B2B vs B2C Markets: Key Differences

B2B vs B2C Markets

• Marketing in B2B focuses on nurturing strong relationships with clients or suppliers.
• Two fundamental questions in B2B marketing involve customer attraction and retention.

Key Differences Between B2B and B2C Markets

• B2B demand is derived from consumer demand, creating a domino effect.
• B2C demand is direct, representing the final transaction in the chain.
• B2B demand volatility is high due to few buyers, increasing company dependence and vulnerability.
• B2C demand volatility is smaller because there are more buyers.
• B2B demand is less elastic due to durable relationships.
• B2C demand demonstrates more elasticity as consumers easily shift brands due to less loyalty.
• B2B clients are heterogeneous and can include companies or suppliers.
• B2C clients are homogeneous, referring to the final consumers.
• B2B market concentration is high, making companies vulnerable if a major client leaves.
• B2C market concentration is lower, an individual client's absence has minimal impact.
• B2B complexity is high, involving numerous parties and increasing specialization.
• B2C complexity is lower, representing the final element in a network of inter-firm relationships.
• B2B market size is larger, representing the biggest part in marketing with a value of $22 trillion in 2002.
• B2C market size is smaller, with a value of $11 trillion in 2002.
• B2B geographic concentration is higher.
• B2C has more geographic dispersion.
• B2B clients and suppliers have similar sizes.
• B2C suppliers are much larger than their clients.
• Vertically integrated companies are now rare due to outsourcing practices, Toyota is an example of a company that outsources.

Visions and Approaches to Marketing

• Kotler's view defines marketing as a way to create, win, and dominate markets.
• Kotler has an atomized market vision, focusing on fast-moving consumer goods (FMCG).
• B2B marketing focuses on managing business relationships involving significant, heterogeneous clients; a value proposition that offers essential solutions.
• Transactional vision focuses on STP (segmenting, targeting, positioning) and marketing mix prevalent in B2C, not applicable in B2B.
• Relational and interactive vision involves managing long-term relationships, common in B2B.

Network Vision, Customer Value, and the B2B Offering

• Network vision regards transactions as a result of an overarching system, focusing on network mapping and strategy.
• B2B marketing requires a personalized approach dependent on all parties.
• Logistics can be a key differentiator when products and services are similar.
• Advice involves activities improving customer understanding of the product, level of knowledge, and communication skills.
• Adaptation involves changes made to accommodate clients showing dedication.
• Elements of the B2B offering includes products, service, logistics, advice and adaptation.

Promotion, Place, and Price in B2B

• B2B communication includes non-customized (advertising, sales promotions, PR) and customized methods (sales force, direct/interactive marketing); personal selling is key.
• Effective communication strategies require a focus on target audience, clear goals, the message, and suitable tools/media.
• Distribution strategies are influenced by factors such as producer qualities, and market/competitive dynamics.
• Pricing involves a multi-factor process integrating internal/external factors as well as company goals like profitability.
• Customer value balances perceived benefits with perceived costs.

The Value Proposition

• Marketing variables translate into a customer-centric value proposition for B2B.
• Focus on SOLUTION instead of product, VALUE instead of price, ACCESS instead of place, and EDUCATION instead of promotion.
• Customer-centricity prioritizes the customer.
• Everyone who interacts with clients provides valuable information.
• A customer-centric perspective enhances cooperation, co-creation, and manages interactions.
• Creating value for customers involves knowing customer business, competitive drivers, challenges, activities, and resources.
• Auditing the offering and comparing it with what clients value identifies (mis)alignments.
• Managing, keeping, controlling, and minimizing investments help align business practices with customer needs.
• Defining and communicating value propositions requires an understanding of customer purchase processes and decision-making units.
• Economic benefits include tangible (easily measured) and intangible (quantifiable by suppliers but difficult for buyers) aspects.
• Non-economic benefits include tangible (recognized but not easily quantified) and intangible (difficult to quantify for both).
• Understanding their business, sharing information, and delivering a superior value proposition solves customer's problems.

Managing Relationships

• Building and managing B2B relationships are interaction processes.
• Business scope and customer portfolios are strategic decisions.
• Select customers that needs to be acquired and developed and to fit the goals.
• Relationship dimensions adapts across varying phases
• B2B loyalty needs to be encouraged.
• Customer relationships require social and informational exchanges due to being strategic.
• Strategic decisions needed to define the business.
• Asymmetry needs to be avoided to ensure the customers are prone to coordinate and cooperate.
• Businesses should define their approach as products, services etc.
• Relationships are long-term processes as the partners adapt and invest.
• Relationships bring predictability, trust, and address problems.
• Focus on underperformers and commoditized buyers to increase prices.

Customer Portfolios

• Customer portfolios are a result of existing customer segmentation, and allocating resources based on potential client revenue, maintaining relationships, and implementing strategies.
• Net price is the price to customer, the cost to serve has four categories: pre-sale, production, distribution and post-sale.
• Use portfolio analysis to check the customer evolution in the market.

Dimensions Of Customers

• Carriages traders are costly but pay higher prices.
• Passive customers pay higher values, but cost less.
• Agressive cutomers need the best service at the lowest price.
• Bargain basement customers are price sensitive and incentivized to a quality product/service.
• The analysis needs repeating based on business dynamics, the customer framework serves to generate profits.

Krapfel types of clients

• Partners are mostly interdependent, with switching costs to other partners at a higher price.
• Friends are compatible but lower in economic value.
• Rivals do not hold any intersts but a high economic value.
• Acquaintance customers are offered standardized, low prices.

Ritter & Anderson matrix for potential customers:

• Loyalty needs to be determined correctly.
• Customer relationship is allocated effectively.
• Dash boards need to be defined correctly.

Analysing Customer Profitabililty

• Customer profitability = customer revenue - customer related costs.
• Analyze profitability by: margin contribution, cost allocation.
• To build you curve, sort profitable customers and calculate profit.

Steps to consider to increase Customer Profitability

• Minimize customizations and unpredictable orders
• Avoid excessive pre/post sales support
• Asses pricing
• Reassess relationships
• Educate the customer
• Renegotiate proposals
• Migrate and terminate the relationship
• Retain proft makers!
• Reduce costs
• Sell more
• Increase the lifetime value of customer