B2B2C
B2B2C (business-to-business-to-consumer) is a business model in which a company partners with another company to reach a consumer and offer extra added value. This model can be very profitable for both companies by expanding their customer base, reducing costs, and taking advantage of existing infrastructure.
What B2B2C Means
In the early days of e-commerce, a clear-cut division existed between B2B (business-to-business) and B2C (business-to-customer). A company would produce products or services and sell them to either other companies (B2B) or to end customers (B2C). The development of technologies that enable interconnectivity, decentralization, and the explosion of touchpoints with customers have disrupted these traditional business models.
The B2B2C model emerged from the challenges that increasing complexity in online commerce poses for producers and service providers. Companies are increasingly faced with obstacles to scale operations, dealing with complex fulfillment processes, and satisfying increasing customer expectations. With so many new possibilities, stakeholders quickly started asking themselves how to take advantage of them with their limited resources.
On the other side, entrepreneurs started noticing exciting opportunities for companies that helped other businesses surmount these challenges and effectively reach wider audiences. By partnering with producers, these companies sell their services to create a complete customer purchasing experience.
The B2B2C go-to-market strategy lives on the premise that a whole is greater than the sum of its parts. Two companies partner up to provide a bundle experience to an end customer. The most classic example is a marketplace. A marketplace offers a producer a place to sell its product directly to its audience. The marketplace provides additional services like keeping an updated inventory, handling fulfillment, and dealing with customer support.
The B2B2C go-to-market strategy lives on the premise that a whole is greater than the sum of its parts.
On the other side, entrepreneurs started noticing exciting opportunities for companies that helped other businesses surmount these challenges and effectively reach wider audiences. By partnering with producers, these companies sell their services to create a complete customer purchasing experience.
The B2B2C go-to-market strategy lives on the premise that a whole is greater than the sum of its parts. Two companies partner up to provide a bundle experience to an end customer. The most classic example is a marketplace. A marketplace offers a producer a place to sell its product directly to its audience. The marketplace provides additional services like keeping an updated inventory, handling fulfillment, and dealing with customer support.
The fact that two businesses are involved in creating a customer experience means there is room for innovation. Apart from marketplaces, cooperation in a B2B2C environment can offer additional purchase possibilities for the customer. For example, some financial companies might partner with manufacturers to offer monthly payment options.
Key characteristics that differentiate the B2B2C model from others:
- The product is not white labeled and there is clear brand differentiation. The customer is aware of the involvement of the two companies and recognizes the input of each company.
- The producer does not sell the product to the intermediate company and retains the ability to set prices.
- For the B2B2C model to work, the two companies must have the same target audience. They should have complementary inputs that can bundle up into a purchase experience.
Benefits of B2B2C for producer
Decrease costs
Creating the infrastructure necessary to meet the ever-increasing customer expectations can be expensive. Partnering with other companies can significantly reduce costs and share the associated risks of new investments.
Increase revenue
By partnering with an intermediary company, producers expect to reach new customer bases, enter new markets, have the capabilities to scale growth, and take advantage of the reputation of the partnering company. All these factors will contribute to the increase in revenue.
Leverage technology
By partnering with companies with ample experience in e-commerce, producers can gain by using existing cutting-edge technological platforms. Successful companies like marketplaces will have a strong incentive to keep their services up-to-date.
Improve product appeal
The primary purpose of entering a partnership with an intermediary company is to create a more attractive product than the producer alone could offer. Customers are learning to expect these additional services and add-ons to be integral to their experience.
Benefits of B2B2C for intermediary company
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Increase revenue
The most straightforward benefit for the intermediary company is the revenue from fees or commission that the producer pays per purchase.
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Data from customers and from the producer itself
Data sharing in B2B2C partnerships can lead to significant gains for the intermediary company by acquiring new customers and valuable data on pricing, stock, inventory, and marketing strategies. This data can help personalize offers and improve service.
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Gains in brand awareness
Any marketing or promotional effort from the producer will reflect in bringing new customers to the partnering company, which will also translate to gains in brand awareness.
Benefits of B2B2C for customers
Seamless purchase experience
Customers take advantage of a customer experience that fulfills their expectations. The B2B2C strategy will offer customers a broader palette of options with more convenient delivery methods, payment options, and add-ons.
More direct relationship with the producer
In B2B2C partnerships, it remains clear that the customer is buying the product or service from its producer. Although there is an intermediary, the relationship between producer and consumer is much closer than in traditional channel partnerships. Producers gain important insights about their audience that are useful to develop the product and their general experience further. Customers will therefore have more impact on the further development of the product.
Challenges of the B2B2C Business Model
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Technological compatibility
A B2B2C partnership poses technological challenges. The two businesses need sync perfectly to deliver a seamless customer experience. Companies need to find a way to efficiently connect their logistics systems, ERP systems, and companies’ back-ends. A versatile and robust e-commerce platform is required to harmonize both systems. Although some partnerships are based on producers enjoying the technological capabilities of the third party, in other cases, the needed investment might be considerably high.
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Harmonizing priorities and needs in complex partnerships
More stakeholders can mean more complexity in decision-making processes. Sometimes the terms of the partnerships are very clear-cut, or producers have no chance of modifying them (e.g., when dealing with big marketplaces). However, when companies need to negotiate terms, complications might arise. For example, there needs to be an explicit agreement on how each partner will promote the product and which data will be shared among the companies.
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Giving up control over customer experience
When engaging in a partnership with other intermediary companies, producers give up their control over customer experience. The producer has limited ways to influence how to interact with the customer on a third-party platform. Moreover, the customer will associate the product with any negative experience with the intermediary company.
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Having products that are not prone to the B2B2C model
Engaging in a B2B2C model requires products that can be sold to a broader audience. Certain goods like regulated medical inputs or industrial parts can only be purchased by other companies.