Weighing the Pros and Cons of B2B vs. B2C

When you decide to embark down the murky and confusing path of entrepreneurship, you must make a fundamental decision very early on in your journey: are your customers going to be the general public or are your customers going to be other businesses? While many of the fundamentals still apply — you’ll want to provide good customer service and your pricing should be reasonably competitive — there are some monumental differences between operating as a B2C business and as a B2B business.

You might remember when I wrote about the freelance clients you want to avoid and the clients you’ll come to love. Those were largely from the B2B perspective and, in re-reading them, you might see just how different the articles may have been if I wrote them from a B2C perspective. Let’s look at how else your business operations would be different.

Your Customer Base

In the case of B2C, your potential customer base is theoretically everyone. You are selling directly to the consumer and everyone in society is a consumer. Of course, this will depend largely on exactly what it is you are selling, but you have a very large base on which to draw. Let’s say that are you in the business of selling socks. A lot of people wear socks and, thus, you have a lot of potential customers. That being said, you may not have a lot of quality repeat customers, because the general population can be quite fickle.

With B2B, on the other hand, your potential customer base is inherently a lot smaller. You can only sell to a particular sub-set, because you are marketing your products or services toward a particular type of business owner. If you are in the business of designing e-commerce websites, then you are only able to sell that service to people (businesses) who want to have an e-commerce website designed.

Typically, this means that you won’t be very effective marketing your services to the random Joe or Jane on the street, whereas if you opened up a sock kiosk at the mall, everyone who walks by may want to buy a pair of socks.

Return on Investment

The nature of the customer base lends itself to a discussion on how the customer approaches the process of buying from you.

With the average consumer (B2C), the buying decision can be one based on emotion or impulse. They are walking through the mall, not really thinking that they need a new pair of black socks when they stumble across your kiosk. They see that your price is competitive, compared to other sock stores in the mall, and you have a good variety of designs. They might choose a pair of socks as an impulse buy. There isn’t necessarily a relationship that forms there, because the same consumer could just as easily buy socks somewhere else tomorrow. This is why so many stores have loyalty programs.

The B2B approach is entirely different. While there are certainly going to be some emotion-based buying decisions, the business customer is more likely to engage in a rational decision making process. They aren’t as concerned about price as much as they are concerned about value. More specifically, return on investment (ROI) may weigh heavily on their minds. They may see how paying you a few thousand dollar to design a very attractive e-commerce store with a high order conversion rate is worth the investment. They spend $2,000 today and they bring in an extra $2,000 in profit each month. That sounds like a good deal.

Furthermore, you’ll find that relationship building can be a lot more important in B2B. Speaking from my own experience, when I build up a solid rapport with a freelance writing client for one project, he is more likely to come back to me for other projects. He already knows what to expect and he’d rather work with me than with a new stranger. The business customer has more at stake, because jumping ship to another provider could have a drastic impact on his or her business.

Willingness to Spend Money

And this lends itself to a discussion of not only how much these customers are willing to spend, but also how soon they are willing to spend it.

With B2C, you may find that customers do a lot more comparison shopping. This is especially true when they perceive that your competitors are effectively selling the same thing. The decision is price-driven and that’s why coupons, discounts and promotions can be reasonably effective. The sales cycle is short, because as mentioned above, the buying decision can be one based on emotion and impulse. They’ll spend sooner, but over the long haul, they may spend less.

With B2B, the situation is different. The sales cycle is typically a lot longer. You may have to “pitch” your offering to the potential business customer and go through several meetings before they agree to the deal. There may be some due diligence involved and there may be more negotiation. In this way, it’s less about the price and more about your unique selling proposition. The longer sales cycle has its rewards, though. While it may take longer to “close the deal,” the long-term spending can be both higher and more predictable.

Success Depends on You

The type of freelance writing that I do, by its very nature, is geared toward the B2B business model. I sell my services to other businesses and, in general, the services that I render are part of a larger machine that is designed to generate revenue either directly or indirectly. Given this, I’ve always wondered if things would have been easier if I decided to open a B2C business instead. I could then better market my services to friends, acquaintances and random people that I meet.

The more I think about it, though, I’m not sure it would have made all that much of a difference. At the end of the day, the success (or failure) of any business depends on the people running it. What are your thoughts? Would you rather run a B2C or a B2B business? Which do you think is more lucrative and more rewarding in the long run?