Business-to-Consumer (B2C) | Meaning, Types, Pros, & Cons

What Is Business-to-Consumer (B2C)?

Business-to-consumer (B2C) is a type of business transaction where a company sells products or services directly to consumers who are end-users of its products or services.

B2C sales can be seen in everyday transactions. For instance, when you purchase a new phone or clothes, eat out at a restaurant, or pay for gas.

Consumer behavior is the primary driver in the B2C markets. B2C companies must maintain good relations with their customers that they return. They must understand what their customers want and how to motivate them to make a purchase.

This drive is what built the B2C sector. However, it is also one of the major challenges for B2C companies because they have to be up-to-date with suitable products and services for their customers.

Customer knowledge will increase the loyalty of customers and reduce any cost associated with their transfer to other competing businesses.

B2C is different from business-to-business, in which the exchange of products or services is between businesses rather than between businesses and consumers.

They also differ from their marketing campaigns because B2B is designed to demonstrate the value of a product or service to other businesses. B2C, on the other hand, must elicit an emotional response to their marketing strategies in their customers.

The rise of technology has changed the way B2C transactions are performed. Today, consumers can easily purchase everything online, from books to clothes to food and beverages.

Evolution of B2C

Hundreds of thousands of domain names were registered when the internet grew in the 1990s. However, there were issues with security on some online sites.

It then led to the development of Secure Socket Layers (SSL) encryption certificates by Netscape that ensures trust in a site and allows consumers to be more comfortable accessing the internet.

E-commerce grew significantly in the late 1990s. Amazon’s revenues, for instance, jumped from $15.7 million in 1996 to $610 million in 1998.

The growth of B2C online sales has created significant challenges for traditional “brick-and-mortar” services and businesses that are losing physical store sales to online competitors.

Many brick-and-mortar retail businesses are continually establishing their online presence to stay competitive in their respective industries. On a positive note, consumers see this as much more accessible and convenient.

Types of B2C Models

There are common types of B2C models, which are as follows:

Direct Sellers

Direct sellers are retail sites or stores where consumers purchase directly from the seller.

Manufacturers, small businesses, and producers could be the direct sellers that market their products and services to their customers.

For example, if customers want to purchase an iPhone, they can go directly to the manufacturer’s website, check product information, and order it.

Online Intermediaries

Online intermediaries are “go-betweens” companies that put buyers and sellers together without owning the products or services.

These companies usually set up a platform that connects buyers with independent sellers. Their profit comes from charging a small percentage of each sale from vendors.

Examples of online intermediaries are Amazon, eBay, Trivago, Expedia, and Etsy.

Advertising-Based

Advertising-based companies advertise their products or services on platforms with significant reach.

Businesses use traffic-driving strategies like content marketing and accordingly choose the platform that would be the most effective to advertise their products or services.

With this, businesses ensure that more people are getting aware of their products or services and would click on the ads to make a purchase.

In this case, B2C advertising-based companies profit from selling advertising space, and sellers generate revenue by getting the leads converted.

Youtube and Reddit are popular platforms that use their sites for advertising products or services from other companies.

Community-Based

Businesses use online communities, such as Facebook, Instagram, LinkedIn, Twitter, and online forums, to help them market their products directly to site users.

They often use platforms that host people with shared interests, ideas, or opinions and host targeted advertisements that help brands and businesses promote and sell their products or services directly to customers.

Fee-Based

Fee-based B2C companies, such as Spotify or Netflix, require users to have a premium subscription to allow access to additional content.

Other examples of B2C companies are The Wall Street Journal, Hulu, and The New Yorker.

Benefits of B2C

The following are the benefits of the B2C model:

Vast & Varied Market

The B2C market is large and varied. It gives the companies the advantage of targeting a more significant number of consumers.

Even small businesses operating at home can sell their products or services to customers on the other side of the world. This enables the company to grow and increase business profit.

Reduced Cost

Operating costs would be reduced when using a website since fewer physical resources and staffing would be required.

With the B2C model, companies can reduce additional costs related to infrastructure, staffing, and electricity. They can also easily manage inventory and warehousing with fewer people and resources.

Direct Communication

Companies that adopt the B2C business model communicate with their buyers directly and in a personalized way. This can be through emails, SMS, and push notifications.

Businesses can also track results actively and check which communication method works best. They can also get feedback directly from the customer, which would help in product development or improving services.

Limitations of B2C

There are also some limitations when it comes to B2B, and these are the following:

Highly Competitive Market

B2B presents a very competitive market. Many B2B companies are already operating in almost every conceivable product category, so it can feel overwhelming when starting a new business.

The competition it brings involves price competition, too. A B2B company must be able to compete against established businesses and find an effective way to attract customers despite this.

Finding and Retaining Customers

Due to the huge competition, businesses need to find ways to differentiate their products or services from their competitors. They need to have a good marketing strategy to make sure that their target consumers are reached.

Marketing should understand the details about their customers, such as who they are, what is important to them, how they are inspired, and how they purchase and receive the types of product one is selling.

B2C companies need to design their whole operation to serve their customer niche effectively. They need to prepare to pay a significant amount of money on marketing to find and attract customers.

