What Is The Meaning Of B2B Model?
When a business sells its products or services to other businesses instead of an individual consumer, it is said to have a B2B model. Gartner defines B2B sales as transactions between two businesses characterised by larger transaction amounts, more educated buyers, and a multistakeholder approval process, leading to a longer sales cycle.
How Is B2B Different From B2C?
B2B and B2C are two different models of businesses that sell their products or services to different audiences. Some crucial differences include::
What Are The Different Business Models In India?
- Direct Model: Businesses sell directly to consumers through online portals or middlemen. These dealers or middlemen represent the company to customers. Examples: car dealers and online smartphone sales.
- Franchise Model: It is a contractual model under which an established brand allows franchisees or businesses to use its brand, and intellectual property, among others. The franchisee pays royalty and licence fees to the parent company.
- Aggregation Model: It connects users with providers through a platform. There is uniformity in payments, service, and technology. The model is boosting micro-entrepreneurship in India. Examples: Ola and OYO.
- Freemium and Subscription: It offers free and premium services to attract and habituate customers. They make revenue from advertisements. Examples: Hotstar (freemium) and BYJU’S (subscription). The subscription-based model involves paying for the entire service — for example, Netflix.
What Are The Benefits Of B2B Business Model?
- Selling through such channels like wholesale leads to wider exposure, further increasing brand recognition for the business, as retailers promote their products.
- B2B marketing involves minimal expenditure as marketing is done by resellers, saving businesses the need for extensive marketing budgets in comparison with DTC approaches.
- Another benefit is the lower customer acquisition costs. B2B buyers often take personalised approaches which reduce the cost of acquiring customers compared to mass DTC marketing.
- B2B customers tend to make more frequent purchases than individual consumers, driving higher sales volumes and revenue.
- Long-term relationships with customers generate consistent and predictable revenue for the business. The predictability factor allows them stability against external factors.
- B2B businesses have automated sales and business processes, which help in minimising errors and make sales more efficient.
- B2B expansion allows businesses to distribute their products through partners, thereby removing international growth challenges.
- Orders often involve bulk purchases, resulting in lesser operational cost per unit.
What Are The Challenges Of B2B Business Model?
Bulk Deal Pricing: Businesses often offer pricing based on volume. However, managing different pricing tiers for different quantities can be a complex and tedious process.
Maintaining Client Relationships: B2B businesses need to track and manage each client’s account, which can be challenging when dealing with a large number of clients. Ensuring timely follow-ups and maintaining communication becomes crucial.
Customisable Shopping Cart: B2B companies that offer multiple product lines or brands need a platform that supports customised shopping carts to enable easy product comparison and selection for buyers, without which the process can be challenging.
Shipping Solutions: Timely and accurate order delivery is critical in transactions. Integrating shipping software to handle order processing, shipping calculations, and delivery information becomes a challenge that needs to be addressed.
Sale Completion Times: B2B buyers require multiple price quotes and approvals before finalising a purchase, leading to longer deadlines for sales as compared to B2C transactions.
Large Quantity Transactions: Handling large orders efficiently while maintaining a professional user experience can be a challenge.
Creating A User-Friendly Experience: B2B businesses must provide user-friendly experiences not only for customers but also for vendors who may need self-service options for order adjustments and flexible payment methods.
Establishing Advanced Logic: B2B companies need to set up complex pricing rules and discounts based on various factors like product categories, shipping options and loyalty programs.
Different Fulfilment Areas: Large B2B companies may have multiple fulfilment centres, which can complicate the process of managing customised shipping requests and ensuring efficient order fulfilment.
