Are you thinking about starting a business but have difficulty understanding what exactly B2B business models are? Well, you’re in luck because in this article, we provide a detailed guide that explains everything, from the concept of a B2B business model to the principles of its functioning, so you no longer feel intimidated or confused and can nail down as a pro.
What Is a B2B Business Model?
Let’s start with fundamentals and define what a B2B business model is.
In layman’s terms, a business model is a set of rules and processes that explain how a company is functioning and how it is making money. In other words, it’s a strategy that companies stick to in order not to deviate from their business goals.
Business models may look slightly different, but the core elements are typically the same and include the following information:
- A brief description of the product or service offered;
- Methods of interacting with clients and selling goods;
- Ways to penetrate new markets;
- Details about revenue streams.
When it comes to B2B business models, it’s important to note that, while they may share some core elements with B2C models, there are significant differences between the two. These differences mainly stem from the fact that the former target other businesses, while the latter are aimed at regular customers.
3 Popular B2B Business Model Types
Of course, just like any other business model, B2B can be divided into several types, depending on the sector they operate in and their approach to doing business. Let’s discuss each of them in detail so you can understand how they differ and which of them would be the most beneficial for you.
- Customer-Centric Type
What defines a customer-centric B2B model is that it puts the needs and preferences of customers at the forefront of every business decision and is focused on continuous improvement. Thanks to this, businesses can offer more customized marketing campaigns and re-engage with their existing customers over and over again.
One example of a successful implementation of a customer-centric model is Amazon. From its inception in 1994, the company has placed a strong emphasis on their customers. This approach has played a significant role in its success, allowing the company to become the e-commerce giant we know today.
- Buyer Centric Type
Another type of B2B model is buyer centric. Under it, businesses put the buyer at the center of the sales process rather than the customer and focus on creating a personalized experience for them. Most often, it’s used by large companies that have a good flow of buyers and a high rate of purchases overall. Walmart is a case in point.
The company has created a portal for buyers and sellers where they can interact. It has set certain rules and standards that they must comply with, but the success of a sale depends entirely on the approach that sellers use to lure customers into buying.
- Intermediary Centric Type
The intermediary centric model is another popular type of B2B that is widely used by companies around the world. As the name suggests, it functions by providing a common platform for vendors and sellers, with businesses acting as intermediaries between the two parties and earning profits through commissions. To give you an example, take eBay.
All participants that go on the platform understand commission charges and agree to the terms before they can get started.
B2B Models That Help Establish Connections With Your Trading Partners
In addition to the aforementioned ones, there exist a few more categories of B2B models that can come in helpful when it comes to connecting with your trading partners. Here they are:
- Direct Model
Under it, companies connect with their trading partners directly to transfer electronic documents easily. They have an IT team that takes the authority for all of the tasks like document translation and technical support. As the number of partners increases, monitoring communications and resolving issues becomes a priority.
- Network B2B
This type of model was created to simplify the direct one. Instead of connecting with each partner directly, companies use a B2B Service Provider called a Value-Added Network (VAN). The VAN provides a single connection for companies to transfer documents using different protocols like AS2, SFTP, FTPS, FTP over VPN, and RosettaNet.
Trading partners, in turn, could also connect to the SP using the protocol that worked best for them.
A combination of the direct and network models is known as the hybrid B2B type. Businesses use it to connect directly with their high-volume trading partners through the Internet to save on transaction fees. At the same time, they still may use a SP to trade with their partners, allowing them to benefit from both models.
Finally, let’s talk about the Managed B2B model. It implies outsourcing the company’s entire B2B process to a third-party service provider, which effectively helps them save on resources, costs, and complexity involved.
The service provider receives documents directly from the company’s ERP system and handles tasks like mapping, technical support, and document tracking. Then they deliver the documents to trading partners via the agreed method that works best for both parties.
Benefits of B2B Business Models
Now that we’ve covered all existing types of B2B models as well as their subdivisions, it’s time to take a closer look at their advantages compared to B2C. We may not be able to tell about all of them, but we’ll certainly go over the most important.
- B2B experiences greater stability. Businesses strive to build long-term relationships with their clients and partners, which allows them to build a loyal customer base.
- Higher accuracy in budget predictions. As companies have a more stable customer base, they can make more accurate predictions with regard to their future spending.
- A strong network of partners. Relationships between clients and partners are built on trust, which leads to more effective collaboration.
- The sales cycle is significantly shorter, which helps lower overall costs.
- It relies on factual data. This makes it easier for businesses to calculate sales and other important metrics while minimizing the risk of error.
The B2B model is not only advantageous for businesses but also for their clients. By using this model, clients can access the desired services or goods at a lower cost without the need to switch between multiple providers. What’s more, they are guaranteed to get consistent quality and may also be eligible for additional loyalty discounts over time.
This guide would be incomplete without mentioning B2B E-Commerce, a model that has shown significant growth in the last few years as more companies understand its benefits.
B2B E-Commerce offers numerous benefits. First of all, it helps businesses attract more buyers by offering higher-quality products and services. It also increases brand awareness, which can result in higher sales volumes and profits.
Moreover, this model provides businesses with the means to monitor their performance, marketing campaigns, and inventory turnover, as well as analyze metrics such as ROE and adjust in time to align them with their end goals.
To wrap it up, choosing the right B2B business model is crucial for any company looking to succeed in today’s competitive landscape. Therefore, it’s important to understand the various types of models available and their benefits.
Hopefully, with the tips and explanations provided in our guide, you’ll decide on the right business model and create an effective strategy that drives growth, increases, and meets your customer needs.