Companies that embrace a business-to-business, or B2B, model, stand to capture significant profit through the sales of high-cost products or sheer bulk orders. B2B practices diverge in several and significant ways from standard business-to-consumer practices. Although some differences entail simple changes in perspective, others create disadvantages for companies seeking to sell to other businesses.
Businesses selling to other businesses face a much smaller buying pool than businesses selling to consumers. The total number of prospective buyers may top out in the low thousands, rather than the potential millions of customers for consumer products. These limited numbers make every lead and every existing customer more valuable and the loss of a single, large customer can devastate the bottom line. For example, if you supply parts to businesses in mature markets, where only a handful of competitors normally operate, your business might not survive if one of your buyers closes shop.
The majority of consumer purchase decisions involve one or perhaps two decision makers and the total time for a purchase decision tends to run on the short side. The B2B sales cycle involves a complicated set of factors, involving multiple stakeholders and decision-makers, with total decision times that can stretch out for months. B2B sellers cannot depend on a fast turnaround with new clients for an influx of working capital and must maintain the financial solvency to operate with long gaps between sales.
Within limits, average consumers remain at the mercy of the businesses in terms of what products they can buy, the available features and at what price points the products sell. In B2B, buyers wield more power than sellers. A B2B buyer can, also within limits, demand certain customizations, impose exacting specifications and drive a hard line with pricing because the seller depends much more heavily on retaining its customers. This requires B2B sellers to retain a level of flexibility in both product development and production not typically seen in B2C businesses.
The typical sales process in B2B demands considerable face time, often multiple meetings, and gets driven by quantifiable factors, rather than the qualitative and emotional factors that drive sales in B2C. This stems in part from the high costs involved in B2B sales from the purchase of thousands of units of a product, a small number of very expensive machines or software that impacts the performance of hundreds to thousands of employees. The sales process often depends on the salesperson’s ability to demonstrate what the product does or allows modifications that solve the very specific problem the buyer faces, and can deliver a solid return on investment.