Business to business refers to a business transaction conducted between two companies; this is in contrast to business to consumer where the transaction happens between a company and an individual. BtoB typically occurs under the following circumstances:
- The company is sourcing materials for their production process
- The company needs to outsource some of their business’ operational areas
- The company wants to re-sell goods and services that are produced by a different company
Business to business transactions happen more often as compared to Business to Customer or Business to Government; in a typical supply chain, there are many businesses that are in need of sub components or raw materials. The best example would be an automobile manufacturer – this type of business requires many B2B transactions like purchasing tires, windows and other spare parts for vehicles. BtoC only happens in this scenario when the dealer is able to sell a vehicle to a consumer.
Difference Between BtoB and BtoC
- In BtoB, committees of people are involved in making a buying decision; each member of the organization feels differently towards a brand and may also have different reasons for buying or not buying a particular product or service. In BtoC, on the other hand, the consumer of a brand is an individual.
- The decision making process involved with BtoB usually takes longer because there are more people involved and details require to be discussed in length.
- Brand loyalty in BtoB is higher because companies tend to establish long-term relationships with their business partners.
- The selling process of consumer goods involves higher costs because it requires a number of procedures – asking for prototypes, samples and mock ups; such procedures help prevent the buyer from purchasing the wrong product or service.
- Buyers involved in a BtoB buying process are well-versed with costing and other product specifications; they also monitor the market constantly which gives them excellent knowledge about the products or services related to their business.
Business to Business Buyers are More Rational
Buyers of consumer products are usually less informed and less accountable as compared to BtoB buyers; consumers are more susceptible to whims, indulgences and are more prone to making ‘emotional’ buying decisions. Business to business buyers make more rational buying decisions because they consider making a profit out of everything that they purchase. Consumers are less likely to consider if the product they are buying has an ROI; they often buy what they want and not what they need.
Business to Business Products are More Complex
Purchasing of an industrial product requires an expert; it requires excellent knowledge of the product before a buying commitment can be made. Many consumer products are largely standardized while business to business products require high levels of ‘fine tuning’. Even the simplest industrial products have to undergo strict inspection to ensure that they meet specific requirements. Consumer products such as an automobile are usually purchased for the reasons that it is fast and sleek while business to business products call for expert examination and modification.