one or both of these ways, you can improve his profits. This is the basis for his growth. It is also the basis for his contribution to your own growth. As the two of you grow each other, you will become mutually indispensable.
“If you cannot grow a customer, you cannot partner him. You can continue to do business with him, buying and selling, but the maximized profits of growth will elude both of you. If all your customers are buyers instead of growers, you will be a slow-growth or no-growth business. None of your customers will be growing you because you will not be growing them.”
By using this B2B2C strategy, Comr.se is an excellent example of what Forrester termed “transactive content – software that blends transactions with interactivity and content over the net.”
If you are a B2B company, what would your products and services look like if you thought in terms of B2B2C, growth partnering and social media “transactive context”?
For a humorous look at the wonderful world of innovation and new ventures, checkout Fl!p and the gang at Fl!p Comics.