What is B2B? This term simply means business-to-business, which is a model that focuses on selling products and services to other companies. Think of it as a supportive enterprise that offers the things other companies need to succeed or get a leg up on the competition. In contrast with the business-to-consumer or consumer-to-business models, B2B offers the raw materials, parts or services companies need to boost profits, from manufacturing industries to retail environments.
A good example of a traditional B2B market is automobile manufacturing. The tires, hoses, batteries and electronics essential to the final product – the vehicle – are often manufactured by separate companies, and then sold directly to the automobile manufacturer. When you buy a car from one company, you're really purchasing parts that were created by dozens, if not hundreds of businesses. Because so many small transactions result in one large business-to-consumer sale, B2B companies tend to experience a high volume of sales.
Examples of real world B2B activity are plentiful, and more visible than you might guess. For example, the cloud-based document storage company Dropbox services businesses, as well as individuals. General Electric makes a number of consumer goods, but also provides parts for other 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.
Like any other business, a B2B model requires some careful planning, said Brent Walker, vice president and chief marketing officer at healthcare marketing firm C2B Solutions.
"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."
A sector known as B2B ecommerce has emerged as a result of the digital revolution. By leveraging online platforms, businesses can sell directly to other companies, as well as share data and pertinent information about products and services easily and quickly. When it comes to B2B e-commerce in particular, there are three major categories.
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.
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 healthcare, construction, education or other specific 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 fulfill companes' supply and procurement needs in another way. These 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.
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."
If you want to get into the B2B market but don't know where to start, visit our list of suggestions for B2B business ideas.
Adidtional reporting by Katherine Arline and Elaine J. Hom. Some source interviews were conducted for a previous version of this article.