Business-to-business (B2B), also called B-to-B, is a form of transaction between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business-to-business refers to business that is conducted between companies, rather than between a company and individual consumer.
Business-to-business stands in contrast to business-to-consumer (B2C) and business-to-government (B2G) transactions.
B2B Business Model Pros and Cons The B2B business model has both pros and cons for the business owner and their team.
Pros:
- Larger orders. B2B sales are high and orders are made in bulk. This means revenue can be higher with fewer sales than B2C businesses.
- Increase conversion. Businesses convert better than individuals. This makes marketing efforts more successful and wastes less money attracting new customers.
- Streamlined structure. Communication between businesses happens regularly so sellers are more informed about their customers’ needs.
Cons:
- Long buying cycle. B2B consumers take a long time to make purchasing decisions. Multiple stakeholders are involved and need a number of approvals to go forward.
- Limited market. B2B sellers have fewer potential customers and the ones they do have are very important. If even a single customer is unhappy, they can lose a lot of money.
- Difficulty forecasting. Both manufacturers and resellers can run into issues with demand forecasting since B2B has a shorter inventory cycle. This can in turn lead to overestimating demand and leave all parties with dead stock (see dead stock meaning).
