Business-to-business, or B2B, refers to commerce between two businesses rather than between a business and an individual consumer.
Transactions at the wholesale level are usually business-to-business, while those at the retail level are most often business-to-consumer (B2C).
The dollar value of B2B transactions is significantly higher than B2C because businesses are more likely to purchase higher priced goods and services—and purchase more of them.
A bicycle manufacturer, for example, will purchase a truckload of bicycle tires, or a coffee manufacturer will buy a massive, industrial bean grinder. Compare that with what’s purchased by a biking enthusiast or the individual coffee aficionado.
How business-to-business selling is different
Selling to a business is different from selling to an individual consumer. Key sales and marketing differences for B2B transactions include:
- Selling sometimes requires participating in a bidding process by responding to a purchaser’s request for proposals, or RFPs. On the business-to-consumer side, this compares to asking various auto dealers to provide their best offer on a specific make and model.
- The decision-making process on a purchase can take days, weeks, or months, depending on how the purchasing company works and the size and nature of the order.
- Purchasing decisions are often made by committees, so each member needs to be educated and “sold.”
- The dollar value of goods or services sold is much higher than on the consumer or retail level, so the buyer needs to take steps to minimize risk. That sometimes involves requesting a product prototype or customization.
B2B doesn’t exclude B2C
A company selling to businesses can also sell directly to consumers. A bead manufacturer selling its beads in bulk to costume jewelry manufacturers might also package them in smaller quantities sold to crafters at craft stores.
A cell phone manufacturer can sell in bulk to service providers or one at a time to consumers shopping online. A firm that provides health and wellness consulting to corporations can also advise individuals one-on-one or in group presentations.
It’s about the customer, not the transaction size
While business-to-business transactions often involve high prices and volume, they can also happen on a much smaller scale, like when a small business sells products or services to another small business.
The hallmark of business-to-business commerce then, is the participants—two businesses rather than a business and a consumer.
What is meaning of business-to-business?
What are the 4 types of B2B?
- Manufacturer-Distributor: This type of B2B relationship involves the purchase of products from a manufacturer by a distributor, who then resells them to the end consumer.
- Manufacturer-Retailer: This type of B2B relationship occurs when a manufacturer sells its products directly to a retailer who then resells them to the end consumer.
- Manufacturer-Wholesaler: This type of B2B relationship occurs when a manufacturer sells its products directly to a wholesaler who then resells them to the end consumer.
- Service Provider-Client: This type of B2B relationship involves providing services such as marketing, consulting, logistics, and financial services to businesses.