What Does B2B Mean?

In every modern economy, there is a history of previous business-to business (B2B) transactions behind every consumer purchase. The distinguishing feature of a business-to-business markets is that the customer is an organization. The major differences between business and consumer markets are found in the structures, classifications and buying behaviors.

An Introduction

Business-to business transactions mean that a company is selling products or services to other companies. A product-based company may sell CRM software to a car dealership or security products to a building management company. A service-based company may provide marketing consultation services to entrepreneurs or outsource labor through third-party providers.

The business-to business model is very appealing because companies statistically spend more money than the average consumer. Because selling and marketing to companies is not well organized and structured, most of these activities rely on cultivating strong, long-term relationships. Business-to business transactions also offer pricing flexibility because entrepreneurs can enter the market selling at cost. Once they build up a customer base, they then can convey higher prices to new customers.

Market Structures

In the traditional business world, consumers directly demand products. In the business-to business world, companies need goods and materials in order to produce the products that customers need. Thus, the business’s demand is dictated by the consumer’s demand.

Sometimes, the relatively small demand changes of companies will drastically affect their suppliers. Thus, business-to business marketers must understand the motivations of the client’s business as well as market and consumer conditions. Business-to business markets are characterized by stronger demand than consumer markets, but this must be continually analyzed through standard measurements sure as the concentration ratio.

Transaction Classifications

Classifying business products or services is very different from standard consumer classifications. That is, products are classified based on how they are used or incorporated into final products. For instance, installations refer to major investments such as machinery or equipment. Business customers will expect payment plans and service options, so the supplier must perform detailed financial and operational analyses. Companies may only provide repair or maintenance services, such as fixing forklifts or production machines. Some companies sell raw materials that are used to create products. Other companies sell manufactured parts and processed materials that directly impact the finished product’s quality. Finally, some companies only market white-collar business services, such as payroll, marketing and human resource functions.

Emerging Challenges

The business-to business world faces new consumer, technology and regulation challenges. Because more and more companies are relying on mobile devices to shop and socialize, having a website that is optimized for the mobile experience is very important.

Website accessibility across different platforms is equally critical because business-to business brands can engage customers through social media platforms, such as LinkedIn, and popular online platforms, such as ThomasNet.

Because business decision makers have instant access to online reviews and competitors, business-to business brands must actively manage their online image and reputation. This is possible through providing quality content that empowers clients to make better decisions.

As markets and industries become globally interconnected, B2B companies will need to stay ahead of the competition through embracing technology and innovation.