Explain the Business to Consumer Model

While business-to-business commerce refers to business transactions between companies, business-to-consumer models are those that sell products or services to personal-use customers. Often called B2C, business-to-consumer companies connect, communicate and conduct business transactions with consumers most often via the Internet. B2C is larger than just online retailing; it includes online banking, travel services, online auctions, and health and real estate sites.

Contrary to some published misinformation, the B2C model does not require a business to sell directly to the consumer, and can include wholesalers, retailers or third-party online sellers to move goods from a business to the consumer, as explained in Principles of Marketing, published by the University of Minnesota.

Characteristics of B2C

The B2C business model focuses on selling and marketing between a business and a non-business consumer, who buys the product for personal use, explains the Arizona Republic’s small-business portal. It often involves direct selling to the consumer, such as via an e-commerce website. A lower purchase volume of higher-priced products typically characterizes B2C companies.

If the model depends on individual transactions and eliminates the wholesaler, the company can make a higher profit while the consumer spends the same amount of money or sometimes less. B2C is effective for smaller companies since individual consumers are not as concerned with company recognition as they are with getting the product for the best price.

Types of B2C Companies

B2C companies divide into five major categories: direct sellers, online intermediaries, advertising-based models, community-based models and fee-based models. Each type is so different from the others that they are not directly comparable. In fact, some B2C businesses utilize more than one type to reach different audiences.

Using Direct Sellers

Direct sellers, such as online retailers, sell a product or service directly to the customer via a website. You can further divide direct sellers into e-tailers and manufacturers. E-tailers are electronic retailers that either ship products from their own warehouses or trigger deliveries from other companies’ stocks. Product manufacturers use the Internet as a catalog and sales channel to eliminate intermediaries.

Roles of Online Intermediaries

Online intermediaries perform the same function as any other broker. The business allows non-B2C companies to reap some of the benefits. Brokers offer buyers a service and help sellers by altering the price-setting processes, according to economics professors Thierry Penard of the University of Delaware and Michael A. Arnold of the University of Rennes in Rennes, France.

Advertising-Based Models

Popular websites rely on advertising-based models. These websites offer a free service to consumers and use advertising revenue to cover costs. They draw a large number of visitors, making them ideal advertising streams for other companies. Advertisers will pay a premium to sites that deliver high traffic numbers.

Community-Based Models

Community-based models combine the advertising method that relies on traffic at sites that focus on specialized groups to create communities. Community sales and advertising take advantage of social and network marketing by focusing on specific groups that want specific products. For example, sites used by computer programmers are perfectly placed to advertise computer hardware and software products. At least one social media website uses member information to target advertisements to interests and locations.

Fee-Based Models

Pay-as-you-buy or paid subscription services fall under fee-based models. The most common of these are online subscriptions to journals or movie sites such as NetFlix. These companies rely on the quality of their content to convince consumers to pay a usually nominal fee.