Thus, it is critical that once the business has customers, it needs to come up with strategies to keep them coming back, as the cost of selling to existing customers is much lower than the cost of acquiring new ones.

Lower Margins

Products sold in a B2B business are cheaper. The business has to find alternative ways to gain back the lost revenue by focusing on quantity over quality.

This increases the risk of not having repeat buyers because of quality issues which will also affect business profit in the long run.

Offering discounts can also be worthwhile in certain circumstances and only if it achieves your goals, such as clearance discounts which can help you to sell off old stocks, release working capital and improve cash flow.

Introductory discounts can also encourage customers to try a new product. However, they may create the wrong image for your product or generate sales that are not repeated when the discount is removed.

Examples of B2C Companies

The following are examples of B2C companies:

Amazon

Amazon specializes in e-commerce, digital streaming, cloud computing, and artificial intelligence. When customers purchase Amazon products, they are performing a B2C transaction. Additionally, customers pay for the online service of Amazon.

Netflix

Netflix is a popular online streaming platform that offers its service to mass-market consumers. Consumers can access various movies, documentaries, and television services when they pay for monthly subscriptions.

Netflix also produces original content. By offering self-produced content to viewers, Netflix is performing a B2C transaction.

Spotify

Spotify offers a music streaming service to mass-market consumers with its monthly subscriptions. Consumers can easily access millions of songs, podcasts, and the latest albums.

Other popular B2C companies are Starbucks, H&M, Facebook, Youtube, Alibaba, Airbnb, Uber, and eBay.

B2C Companies and Mobile Purchasing

Mobile purchasing continued to grow after the e-commerce boom decades ago. With smartphone apps and traffic growing annually, B2C companies have shifted their attention and efforts to mobile users and capitalized on this popular technology.

Around the early 2010s, B2C companies were racing to develop mobile apps and websites of their own.

With this, success in a B2C model is established by continuously evolving with the appetites, trends, opinions, and desires of the consumers.

B2C vs. Business-to-Business (B2B)

There are differences between B2C and B2B, some of which are indefinite. There are cases when these differences do not apply. For instance, not all B2B products or services are complex, but on average, they are more complex than B2C products and services.

Some key differences between B2C and B2B are the following:

User Groups (B2B) vs. Individual Buyers (B2C)

B2B tends to market a group of businesses or stakeholders in order to make one sale. This may include executives, IT staff, product users, and managers.

In B2C, you tend to market and sell to one individual buyer only.

Detailed Information vs. Broad Description

B2B needs to create detailed and longer information for your customers. It may involve preparing a proposal or giving an exact quote to prospective customers.

B2C only needs to create a short and broad text. For instance, you do not need to prepare a proposal for someone looking to buy new shoes.

Rational vs. Emotional

B2B companies need to plan more carefully because there are more risks and higher amounts of money involved.

Emotions do not play a role in the decision-making process as much as they would for B2C companies. B2C buyers tend to be more spontaneous and even purchase things without actually having a need for them.

Multiple Pricing Tiers vs. Single Pricing Tier

B2B companies usually offer multiple pricing tiers and levels of discounted prices based on the quantities and frequency of orders.

B2C companies offer a single tier of pricing for all customers that are only affected by sales or discounts.

Large Scale vs. Personal Use

B2B focuses its marketing efforts on people that need to buy products or services for a lot of people. For instance, a company wants to purchase new laptops for all its employees.

B2C market to people who buy it for themselves, family, friends, or other people in their household.

Longer Sales Cycle vs. Shorter Sales Cycle

B2B has longer sales cycles. This means it needs to sustain over a more extended period before a sale is made.

In B2C, it only has short sales cycles that make a sale at the very first touchpoint.

Longer Customer Relationships vs. Shorter Customer Relationships

In B2B, the goal is to establish a long-term relationship with customers. It needs to continuously maintain the customer to continue to buy products or services from them in the future.

In B2C, although there is a wide market, there are usually shorter customer relationships, and customers are less likely to be loyal.

Higher Acquisition Costs vs. Lower Acquisition Costs

B2B may have higher customer acquisition costs that are justified with its equivalent higher prices. B2B products and services are usually solid investments for the company purchasing it.

This is why it takes more resources to generate customers for those products.

B2C usually has lower customer acquisition costs that go along with lower prices.

They have lesser customer acquisition costs since most of the purchases are less costly, more casual, and sometimes impulsive.

Simpler marketing strategies can generate enough leads and customers for B2C products.

Conclusion

B2C is the process of selling products or services from businesses to individual consumers.

It has evolved over time, and B2C companies have shifted their focus to mobile users in recent years.

When deciding whether to use a B2B or B2C model, it is important to consider the type of product or service being offered, the target market, the price of the product or service, and the desired customer relationship.

Generally, B2C companies need to focus on creating a strong brand and providing an excellent customer experience.

B2B companies, on the other hand, need to focus on developing long-term relationships and providing detailed information about their products or services.

Each type of business model has its own advantages and disadvantages, so it is important to choose the suitable model for your company based on your specific needs and goals.