B2B is a familiar term used in business and is growing strongly with the trend of e-commerce. In this article, GOBRANDING will explore with you what B2B is , its characteristics and types of B2B models, and learn how B2B businesses can face challenges and maximize their profits and market share.
What is the B2B business model?
B2B (short for Business to Business) is a form of business and trade between businesses.
It covers all activities from Marketing to Sales and Customer Care.
In practice, some complex transactions will take place based on product purchase and sale quotes, direct negotiations and contract signing between the parties.
What is the b2b model?
B2B business includes marketing, sales, and customer care activities.
B2B business will be different from other business forms such as:
B2C (Business to Consumer) – transactions between businesses and end-user consumers.
B2G (Business to Government) – transactions between businesses and state agencies, governments and public organizations (schools, hospitals, etc.).
Unlike other business models, the B2B purchasing process has its own unique features that help save time, costs, and bring more opportunities for cooperation. Not only that, transactions between businesses facilitate the elimination of subjective emotional factors because it focuses on the interests of the collective and emphasizes logic.
What is the seller side and the buyer side in B2B business?
What is the seller side and the buyer side in B2B business?
B2B business example:
General Electric manufactures a number of consumer goods and parts for other businesses.
Computer manufacturer Dell works with suppliers of integrated circuits and printed circuit boards (PCBs).
The company provides security services to businesses
Tam Viet Group specializes in providing consulting services on building corporate culture and training skills for corporate employees.
In addition, the B2B form is also clearly shown through e-commerce platforms such as Amazon, Alibaba, Ebay, Shopee, Lazada, Tiki, etc. Businesses that want to supply goods only need to register and post product information on the platform. Businesses that want to buy goods will also contact the platform to make transactions.
Besides, there are also many websites and fanpages of businesses and factories. Shop owners and small retailers just need to contact through these pages to choose products, quantity, negotiate prices, then place orders and pay.
5 characteristics of B2B business model
Each form and business model has its own characteristics that require businesses to understand very clearly in order to have a suitable action plan. Below are 5 basic characteristics of the B2B business model that you need to know:
Product
Products in the B2B business model (abbreviated as B2B products) include physical goods or services provided to businesses.
For example:
Goods: machinery, office equipment, medical equipment, food, pharmaceuticals, construction works, etc.
Services: communication, advertising, marketing, consulting, training, information technology, software, headhunt,…
B2B products typically include one or more of the following characteristics:
Products sold in bulk (household goods, food, agricultural products, etc.)
High value products (industrial machinery, medical equipment, etc.)
Products with complex technical specifications (technology infrastructure, software, etc.)
What are the characteristics of B2B products?
What are the characteristics of B2B products?
Transaction value
The value of each contract or order is often high.
Agreements and commitments are often expressed in the form of a memorandum of agreement or contract.
Client
Have specific purchasing needs and costs.
There are certain specific rules, regulations and procedures when it comes to shopping.
Many people in the buying business are involved in the purchasing process: buyers, influencers, decision makers, etc.
Small number of buyers (compared to B2C customer number).
B2B Customer Buying Behavior
The review process and final purchase decision are often lengthy and require multiple levels of approval.
B2B product purchasing requirements are quite strict.
Professional way of buying, with certain rules.
The factor that leads to the final decision is often price.
Purchasing is less influenced by emotional factors.
Transaction time
The process of exchanging needs, negotiating, signing, etc. takes place over a long period of time and has many fluctuations (by week – month – quarter – year…).
>> Learn more The difference between B2B and B2C models
4 popular B2B business models
With the above sharing, you certainly have a better understanding of the characteristics of the B2B business model. Here are the 4 most common types of B2B business models!
What is b2b model? 4 popular b2b business models
What is b2b model? 4 popular b2b business models
1. The B2B model is biased towards the seller side.
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This is a very popular form in the Vietnamese market . Enterprises will own an e-commerce site that will provide a full range of products and services to retailers, wholesalers, manufacturers or consumers.
2. B2B model is biased towards the buyer
This B2B model operates by taking business units that need to purchase and import goods and products from third parties as the center.
Many businesses have websites to post their purchasing needs. Other selling businesses will update their quotes as well as distribute wholesale and retail products through these websites to purchasing businesses.
In the Vietnamese market, the above model is less common than in foreign countries. Because most businesses have the need to sell and distribute products.
