Business-to-business

The "electronic components district" of Guangzhou, where numerous shops sell electronic components to other companies that would use them to manufacture consumer goods.

Business-to-business (B2B) describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. Contrasting terms are business-to-consumer (B2C) and business-to-government (B2G). B2B (Business to Business) Branding is a term used in marketing.

The volume of B2B (Business-to-Business) transactions is much higher than the volume of B2C transactions. The primary reason for this is that in a typical supply chain there will be many B2B transactions involving sub components or raw materials, and only one B2C transaction, specifically sale of the finished product to the end customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windscreens, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single (B2C) transaction.

B2B is also used in the context of communication and collaboration. Many businesses are now using social media to connect with their consumers (B2C); however, they are now using similar tools within the business so employees can connect with one another. When communication is taking place amongst employees, this can be referred to as "B2B" communication.

Etymology

The term was originally coined to describe the electronic communications between businesses or enterprises in order to distinguish it from the communications between businesses and consumers ("business-to-consumer"). It eventually came to be used in marketing as well, initially describing only industrial or capital goods marketing. Today it is widely used to describe all products and services used by enterprises. Many professional institutions and the trade publications focus much more on B2C than B2B, although most sales and marketing personnel are in the B2B sector.

Definition B2B vs. B2C

The terms B2B and B2C are short forms for Business-to-Business (B2B) and Business-to-Consumer (B2C). Both describe the nature and selling process of goods and services. While B2B products and services are sold from one company to another, B2C products are sold from a company to the end user.

While almost any B2C product or service could also be a B2B product, very few B2B products or services will be used by consumers. For example, toilet paper, a typical B2C product, can be seen as a B2B product if it is bought in larger quantities by a hotel for their restrooms and guestrooms. However, few people will buy an excavator for their private use.

Most B2B products are purchased by companies to be used in their own manufacturing, producing goods and services to be sold on. The value added product can then be either sold to yet another company; or to the consumer.

Any consumer product would have gone through numerous value-add processes before it is being purchased by the final user. Numerous suppliers from various industries would have contributed to the finished product. For instance, a can of soft drink will require different companies to provide the can, water, sugar, other ingredients, label-printing, packaging, transportation and paint for the printing. The can itself is made from aluminium that needs to be processed and extracted. Only the very last transaction in the sales/ purchase chain is a true B2C relationship.

In terms of perceived risks, a b2b product is commonly viewed to possess higher perceived risks compared to b2c products due to the value of each transaction: e.g. buying a machinery can cost $2Million compared to a tube of toothpaste which would cost just $2. However in reality, risks levels in terms of duty-of-care, can be fairly similar depending on the nature of the product. A faulty machine similar to a contaminated tube of toothpaste can bring grave harm to its respective users. However, because of the quantum of purchase, buyers of b2b products tend to place more focus on the evaluation and selection process.

What is a Brand?

A brand is an idea in the minds of people. Despite the logos and products that people would recall when they think of something branded, a brand is really an intangible concept. And a branded entity is something that is differentiated.

The term branding stems from a procedure born 4,000 years ago to mark cattle. Back then, cows roamed pastoral lands. So each owner had a distinct mark which they then branded into the skin of their cows. This way, owners could differentiate their cattle from those that belonged to other owners.

Today, branding still exists and it works in the same manner. A brand is a sign, logo or emotional feeling that will tell the products of one manufacturer apart from another. Brands even go beyond to separate products from manufacturer A and B, but they also differentiate products from the same manufacturer (e.g. Toyota and Lexus). When mentioning these two brand names, every reader will actually have a personalised image of the brand in mind.

Complex as the human mind is, in the context of branding it is only able to grasp one idea per brand. Any brand can only stand for one idea or concept. This is why companies launch additional brands. Such practice will ensure that the target audience will understand what the brand stands for; and what it does not. However, what a brand stands for is subject to the individual interpretation and is influenced by many factors, such as cultural background, social status, education and disturbances in the communications.

Differences between B2B and B2C

The main difference between B2B and B2C is who the buyer of a product or service is. The purchasing process is different in both cases and the following is a list of key differences between them.

Risks

Buying one can of soft drink involves little money, and thus little risk. If the decision for a particular brand was not right, there are very little implications. The worst that could happen is that the consumer does not like the taste and discards the drink immediately.

