Marketing includes those business activities in the flow of goods and services from production to consumption. Goods and services are of two types; consumer and industrial. Firstly, it is important to define the primary difference between Business to Business (B2B) Marketing and Business to Consumer (B2C) Marketing. Both markets are types of commercial transactions, however, simply put, business to consumer (B2C) is the process of selling products directly to consumers and industrial/business to business (B2B) is the process of selling products or services to other businesses. However, the differences between both business systems are much more complex than their simple definitions, so are their similarities. Obviously, both B2B and B2C markets have one fundamental difference: the type of customer. However, this article is going to investigate these markets further, discussing the similarities and differences between their market’s structure, marketing practices and buying behaviour within the industry.
Market Structure
One key difference in the markets is the nature of demand. The demand within consumer marketing is primary/direct and demand within business marketing is derived. Essentially, consumers want certain goods to satisfy their needs. Businesses require goods in order to produce products that satisfy customer needs. Therefore, a business’s demand is derived from consumer demand. For example, within the fast-food industry, consumers demand fast-food products out of the primary need to consume food when they’re short of time. Whereas fast-food businesses demand ingredients such as chicken, potatoes and oil in order to manufacture these fast-food goods, a demand derived from the consumer’s demand for the final food product.
However, the demand for consumer goods can also be derived and that demand for industrial goods can also be primary. For example, a consumer’s demand for baking ingredients can be derived from the demand to bake a cake, just as a business’s demand for basic goods such as lightbulbs can be seen as primary/direct. This displays that similarities and differences aren’t as clear cut as they might seem.
Another characteristic of demand which is different within the two markets is demand elasticity. Demand elasticity is the responsiveness of the quantity demanded to a change in price. Businesses demand tends to be less price elastic because businesses have less freedom to simply stop buying things than consumers. This is because businesses often require critical components and raw materials in order to continue manufacturing and remain competitive within the market. Whereas consumers have more freedom and if prices rise, they can simply stop purchasing or find an alternative; there is less need for consistency within consumer purchasing than there is for business purchasing as it causes little issue for the consumer to simply switch brand/product, whereas this is troublesome and complex process for a business to simply switch vendors. For example, if the prices rose at McDonald’s, the consumer could easily seek cheaper alternatives such as Burger King, KFC etc. Whereas, if the prices of potatoes rose, it would be incredibly difficult for McDonald’s to just change potato vendors who had the capacity to supply their whole chain to high quality. Therefore, McDonald’s would most likely have to accept the price rise in order to avoid the implications of switching vendors. However, again, this demand elasticity is derived from the consumer’s demand for fast-food.
Another key difference between industrial and consumer marketing is the size of the market. There are much fewer industrial buyers than consumer buyers due to the specialisation involved in industrial markets; some specialised industrial markets may comprise less than a dozen potential customers. For example, in an industry such as software technology, products are so niche and specialised (and often tailored to the business customer) that there are very few buyers in the market. Whereas in a similar consumer example, if there was a particular software on the market, such as Microsoft Office or a virus software, this can be marketed to the masses as many people today own computers and therefore, there is a demand for such software, but not a demand for a specialised, tailored industrial software. This therefore, highlights the difference in target market and demand between industrial and consumer markets.
Marketing Practices
One key difference between B2B markets and B2C markets is the importance and length of relationships. In B2B markets, businesses often tend to seek longer relationships with their customers as they are seeking a reliable partner who they can depend on for the foreseeable future. Developing and nurturing close, long-term relationships is an important goal for the business marketer as it displays trust and demonstrated performance. Both business marketing and consumer marketing could benefit from adopting a relationships and network perspective, particularly in relation to the management of their supply chain. However, B2B marketing organisations certainly have the most to gain from the relationships and network perspective on strategy. Relationships are especially important for larger corporations that often because they require larger quantities of goods and need consistent quality.
For example, within the fast-food industry, a huge corporation such as McDonald’s requires a vast supply of food, as well as consistency throughout their entire chain of franchises. Therefore, it is very important for them to have a strong and long-lasting relationship with their supplier and be able to depend on them to deliver what is required and agreed. If McDonald’s had vendors constantly letting them down and were therefore, having to change suppliers regularly, they would not be able to uphold the consistent level of quality and service which has made them so successful.
