The world around us is constantly evolving. Remember the time when brick and mortar outlets were the outlook of a business?! Times have changed and now most of these businesses have an online presence too. Then there are those businesses like Amazon who have taken a leap in the e-commerce space and shifted their entire business completely online.
Whatever be the type of business, they all require a stringent business model to follow through with their goals. Here we are going to talk about the two most popular business models that govern online and offline businesses alike.
B2B Model – How Businesses Profit from Each Other
There is a general assumption that customers and businesses are poles apart- the customer being the consumer, and the business being the provider. Shattering these assumptions, the B2B Business model introduces us to a concept wherein businesses act like customers too.
B2B is a type of business model where the exchange of goods and services takes place between two or more businesses. The consumer usually isn’t involved in these types of models and comes into play only at a later stage.
A huge chunk of these transactions takes place in the exchange of raw materials. One common scenario is wherein a business sources materials from another business to manufacture a new product.
You can see this happening quite often in the Technology industry, a well-known example is the Apple iPhone itself. Apple makes iPhones under their trademark but sources various chipboards from Samsung. Although considered rival companies, there exists a B2B relation that profits both.
In most B2B business models both the businesses benefit from each other in some way and have comparable negotiating powers. They also employ professional staff and legal counsel who are constantly involved in negotiations with other businesses.
The final product that you see being yielded as an outcome of processing and manufacturing is usually rich in quality and goes in the market for several times the initial investment on raw materials.
Diversifications in B2B Business Models
As you might have imagined, a model as complex as B2B ought to be divided into several categories. They are divided into 3 types basically.
A) Supplier Centric Model
Supplier-centric models form the type of business where a supplier sets up a marketplace and intends to sell his customized solutions to various businesses. Most of them price their solutions according to the needs of the client/buyer.
B) Buyer Centric Model
This type of business model is most popular among the big corporates who involve in transactions with huge purchasing capacity and high volume purchases. The company here sets up a portal, mostly online to accept quotations from different sellers. The sellers then approach the company with their quotations and the company chooses to go with a seller that they deem profitable after thorough analysis.
C) Intermediary Centric Model
Intermediaries in the marketplace are the ones who provide a common platform for Buyers and Sellers to come together and interact, interactions in this sector can be in the form of transactions or plain communication. They maintain a database of buyers and sellers and their main goal is to profit from these associations.
B2B Business Model Example: Apple & Samsung
As we discussed above, Apple and Samsung working together on iPhone is a great example of the B2B business model. Samsung is a reliable provider of Processor chips for Apple and these processors are used on the latest Apple iPhones.
Even though there is a rivalry among the companies, both of them stuck with this B2B model because Samsung can meet the huge demand of processors for Apple, and Apple pays a hefty sum for each processor Samsung delivers.
B2C – How Businesses Profit from Consumers
Now that you are familiar with the B2B type of business model, let us move on to the next common type of business model. You would be surprised to know that every individual who has ever transacted online or offline has contributed to this model.
B2C business model is the type of model where the business sells directly to the consumers. These businesses produce an end product that is appropriately priced and then marketed to the general public. A quick example is if a solopreneur used online course software to sell educational content to their following.
This model is closer to the end-user and consumers are more familiar with B2C models because they interact with and form a part of this model. Recent ones are online shopping sites like Amazon.
Diversifications in B2C Business Models
Reaching out to consumers and selling products to them is the primary goal of a B2C business model. To accomplish this, B2C has been divided into different categories based on the type of audience and the type of targeting used to reach them.
A) E-Retail or E-Tailing
E-Retailing has become the latest trend. Most consumers have an online presence these days and reaching them online is the cheapest and fastest mode. Businesses have realized this and have started setting up websites and marketing campaigns to reach and sell products to netizens.
B) Brick & Click Retail
You are all familiar with the typical brick and mortar shops, the kind where you walk in, select your goods, pay at the counter and take your goods.
Now, these businesses have realized the potential of the Internet and have started reaching out to a wider audience by setting up websites for their shops.
The best example of Brick and Click retail is TATA-owned electronic showroom chain Croma. They began with a brick-and-mortar shop which spread throughout the country garnering loyal customers for over a decade. Recently they started advertising their products through the croma.com website and now even have a dedicated online shopping portal called tatacliq.com
C) Virtual Malls
Visiting a mall is an experience in its own, you get overwhelmed with the abundant choices that they portray, always providing a fair level of competition to all businesses. Now imagine an online version of the same, that is the whole concept of Virtual Malls.
It is a website hosting several merchants, giving them a space on the web to showcase their products. The website owners charge a nominal fee from sellers to display and sell products.
These types of malls are better for businesses who want to market their Books, Music, Movies, Software or something along that line.
B2C Business Model Example: Amazon
Amazon is a consumer-centric company that has aced the B2C business model. Their tremendous user base and gigantic inventory make them the ultimate online store.
They have mastered consumer satisfaction with their array of customer support agents and product return policies, these features helped them retain customers.
B2B and B2C Business Models – The Contrasts
Business to Business and Business to Consumer models differ in many aspects,
The galore of raw materials and subcomponents used in the manufacture of a product results in a large volume of transactions in the B2B model-based companies whereas the only transaction in a B2C model is the one between the company and the consumer i.e the sale of the final product.
From a marketing perspective, B2B campaigns are focused on the value of a product that will entice other businesses to opt for them. These campaigns are more professional in nature rather than casual since they target a more corporate audience.
B2C marketing campaigns are geared towards the general public hence there is an emotional appeal to these campaigns. The targeted audience resonates more with a casual approach of advertisement therefore these campaigns contain witty lines, catchphrases, or jingles.
Ending Note
Successful businesses are based on strong business models, there is no real alternative to those hence they are here to stay. It all depends on how well you utilize them.
If you have a blended business model, here is a case study of a project we worked on for “Tao of Tea“.
What do you think would be a better business model for those starting their own e-commerce website? Share your thoughts.
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Jay Millena :
Thank you for this wonderful blog!
God bless!