Many companies operate on a B2B2C (business to business to consumer) model, with business customers distinct from end-users. A company operating with a B2B2C model will provide their product or service via another business that will have direct access to the end-user and also the consumer relationships that come with it. With the emergence of new tech businesses, this model has become increasingly prevalent.
This blog will discuss the B2B2C business model and how you can reach success using it.
Business models are usually categorised as either B2B or B2C, with clear distinctions being made between each of these models’ end-users. But what if you are not able to sell directly to your end-user? That is where the B2B2C model comes in.
The key difference about the B2B2C business model is that your end-user is different to your buyer. Where your end-user is different to your buyer, you’ve got two sets of requirements and optimisations to account for. Normally, the person that you're selling to is the one that will be using the product.
The B2B2C model has been there for quite some time. Let’s take an example like Coca Cola. Their distribution/wholesaler type model is very much about B2B2C. One of the customers we've worked with is Diageo. Diageo has a whole operation of customer-facing brands, but they sell to wholesalers, who then sell to pubs and bars.
If you're working in tech, sometimes you perceive business models as tech-only. But if you peel back the layers, you’ll see that many of those models have existed before the tech-type business models. It's easier to create a customer-type experience like Facebook or a sleek consumer-type app that can be sold to a business. The boundaries between the experiences you might expect from a B2B or B2C-type experience are changing. It might be easier to create those, but this model itself is largely unchanged. From a business model sense, something like a D2C business model is much easier. Through the internet, you can access customers and cut out middlemen in ways that didn't exist before, making the process much more efficient.
The B2B2C business model is not a choice. It's a situation where you are trying to find a distribution channel for your end product that is efficient.
Let’s go back to the Coca Cola example. You can't buy Coke directly from Coke. Coke isn’t set up for that kind of distribution. Businesses don't consume Coke – individuals are consuming it.
The only choice would be whether you should go with a B2B or B2C or D2C business model, but the economics and the distribution channels don’t align for that. Choosing B2B2C is a situation that you find yourself in with your business.
The three ways to get it right
1. First – you have to create a product that is good enough for the end-consumer, but also one buyable by the B in the middle. A great example of that is the current battle between MS Teams and Slack.
Once you’ve used Slack, you might not want to use MS Teams. Slack started as a B2C or small B2B model – very small teams, small businesses, etc. They were a free offering. They then started to shift towards large businesses, but many of those large businesses already have Microsoft Office packages with MS Teams being bundled in for free. So you end up in this situation whereby if you used Slack, you don't want to use MS Teams. But if you're already getting Teams for free, why would you buy Slack on top?
There, you find the challenge in a B2B2C-type world. MS Teams had to be good enough to compete with Slack. Once it got good enough, then the buyers of MS Teams are like “Well, we get MS Teams for free. But it would cost us eight pounds per seat, per month for Slack”. That's a no brainer.
2. The second point – if the business you are selling to, is quite close in likeness to an end-consumer, you are moving up the value chain, seeing the buyer and the user of your product separating.
What challenges does that present you with and how do you continue to serve both those audiences? Serving two audiences is very difficult – optimising a product for two different audiences even more so and often causes companies to lose focus. Advice for a business is “personalisation”. Execute your core proposition well and become known for it. If your core proposition is just good enough, that causes you to lose focus. Moving up the value chain is the second challenge.
3. Third and last – understanding incentives. If you’ve got a good enough product or a great product that is becoming good enough, really think about what are the incentives and the buyer. Unless you properly know your customer inside-out, you can't compete in any market.
Of course, we are just scratching the surface of the B2B2C business model. The key thing is to truly understand what the model entails. Then, you can build elements of what you do to change your proposition over time such that you can succeed in it.