What is Business to Business (B2B)?

Business to Business marketing is a business model where businesses make transactions or work with one another. It is a model in which one business is involved in the sales of products and services to other businesses rather than to the end-users or customers. The best way to understand a B2B model is by considering the relationship between a wholesaler and a retailer. In this case, the wholesaler (business) supplies its goods to a retailer, which is another business entity. So, here the transactions occur between two different business entities.

B2B vs B2C

Another form of business model is the Business-to-Consumer (B2C) model. In this, the commercial activities occur between the business and the customer. Other points that distinguish B2B from the B2C model are as follows.

Business-to-Business (B2B)Business-to-Consumer (B2C)
Purchases are done in bulk.Purchases are done in retail (less) quantity.
Profit margin is high.Profit margin is low.
The sales cycle is long and complex.The sales cycle is simple and straightforward.
Decisions of buying are made after conducting a thoughtful process.Involves impulse buying and emotional buying decisions.
Brand identity is not much important.Brand identity plays a significant role.
Purchase is made based on long-term goals.Purchase is made to fulfill the immediate desires of business customers.

B2B e-commerce

Business to business electronic commerce (B2B e-commerce) involves interactions and sales between two or more businesses using the internet. Since these involve the use of electronic channels, it is referred to as B2B e-commerce. Due to the rapid growth of the internet, B2B e-commerce businesses are booming.

Companies create their websites to showcase their products or services. These websites allow potential buyers to surf information about the organization’s B2B products and contact them. Several platforms also allow businesses to perform B2B transactions using their e-procurement portals.

How Business-to-Business model works?

In the business-to-business model, the sales occur between two or multiple businesses. Normally, it involves a group or company that uses the buying company’s services or products. Sometimes an individual buyer may make the transaction on behalf of the company. However, in most cases, the transactions will occur under the company’s name.

Mostly, B2B transactions occur when a company purchases products or services used by the company's employees or by the company’s client. These include office spaces, furniture, computers, software, and stationery. The buying committee handles the decision for the purchase and the product selection process. The buying committee may include:

  • The person responsible for handling the company budget.
  • The person responsible for handling the technical equipment and evaluating the product capability.
  • People who provide input decisions in the organization.

Most of the time, before making the final purchase decision, the company will demand a proposal from the vendors. This proposal would consist of product details, pricing and terms of the vendors.

Types of Business-to-Business model based sectors

Business-to-business organizations are of various types. Below are the types of B2B companies depending on the types of services or products the companies provide:

Graphical representation of types of B2B organizations
  • Manufacturers or producers: Manufacturing companies carry out the entire process of developing a final product from the raw material. It involves designing, creating, and manufacturing the products. These companies can sell their products to other businesses or retailers, or resellers.
  • Retailers or resellers: These businesses do not manufacture or create their products. Instead, they purchase products from manufacturing companies and sell them to other businesses directly. Such companies can run their businesses online, in physical stores, or in both forms.
  • Agencies and consultants: Agents or consultants give advice and look after sub-contracted work for businesses.

Industries where B2B model is used

B2B companies exist in every industry, be it manufacturing or retail. Every business requires suppliers to supply goods, services and provide legal counseling. Some industries where B2B companies play a significant role are:

  • Financial sector.
  • Technology.
  • Automobile.
  • Manufacturing.
  • Construction.
  • Retail sector.
  • Telecommunications.
  • Healthcare industry.
  • Education.
  • Food and beverage.
  • Real estate.

Real-life examples of B2B companies

Almost every company requires services from B2B companies. However, there are very few times when people notice the actual B2B company behind B2C company or retail business. Below are the examples of some of the real-world B2B companies:

  • Amazon Web Services (AWS): Amazon is a famous e-commerce (B2C) platform. However, it has a B2B service, called Amazon web services. AWS offers database storage services, content delivery and other software services to businesses.
  • General electric: General electric offers goods to the customer and also to other companies or enterprises directly.
  • Xerox: Xerox is another B2B company famous for providing paper and printing services to businesses.
  • Caterpillar: Caterpillar produces construction and mining tools, diesel and natural gas engines, industrial turbines, and many more products. It sells its products directly to other businesses.
  • Caterpillar financial services: Caterpillar financial services provides financial services such as managing day-to-day operations and expanding businesses to other businesses.
  • Alibaba: Alibaba is a leading e-commerce company that connects buyers and sellers from all over the world. Several businesses purchase products from Alibaba to sell them on their e-commerce store or offline store.
  • Upwork: Upwork is a job-listing website (portal) that connects freelancers with employers. The portal has projects related to various services, including social media marketing, web designing, graphic designing, and video editing.

Challenges in B2B businesses

B2B business models consist of a long and complex procedure. During the process, businesses deal with several challenges such as:

  • Long-term customer retention: Convincing B2B customers to make purchase decisions in the B2B model is tedious.
  • Limited market: The business market for B2B businesses is very limited. Hence, for small and midsize organizations, handling B2B businesses is risky.
  • High Competition: The B2B market is small, but the competition is high.
  • Long decision-making process: Since the process in B2B companies is complex, it takes time to make a final decision about the purchase.
  • Price negotiation: The purchases in B2B are in bulk, but the buyers normally negotiate to get better prices, demand discounts and additional services.

Common Mistakes

Students need to understand the differences between B2C, B2B, and C2C models. These topics are similar, but they work differently.

Context and Applications

Business to business is an important topic in both undergraduate and postgraduate courses in:

  • Bachelors in Business Administration.
  • Masters in Business Administration.

Practice Problems

1. What is the purchase of products and services used by a company to produce other goods and services, support daily operations, or resale known as?

  1. Wholesale marketing
  2. Business-to-business marketing
  3. B2C sales marketing
  4. Corporate marketing

Ans: Option b

Explanation: B2B marketing involves the identification of the businesses’ requirements. It should also ensure that all the stakeholders of the business and associated transactions benefit from the decision.

2. Why does B2B marketing different from other consumer goods or services marketing (B2C marketing)?

  1. It has longer distribution channels for B2B products.
  2. Customer relationships are short-term and account-based.
  3. Buyers do not use the products themselves.
  4. Customer service is not significant.

Ans: Option c

Explanation: B2B marketing differs from other types of marketing in several ways. The main reason is that the B2B buyers do not purchase the goods or services for themselves. Instead, the purchase is made for the company or its clients.

3. Which of the following options play a significant role in the development and maintenance of buying and selling organizations?

  1. Products
  2. Relationships
  3. Services
  4. system

Ans: Option b

Explanation: Organizations need to maintain relationships between buying and selling in order to succeed. The collaboration and partnerships between companies are fundamental elements of B2B marketing.

4. What are the three major types of B2B companies?

  1. Domestic, regional, international
  2. Small, midsize, large enterprises
  3. Commercial, government, institutional organizations
  4. Small businesses, large enterprises, non-profit organizations

Ans: Option c

Explanation: Commercial, government, and institutional organizations are types of B2B.

5. What does business mean?

  1. Commerce
  2. Industry and commerce
  3. Trade and commerce
  4. Buying and selling of goods

Ans: Option b

Explanation: Business is about industry and commerce. Industry deals with economic activities, necessary procurement, raw material processing, and delivery to customers. Commerce deals with the exchange of goods and services on a large scale.

  • Business-to-consumer
  • E-commerce
  • Business-to-government
  • Planning B2B events and B2B marketing strategies
  • B2B business ideas
  • Impacts of Covid-19 on B2B companies

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