Another reason why businesses like to have longer relationships with their suppliers is to keep costs down. If they are buying large quantities over large periods of time and have proved themselves to the business to be a reliable customer, then they are likely to benefit from reduced costs and economies of scale. In summary, there are many benefits to relationship management including customer loyalty and retention, this is especially important in B2B where there are only a small number of buyers and therefore, competition is high. Relationships are far less important in the majority of consumer purchases as consumers do not require dependability as much as their purchases are often one-off. However, B2B relationships can be similar to B2C relationships when regarding services as there is the requirement for face-to-face interaction and the reliance on the business to complete the service.
Another major difference in the marketing practices of B2B and B2C marketing is the type of marketing and the contents of the marketing mix. Within industrial marketing the seller commonly goes to the buyer -the reverse situation in the consumer field, with the exception of door-to-door selling. B2B marketing therefore, usually heavily consists of identifying a specific target market in order to generate leads of potential customers and personal selling to them in attempt to close them, which may include the negotiation of adjustments to the supplier’s products offer or the formulation of a bespoke offering to match the customer’s needs. This means that organisations are able to offer price segmentation where they can adapt the prices to the customer given the level of tailoring and modifying of the product to the customer’s needs as well as the quantity and level of service required. For example, if a potato supplier was to gain a contract with such a big customer such as McDonald’s, they would likely be able to offer them a cheaper price due to the mass quantity they required. Whereas if they were to supply an independent restaurant, they would have to charge a higher price per quantity. This is a basic principle of purchasing economies of scale, where there are reduced costs for larger businesses in buying inputs, such as raw materials or parts…because of a larger discount given to a larger purchase than smaller businesses can make…allowing a lower cost per unit. This is obviously an advantage that businesses can benefit from, which consumers can’t to the same extent, given the vast quantities required. However, consumers are sometimes still able to benefit from ‘bulk buying’ and economies of scale in some cases, and products are sometimes open to negotiation, however, less prevalently than within B2B markets.
This contrasts to B2C where transactions are often quick and there is little to face-to-face interaction or personal relationship between the business and the consumer. They most likely do not require a longstanding relationship with the business as they are seeking a one-off or low quantity purchase, therefore, the price is often fixed. Businesses that advertise to consumers likely invest a lot on marketing campaigns to attract the consumer, but usually using impersonal methods. Therefore, sales promotion expense (including advertising but excluding direct selling) in relation to the selling price is likely to be much lower in industrial selling than in consumer marketing. The consumer is more broadly targeted in most cases, and products are therefore, “mass-marketed”, however, are still often segmented and targeted similarly to B2B, just less directly and personally. For example, McDonald’s advertise on platforms such as television and radio, targeting the mass market. Although they still offer a wide product portfolio to meet the needs of different types of customers, for example, they make salads and healthier alternatives to fried food and have recently just created a range of vegetarian and vegan meals, appealing to different market segments. This again emphasises the contrast of target vs mass marketing within the two markets.
Buying Behaviour
The buying behaviour of B2B and B2C markets is another factor that’s different. Within B2C markets, most sales are made on a one-time basis, with the hope for loyalty in the future, therefore B2C organisations spend more time and money on brand awareness, than customer retention programmes, therefore, single unit or small volume purchases are characteristic in consumer marketing. Consumers priorities are usually speed and ease of purchase and simple product functionality. Consumers are more likely to take short amounts of time making purchasing decisions (except for larger, more expensive purchases) and even impulse buy. Whereas, industrial buying covers not only single unit purchases but also a prevalence of volume purchasing of raw materials and component parts and many include volume purchasing of supplies. B2B customers also seek more product customization, specialisation and service therefore, they are likely to take more time and consideration over the purchase decision. This is likely due to the fact that the purchases will be more expensive, but also the fact that the product or service has to fit the requirements of more stakeholders, and therefore, the decision has to be deliberated between multiple people and justified to managers/accountants. This means that B2B businesses may have fewer buyers than B2C, but buyers normally buy a larger quantity and spend more money.
When making a purchasing such as food, the decision making process is likely to be short due to the likely speed/convivence/low cost of the purchase. However, when buying more important/more expensive goods that take more financial investment, families are more likely to take greater consideration when making the decision and discuss more thoroughly the costs and benefits between them and come to a mutual decision. This is similar to the way a team or department within an organisation might discuss different factors before making a purchasing decision. This area of consumer decision-making is performed very similarly to that of an organisation as it considers the role of stakeholders in buying behaviour.