B2B commercial intermediary model
The marketplace type of commerce is the space where suppliers and e-commerce businesses operate, for example Alibaba.com, iboats.com,…
For this business model, two businesses (buyer and seller) will connect and exchange products / services through an intermediary electronic trading platform.
In recent years in Vietnam, the B2B intermediary trade model has become more popular. On e-commerce channels such as Shopee, Tiki, Lazada, … businesses with a need to sell will post and distribute products for advertising, attracting other businesses with a need to come and view and place orders. All activities (including the buying and selling process) are carried out in accordance with the regulations of the platform.
E-commerce platforms are typical of the intermediary B2B business model.
E-commerce platforms are typical of the intermediary B2B business model.
4. B2B model of collaborative commerce
This model is similar to the B2B intermediary model. However, this model is centralized and owned by many businesses. This model is often expressed in the form of internet exchanges, e-markets, e-marketplaces, trading exchanges, etc.
Benefits and opportunities of B2B businesses
As listed above, in B2B business there are many different models, the buying and selling side of the business also has a variety of objects. Therefore, business (Marketing – Sales – Customer care) also has very different characteristics and there is no general formula for all cases.
Below are some of the benefits and opportunities for businesses when participating in the B2B business model.
1. Long-term relationship
The B2B business model, when implemented correctly, offers the opportunity to form longer lasting relationships with customers.
This provides stability and increases predictability of market demand fluctuations. This strategy also reduces marketing costs (due to the need for fewer promotional campaigns).
Scalability and Availability of Products/Services
Many businesses have a desire to expand their product/service portfolio to increase market share and product/service availability. However, with the resources available, their desire to expand sometimes exceeds what they can offer.
Therefore, to enhance competitiveness, many businesses seek support from B2B businesses, in order to take advantage of the scalability and availability of products or services from businesses in this B2B supply chain.
For example, Amazon Web Services provides an on-demand cloud computing platform that facilitates the growth and expansion of e-commerce businesses,…
Amazon Web Services (AWS) helps businesses grow and expand
Amazon Web Services (AWS) helps businesses grow and expand
3. Ability to provide differentiated products or services
B2C business models typically offer products and services that are not too differentiated, in the hope of gaining market share and maintaining brand loyalty . However, by leveraging relationships in B2B business, companies can differentiate their products and services by providing specialized services to key customers.
For example, Amazon Web Services (AWS) offers cloud computing platforms customized to the needs of individual business customers.
Stronger, more effective brand positioning
The B2B business model enables businesses to establish a stronger brand positioning by building direct relationships with their customers – thereby developing trust and maintaining customer relationships. This strategy also contributes to lower marketing costs (requiring fewer campaigns).
5. Lower Marketing Costs/Lower Competition
By selling your products/services directly to another business, you avoid the advertising costs of reaching the end consumer. You also avoid having to bid higher to compete with other companies for keywords, which also goes towards reducing marketing costs. Additionally, the business is not competing in a crowded market and aims to provide a more targeted customer base.
>> Read more B2B Marketing Trends to Increase Leads and Revenue
V. What are the challenges of choosing the wrong B2B model?
Perhaps the most important challenge most B2B companies face is finding businesses to buy their goods and services, as the B2B market is much smaller than B2C.
However, businesses typically spend much more on purchases than consumers. So while a B2B company may generate less revenue, it is likely to be much more profitable than a B2C company. However, there are common challenges that businesses face.Difficulty b to c database in managing cash flow: Business-to-business transactions often have longer payment terms, putting great pressure on business finances.
Revenue/Profit Fluctuations: Dependence on large customer groups, industry cyclicality, financial risks, changes in the business environment, etc. can cause instability and difficulty in financial management.
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Market share growth strategy for B2B businesses
Once you understand the benefits and challenges other benefits of ecommerce automation of the B2B model , it is important for managers to strategize how to compete and increase market share in the B2B market.
Increasing market share is a top concern for B2B businesses.
Increasing market share is a top concern for B2B businesses.
1. Participate in the exchange of goods (supply and purchase)
Cost-effective procurement is a constant challenge for many businesses. In large organizations with many branches and departments, there will likely be different budgets and agreements with different suppliers.
The supply of goods or purchase of inputs should aim at saving costs so that the company’s business operations can generate profits.
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