B2B vs B2C
The amount of shorthand in the business world can be difficult to keep track of sometimes.
B2B, B2C, CRM, SaaS, and many more are repeated ad nauseam as if everyone is on the same page as to their definitions. Sometimes, as in the case of B2B and B2C, two acronyms can be spelled nearly identically yet mean very different things, and this article is meant to clear up the confusion and answer a question…
What’s the difference between B2B and B2C?
Before explaining the difference between B2B and B2C, it’s worthwhile to go over their definitions in short terms.
“B2B“, or “business to business“, refers to commercial transactions happening between two businesses.
These transactions are typically selling goods and services to other businesses for further use in production, general operations, or resale.
Thus, the B2B market includes companies that are suppliers, manufacturers, wholesalers, and/or distributors of goods and services.
“B2C“, or “business to consumer“, refers to commercial transactions happening between a business and a general consumer like me or you.
They’re generally more focused on individual needs and individual quantities, as the person buying has no intent to make changes to and distribute the product.
The difference between these two things is the difference between “B” and “C”, a business and a consumer.
In this case, “business” can be replaced with “producer” and the separation might be clearer.
Producers can make something from nothing; they have to have something to work with in the first place, especially when it comes to physical products and raw materials.
A producer will take these raw materials, manufacture or machine them into consumer products, then sell them to a general consumer base.
The only thing that bridges the gap between B2B and B2C is what is known as “prosumers”, who are consumers who buy products with professional use in mind. These people are the exception, however, and don’t really factor into the difference between B2B and B2C.
Types of B2B Transactions:
Given the massive amount of unique business types, there are many different flavors of B2B that keep those businesses running. Here are the three types of B2B businesses:
Product-based B2B companies are the type of companies that sell physical products to wholesalers or retailers around the world. For example, imagine a lumber mill that I’ll call company A.
Company A will prepare and store wood of many different types for many different use cases and, whenever a company (who I’ll call company B) requires wood for their business, the lumber mill can deliver it to them.
This is a particularly helpful example of the difference between B2B and B2C because the main market for lumber in bulk would be other companies like company B.
Normal consumers wouldn’t buy lumber in the quantities a lumber mill would deliver, but they might buy whatever product is made by company B using company A’s lumber.
However, physical B2B goods aren’t limited to the physical resources used to make more specialized things.
Another good example is an office furniture vendor selling to businesses who buy in bulk, as their market is likely businesses with offices and is thus another example of a B2B product.
Service-based B2B transactions can be similar to product-based B2B transactions, but that depends on the industry.
For example, back to the lumber mill example, maybe company B is a manufacturing company and not the final retailer for the product, A.K.A. the B2C company.
In that case company A, a product-based B2B company, would supply company B, a service-based B2B company, with the physical product, and company B would manufacture whatever that lumber was being turned into and sell it to the final retailer (whom I’ll call company C), who may just put their brand logo on the product and sell it to general consumers.
Maybe company B was manufacturing wooden rocking chairs that company C would buy wholesale, then label with their brand’s logo then sell to general consumers.
Just as with product-based B2B, service-based B2B doesn’t have to be limited to manufacturing and machining.
In a corporate setting, service-based B2B could look like a company hiring an accounting firm to keep its finances in order, the accounting firm being a service-based B2B company. ‘
A general consumer would have no need for a business accounting service, thus the market is B2B and not B2C.
Software B2B is likely the most common, as there has been software developed for nearly every business use case imaginable.
The basic examples are more universal things that all companies might need, like accounting software, customer relationship management (CRM) software, databases, etc.; more specialized examples could be shipping and receiving software for freight companies, 3D CAD software for industrial designers, or fashion design software for high fashion brands.
Whatever the use case might be, these software examples are unlikely to be used by the general consumer base, thus their services are catered towards other businesses looking to create and sell their own products.
These are the three main buckets that you can fit any B2B company into; some can be more than one, and some can include all three, but they will all fit into these three categories in some way.
Types of B2C Transactions:
B2C transactions are much easier than B2B transactions in terms of classification; if it’s something you would purchase in your personal life, it’s likely a B2C transaction.
The biggest B2C platform in the world is Amazon, which sells almost anything a standard consumer could want and maybe even some prosumer products as well.
When it comes to B2C transactions as opposed to B2B transactions, it’s possible for impulse purchases to be made, resulting in a much shorter sales cycle and encouraging marketing on the part of the business as well.
Marketing will influence B2C transactions much more than B2B transactions, as consumers are more likely to buy in a short sales cycle than producers, who will be more deliberate with their purchase decisions.