How B2B Companies Operate

B2B stands for “business to business”, which literally translates to "company to company" in French. B2B refers to the professional market, as opposed to the consumer market. It follows a sales cycle unique to this type of Business, since it involves commercial exchanges between companies rather than between a company and an individual.

The Concept of B2B

Let’s start by putting B2B into context.

Definition

Business to Business, or B2B, refers to inter-company transactions. B2B business models involve manufacturers and wholesalers, and sometimes wholesalers and retailers. Many companies operate in B2B. Transactions between businesses usually occur within the supply chain: when a company buys raw materials from another company for manufacturing purposes.

Originally, this was called B2B industrial marketing, as companies only sold raw materials and parts needed to make other products. Today, this approach has evolved, as inter-company transactions have become much more complex.

Examples

B2B exists in a wide range of industries, from technology and manufacturing to financial services, retail, SaaS, and more. B2B transactions are most common in automotive, property management, housekeeping, and industrial cleaning companies.

Here are some common examples of B2B sales:

• An organization providing professional services (such as market research) to other businesses.
• Companies offering digital/software services (like CRMs) to businesses.
• Companies supplying raw materials to manufacturing firms.

For instance, Samsung is one of Apple’s main suppliers for iPhone manufacturing. Apple also has B2B accounts with many other major companies, such as Panasonic and Micron Technology.

B2B: A Complex Model

Unlike B2C, the risks in B2B are higher. The decision-making process requires extensive planning and consideration involving all stakeholders. As a result, this process can take several months to reach a viable conclusion.

B2B sales often involve higher prices, more complex processes, and multiple touchpoints across various channels, so B2B companies need a team of highly skilled sales professionals.

The B2B sales approach involves several factors, including the seller’s skills, the efficiency of the sales process, product fit, available alternatives, as well as the buyer’s purchasing ability and willingness. For all these elements to work together, companies need to:

• Develop a responsive B2B business strategy
• Identify the best B2B sales techniques for their team and ideal client
• Create well-calibrated sequences for their salespeople to follow
• Measure and improve performance

To illustrate B2B complexity, here are some steps in the B2B sales cycle:

1. Preparation, research
2. Prospecting
3. Needs assessment
4. Sales pitch
5. Negotiation / handling objections
6. Closing
7. Follow-up

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Advantages and Disadvantages

Advantages:

• Higher margins: B2B companies often sell items in bulk, allowing buyers to get good deals and reducing the need for frequent restocking. Larger orders mean potentially higher sales and more cash flow for B2B sellers. At the same time, promoting to other businesses via B2B websites can help reduce marketing costs and increase conversion rates.

• Increased security: Contracts are common in inter-company trade, providing buyers and sellers with a level of security since contracts protect them from most issues.

Disadvantages:

• A lot of competition for a smaller pool of potential clients. B2B companies miss out on sales to individual customers, so their market is smaller.

• Marketing that targets other businesses rather than individuals must be highly specific for one main reason: the market niche is smaller, making it harder to reach the right contact.

• More complicated setup process: Starting as a B2B company requires figuring out how to attract loyal clients and secure large enough orders. This often means doing extensive research to advertise to potential businesses, setting up a custom ordering system, and quickly adapting when sales are disappointing.

• Greater risk of lack of skills/training among salespeople: sellers need to excel to achieve any results.