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Lead Your Team Strategy

What is B2B?

What is B2B?
Credit: Rafal Olechowski | Shutterstock

If your business is focused on selling products or services to other companies, your model is called B2B, or business-to-business. In contrast with the business-to-consumer or consumer-to-business models, B2B facilitates the transfer of raw materials, parts and components from which additional profit is derived, through manufacturing or final sales to consumers.

An example of a traditional B2B market is automobile manufacturing. A vehicle's components are generally manufactured by different companies, and the auto manufacturer purchases these parts independently. The tires, hoses, batteries and electronics may be manufactured by separate companies, and then are sold directly to the automobile manufacturer. The products themselves do not end up in the hands of consumers, though often, the end product of the purchasing business does. Because so many small transactions result in one large business-to-consumer sale, B2B companies tend to be high volume.

B2B, like all business models, requires some careful planning to undertake successfully, noted Brent Walker, vice president and chief marketing officer at C2B Solutions, a healthcare marketing consulting firm. "B2B typically relies on its sales function and account management team to establish and strengthen customer/client relationships," Walker told Business News Daily. "Marketing may include advertising in trade journals, having a presence at conventions and trade conferences, digital marketing (online presence, SEO, email outreach) and other traditional awareness efforts."

B2B e-commerce

B2B e-commerce, or e-biz, is a slightly more evolved version of commerce. This type of e-commerce is the electronic exchange of business documents among businesses for the purpose of conducting commerce. This began with the Electronic Data Interchange (EDI), which started in the 1960s. Trading partners within supply-chain networks are typical participants, as they exchange electronic documents in support of the purchasing of goods and services. B2B e-commerce is used for contract manufacturing, customs declarations, global trade compliance, order management and supply-chain logistics. By using B2B e-commerce, companies can improve communications among partners and enhance the purchasing experience from business to business.

When applied to e-commerce specifically, B2B can be broken down into a number of categories. The first category is company websites, as many companies need to reach other companies and their employees specifically. A company website can serve as the entrance to an exclusive extranet for customers or registered site users, or as an intranet for internal use only. Companies can also sell directly from this site, e-tailing to other businesses. Some B2B companies provide software for building B2B websites, thus becoming a B2B for B2Bs. This software includes site-building tools and templates, database features and methodologies for best practices, plus transaction software.

The second category is product supply and procurement exchanges, otherwise known as e-procurement sites. These sites serve a range of industries and often focus on a niche market. A company purchasing agent can shop for supplies from vendors, request proposals and even make bids for purchases at specific prices. These B2B websites enable the exchange of product supplies and procurement.

Specialized or vertical industry portals provide a subweb of information for a specific industry or vertical, such as health care, construction, education or other vertical markets. These sites provide product listings, discussion groups and other features. Vertical portal sites have a broader purpose than procurement sites, though they may also support purchasing.

Brokering sites act as an intermediary between service providers and a potential business customer. For example, a construction company may need to lease equipment. A broker site can help the construction company find an equipment manufacturer that is willing to lease out the needed equipment. Brokering sites and services include Neostratus' B2B Cloud Brokerage Platform and Axway B2Bi.

The final category is information sites, or "infomediaries," which provide specialized information sites on specific industries for companies and their employees. These specialized search sites are often used as trade and industry standards organization sites.

While this may sound complicated, there are a number of companies you already know that are B2Bs. Dropbox is a storage service that many consumers use, but businesses also use it. GE makes a number of consumer goods but also provides parts for enterprises. Perhaps you've worked at a company where the paychecks were stamped by ADP, a company that provides payroll and financial services for businesses. Xerox is a household name but makes billions on providing paper and print services to businesses.

Though B2B is critical to the success of many industries, when considering your company's potential, do not limit yourself to one model. B2B, C2B and B2C models need not be mutually exclusive, and combining their particular strengths can generate new opportunities for your business.

"A business can package consumer insights and consumer-centric solutions to sell or provide as a value-add to its business customers/clients," Walker said. "In a consumer-driven marketplace, such a service can be extremely valuable to a business."

Resources for B2B businesses

The following sites and tools can help you make the most of your B2B model:

Elaine J. Hom also contributed to this article.