Enter B2B2C (Business-to-Business-to-Consumer) – a hybrid model that promises bulk acquisition of customers at a remarkably low cost. We explore how traditional B2Bs are harnessing the power of B2B2C and B2B eCommerce to retain relevance and a competitive edge in this increasingly omnichannel world.
A Quick B2B Vs. B2C Recap: The Relative Strengths and Weaknesses
B2B companies sell to enterprises, and B2C companies sell to consumers, yet, in reality, many businesses live in both worlds, running B2B and B2C models concurrently (sometimes referred to as Business-to-Many or B2M.)
Oracle CPQ Cloud Replaced With KBMax To Connect Customers, Sales & ManufacturingB2B and B2C models both have their own strengths and weaknesses, depending on the products and services a business sells and a prospect’s position in the customer cycle. These can be summarized, in general terms, as follows:
- The Duration of the Decision-Making Process: B2C purchase decisions are often made on the spur of the moment, while B2B businesses face a greater time-burden. B2B sales reps have to work harder and longer to get deals over the line and cultivate relationships over the long term.
- The Number of Decision-Makers: B2C companies usually deal with a single decision-maker, while B2B businesses have to contend with a group decision-making process. Such a process can be tricky to navigate, as a firm “no” from any single individual in the decision-making chain can scupper a hard-fought deal.
- The Length of the Business Relationship: B2C customers are more fickle: business relationships often end at the point of purchase. B2B business relationships are more long-lived. It’s not unusual for B2B relationships to last for many years, and as such, relationships require careful nurturing.
- The Size of the Lead Pool: In the United States, there are 327 million individuals and 5.6 million employer firms. It stands to reason then that the lead pool for B2B businesses is significantly smaller; hence why B2B relationship management is so crucial.
- Order Values: The average transaction value (ATV) of a B2B purchase is significantly higher than that of a B2C purchase, meaning B2B companies need fewer customers to sustain profitability.
B2B eCommerce is simply the sale of goods or services, business-to-business, through an online sales portal. How B2B companies operate is rapidly changing, with B2B eCommerce steadily overtaking more traditional forms of B2B transactions. Forrester forecasts that US B2B eCommerce will reach $1.8 trillion and account for 17% of all B2B sales in the US by 2023 – a compound annual growth rate (CAGR) of 10%. That’s huge.
- Better Reach: Businesses can massively increase their total addressable markets by moving online, reaching a global pool of potential customers through search.
- Higher Efficiency: Forward-thinking businesses are migrating their services over to the cloud, integrating them for greater efficiency. Inventory tracking, fulfillment, and supply chain management are just three of the processes that can be streamlined and consolidated through B2B eCommerce.
- Easier For Customers: Customers increasingly favor shopping online. Just like B2C, it’s easier to view order histories, track deliveries, access Ts and Cs, and browse products.
- Increased Order Values: Upsells, cross-sells, recommendations, and promotions are made easier and more effective.
- Improved Customer Feedback: Potential new customers can read reviews and feedback from existing ones, instilling trust. It’s word-of-mouth, at scale.
- Lower overheads: Automation of repetitive, time-sapping tasks reduces the administrative burden on sales and customer service reps. Those on the payroll can spend more time on creative and strategic projects.
- Enhanced Analytics: eCommerce analytics provide deeper insights into everything from next year’s sales to the efficacy of marketing spend, aiding decision-making, and informing strategy.
- Fewer Costly Errors: The potential for human error is diminished through greater automation and a rule-based back-end.
- Better Catalog Management: Adding, removing and editing products can be done on the fly.
- Appealing to Millennials: A growing number of B2B decision-makers are millennials – a group with a strong preference for online.
- Ideal for Complex Products: B2B customers can benefit from a simple, consumer-like buying experience for even the most complex or engineer-to-order products.
B2B2C is a slightly more sophisticated model and one that’s frequently misunderstood. First, let’s start by explaining what B2B2C is not. It’s not a straightforward channel partnership. A simple channel partnership is when a business wholesales its goods to another company, which in turn sells them on to the end-consumer (or another enterprise).
With B2B2C sales, the first business (B1) accesses its customers through the second business (B2), but interacts directly with the customer, under its own brand. Unlike a channel partnership, customers are fully aware that they are buying from B1, and, crucially, B1 retains the customers and data generated from every transaction.
To illustrate B2B2C more clearly, let’s use a KBMax customer, Tuff Shed, as an example. One of the ways Tuff Shed (B1) reaches its customers (C) is through Home Depot (B2). Customers access Tuff Shed’s online product configurator on iPads located in Home Depot stores. They configure their sheds to their specifications, and once the process is complete, the data is submitted directly to Tuff Shed’s manufacturing department, which then makes and ships the product.
The product configurator is heavily Tuff-Shed-branded, leaving customers in no doubt that they are dealing with Tuff Shed directly, and all the customer data generated by the transaction is captured by Tuff Shed itself, for it to keep and use.
For such a B2B2C relationship to be successful, there needs to be justification and motivation on all sides. B1 has to be sure that B2B2C will be more profitable or strategically advantageous than going direct-to-consumer, which generally returns a higher margin per transaction. And, B2 has to be confident that by acting as a conduit for B1, it isn’t damaging sales of its own products.
How Does a B2B2C Model Benefit B1?
- Acquires large volumes of customers in bulk
- Achieves economies of scale by selling more units
- Gains a level of credibility and trust by partnering with an established and respected B2
- Meets extremely low per-customer acquisition costs
How Does a B2B2C Model Benefit B2?
- Makes a commission on sales without getting its hands dirty
- Lures more customers into stores
- Offers a more extensive range of high-quality products
- Increases sales of related products and services
- Co-own B1’s customers (subject to the B2B2C agreement)
How Does a B2B2C Model Benefit the Customer?
- Gets a more convenient shopping experience
- Has a higher degree of confidence in their purchase
- Receives face-to-face customer assistance
While B2B2C can be hugely beneficial to all parties (hence the model’s rise in popularity) it’s not without risks. B1 risks having its customer base stolen. B2 can take what it’s learned from the relationship and make its own competing products, leaving B1 high and dry. Furthermore, B1 has little control over the way B2’s employees sell its products and whether or not information is being conveyed correctly.
On the flipside, B2 has to trust B1 that it will deliver on its promises, giving B2’s customers the level of service they expect. Any delays or errors will likely reflect more negatively on B2 than B1. B2 also needs to be sure that B1’s products are not cannibalizing, directly or indirectly, sales of its own products, because that would render the relationship totally counter-productive.
CPQ Product RulesBefore getting started, you need to decide which model, if any, will fit your business. The global B2B eCommerce market, valued at US$12.2 trillion in 2019, is over six times that of the B2C market. Quite simply, the B2B eCommerce opportunity is vast, and most companies would be foolish not to invest in this space.
But, of course, there are always exceptions. Companies fearful of revealing details of their products and prices to competitors (and customers) may want to think twice about the B2B eCommerce route, as will companies that are simply unable to meet any higher demand than they are already.
Adopting a B2B2C model is less of a no-brainer – it’s a complex arrangement that takes a lot of work from both sides. It works best when B1 wants to solve a problem for its customers but categorically does not want to be in the business B2 is offering.
The next step before leaping in either the B2B eCommerce or B2B2C direction is to put together a solid implementation plan, one that takes into account the needs and wants of all stakeholders and has established roles, budgets, and accountabilities for every target and proposed outcome.