Buying B2B products is much riskier. Usually, the investment sums are much higher. Purchasing the wrong product or service, the wrong quantity, the wrong quality or agreeing to unfavourable payment terms may put an entire business at risk. Additionally, the purchasing office / manager may have to justify a purchasing decision. If the decision proves to be harmful to the organization, disciplinary measures may be taken or the person may even face termination of employment.

In international trade, delivery risks, exchange rate risks and political risks exist and may affect the business relationship between buyer and seller.

Strong brands imply lower risk of using them. Some of them in detail:

• Buying unfamiliar brands implies financial risks. Products may not meet the requirements and may need to be replaced at high cost.
• There exists a performance risk as there might be something wrong with an unfamiliar brand.
• When buying machinery or supplies for a company, peers may not approve the purchase of an unknown brand, thus posing a social risk

Buying behaviour in a B2B environment

Some characteristics of organizational buying / selling behaviour in detail:

• For consumer brands the buyer is an individual. In B2B there are usually committees of people in an organization and each of the members may have different attitudes towards any brand. In addition, each party involved may have different reasons for buying or not buying a particular brand.
• Since there are more people involved in the decision making process and technical details may have to be discussed in length, the decision-making process for B2B products is usually much longer than in B2C.
• Companies seek long term relationships as any experiment with a different brand will have impacts on the entire business. Brand loyalty is therefore much higher than in consumer goods markets.
• While consumer goods usually cost little in comparison to B2B goods, the selling process involves high costs. Not only is it required to meet the buyer numerous times, but the buyer may ask for prototypes, samples and mock ups. Such detailed assessment serves the purpose of eliminating the risk of buying the wrong product or service.

B2B brands need to be differentiated

One of the characteristics of a B2B product is that in many cases it is bought by a committee of buyers. It is important to understand what a brand means to these buyers. (Note: Temporal) Buyers are usually well-versed with costing levels and specifications. Also, due to constant monitoring of the market, these buyers would have excellent knowledge of the products too. In many cases the purchases are specification driven. As a result of this, it is vital that brands are clearly defined and target the appropriate segment.

As explained above, every one product can only be associated with one brand. Because of this, it is vital that companies find a white space for their brand, an uncontested category to occupy space in the minds of the buyer.

Differentiating one’s brand, companies can use various strategies, leveraging on the origin of the goods or the processes to manufacturing them. Some have identified up to 13 such strategies. Depending on the company’s history, the competitive landscape, occupied spaces and white spaces, there could be one or many strategies any one company could use.

Ultimately, a strong B2B brand will reduce the perceived risk for the buyer and help sell the brand.

B2B brand promotion

B2B brand promotion works in different formats as compared to B2C brand promotion. B2B brands avoid mass market broadcasts and generally use media that can be targeted at a specific business audience, such as direct marketing both on and offline. B2B companies are present where their potential customers are: Trade Shows, Exhibitions, Industry Fora and increasingly so in online communities.

See also

• Factory-to-consumer
• Business-to-consumer
• Business-to-employee
• Center for E-Commerce Infrastructure Development
• Consumer-to-consumer
• E-business
• E-Business XML (ebXML)
• Electronic Commerce
• Electronic Data Interchange (EDI)
• Empty Vessel
• Online shopping
• Private Electronic Market
• UN/CEFACT's Modeling Methodology (UMM)
• B2B e-Marketplace

References

• Chew W. (2010). Debunking Common Myths of B2B Branding For SMEs. Published by Brandbank: http://www.strategicom.com/index.php/knowledge.html>
• De Chernatony L. et al. (2003): Creating Powerful Brands Elsevier/Butterworth-Heinemann, 3rd Edition
• Huczynski, A. et al. (2001): Organisational Behaviour 4th Edition, Harlow
• Ries A. et al. (1994): The 22 Immutable laws of Marketing Harper Collins Publishers
• Dr. Temporal, P. (2005): B2B Branding–A Guide to Successful Business-to-Business Brands, International Enterprise Singapore
• Tai J. et al. (2008): Killer Differentiators–13 Strategies to Grow Your Brand, Marshall Cavendish Business
• Trout, J. (2004): Trout on Strategy: capturing mindshare, conquering markets. McGraw-Hill
• B2B Marketing and Social Media