A company that selects a B2B strategy decides to sell its products directly to other businesses. B2B (business-to-business) is an alternative to the B2C strategy, in which a business sells products to retail customers. With the B2B strategy, the business has fewer clients, but each client has a larger budget and makes a larger order. The product offering is also different, because the company focuses on selling products that another company wants to purchase.
Employment Agencies
Because one of the biggest expenses for a business is hiring employees, some B2B firms focus on providing employees to other companies. A temporary agency is a B2B seller, and consulting agencies and outsourcing firms also are B2B sellers. A B2B company can be much more efficient at performing a single service, such as payrolls or bill collection, than a company that has employees who work in many different areas. The B2B company has an advantage because an individual usually can't afford to hire a fulltime contract worker, so a B2C company can't compete in this market.
Client Relationship
A B2B firm has fewer clients to keep track of and to keep happy. The B2B firm can focus on the preferences of a few large customers, and it can assign individual sales representatives to each customer so it can determine exactly what each customer wants. The B2B firm reduces its risk of producing a product that its customers are not willing to purchase, which is an advantage.
Income Sources
One disadvantage of a B2B firm is that it is dependent on large orders from its existing clients. If a single auto manufacturer normally purchases all the auto parts from a parts seller, and then the auto manufacturer goes out of business, the parts seller may have trouble finding other clients. If an individual consumer stops buying groceries at a supermarket, however, this does not affect the supermarket much.
Bargaining Position
B2B firms have less leverage over their customers than B2C firms do. The other business knows the B2B firm depends on its business, and it may ask for an aggressive price reduction or demand other services, such as free delivery. An individual retail customer usually has to pay the sticker price on an item and has to accept the financing terms that the retailer offers to all customers. This is a disadvantage for the B2B firm.
Marketing Costs
A B2B firm can save money on advertising and marketing expenses. A B2C firm has to spend money in many advertising channels, such as television, radio, Internet and newspapers, because it needs to attract a large number of clients. The B2B firm only needs to reach a few decision-makers at the client firm, and its representatives can contact these people directly.
Tags: auto manufacturer, company that, disadvantage firm, each customer, fewer clients