Here’s a trivia question for you. Which is better: B2B or B2C? The answer, of course, depends on the product you’re selling and just how you like conducting business. If you’ve chosen the B2C path, you’ve likely already encountered a number of advantages, whether you’ve found yourself innovating to meet the needs of a large and diverse customer base or leaping over those low barriers of entry into new, untapped areas of the market. However, B2C also comes with a myriad of disadvantages that can throw any business off track. Just what are these disadvantages and how have other successful B2C companies overcome them? Here, we take a look.
1. Higher Cost of Doing Business
From direct sellers to businesses that generate revenue through advertising, going B2C usually means a higher cost of doing business. While the individual pieces of inventory for B2B tend on a whole to be more expensive, B2B customers tend to be better funded, more consistent and more stable than B2C customers, somewhat mitigating the risk of purchasing large-scale business machinery and raw materials or commodities.
This makes B2B inventory purchasing decisions a relatively simple affair, while B2C is much more unpredictable, changing with customer whims and requiring much more in-depth market analysis. B2C companies risk either streamlining their stock to the point of being irrelevant, or over-diversifying their stock and then not being able to unload inventory.
There are also high administrative costs in processing such a diversity of orders. B2C companies often require a greater number of employees with broader expertise (especially in the marketing department), and often run the risk of developing a costly and bloated workforce.
Case Study Solution: Keep It Simple Like Craigslist
Take a look at the most innovative tech companies out there, and you’ll notice a pattern: efficiency. The chart at the beginning of this post, for instance, makes the argument that the most effective companies are those that generate the most revenue per employee. And the king of doing just that is Craigslist, which generates approximately $3,330,000 per each one of its scant 30 employees.
How does the company do it? By keeping its mission close to its roots, and not making profit its central goal, a fact CEO Jim Buckmister has emphasized in interviews. While the company may extend its revenue generating strategies to advertising, that’s about as far as they plan on going. Instead, they’re sticking to their relatively inexpensive and easy to understand product, as well as the business model that got them where they are today.
Lesson learned: Do what you do best with the least people possible.
From lead generators to countless processing stops along the supply chain, middlemen are both common in B2C businesses and expensive. Often times, the cost of middlemen is either passed on to the customers, or, if there’s a price level cap, eaten by the business itself, thereby limiting its budget and preventing the company from taking important risks or making innovative change in the long term.
Case Study Solution: Go Direct Like Flower Muse
Just because bigger players in the market have established a long, complicated supply chain as the norm, doesn’t mean smaller (or any other) players have to follow suit. Just take a look at Flower Muse: when they ship mini calla lilies, for example, they don’t ship them to a warehouse where the flowers then sit for days until enough orders have been added to the shipment (as is standard in the flower industry). Nor are they made to sit at an importer’s. Instead, the lilies are shipped right to the customer from the farms where they grow, arriving in much better shape and lasting for much longer in the vase. This makes customers feel like they’ve purchased a better product — one that is more of an investment than those bouquets that need to be tossed out in three days — and are therefore more loyal.
Lesson learned: Cut the middlemen out and emphasize the quality of the product over reduced
costs on the backend.
3. Customer Support
For companies big and small, developing the infrastructure needed to adequately deal with customer inquiries can be a cumbersome burden. Emails go unanswered, or are responded to long after the customer has given up. In times of crisis, there aren’t enough people to answer the phones; and, when they do, they may not have the training they need to fully empathize with the customer experience. Calls may also be routed to another country where the accents are thick, which can frustrate customers even further. All of this can lead to lost revenue, or at the very least, a lack of passion about the brand.
Case Study Solution: Make Everyone Happy Like Zappos
It’s hard to find a company that does customer service quite as well as Zappos. In fact, in an interview with Business Insider, senior brand manager Michelle Thomas is quoted as saying, “The one constant is that we are a service company that happens to sell__________ (fill in the blank).”
In other words: customer service is so baked into the company’s DNA, they consider it to be their primary product. This value is passed on to the company’s famously happy customer service staff in four weeks of initial training. The lessons learned here are numerous, so we’re going to list them out:
- Respond quickly. Use an email auto-responder if you have to, but make sure a customer receives some kind of response as quickly as possible, and the follow-up is just as rapid.
- The customer is always right. If the customer wants to make a return, let them make a return. Zappos is so into this idea, they actually encourage customers to try multiple shoes and return the ones they don’t like. You may lose money in the short term, but you’ll gain it right back in developing a long-term relationship with your customers.
- Treat customers like unique individuals and reward your most loyal fans. Zappos customer service representatives don’t read from scripts. They relate to customers as people, and they reward their loyal customers with discount deals.
- Go the extra mile. Or several miles, as when Zappos sent a representative in person to buy a discontinued shoe from a competitor store and delivered it in-person to a customer who had forgotten her pair on her Vegas vacation. If that doesn’t breed brand loyalty and evangelism, I don’t know what will.
4. Large and Segmented Consumer Base
One of the biggest disadvantages of B2C commerce is that the consumer base is large and segmented. And you know what happens when you get too many cooks in a kitchen: everyone wants to add a dash of their own spice. B2C businesses often find themselves receiving input and feedback that’s all over the map, which can cause them to spread themselves far too thin. This is actually a pretty common phenomenon among entrepreneurs, who constantly hear the feedback, “This is cool! I wish it also had…” But a jack of all trades is a master of none, and B2C businesses that overextend themselves will find themselves trying to compete in too many markets at once.
Case Study Solution: Find Your Niche Like Lehman’s
No matter what the business or industry, determining who needs your product or service and getting the attention of the consumer group most likely to be a prospective customer is absolutely crucial. Just think about it. Would you be more likely to buy a car from a dealer who sells a little bit of this and a little bit of that, or would you buy from the dealer that not only has the exact car you’re looking for but who also understands why you want that car and just what you’re looking for throughout the buying process?
Yes, you may lose some customers in the process, but you’ll gain a lot more, as you’ll be able to market yourself much more effectively. Several strategies include marketing yourself as an expert resource, developing much more targeted elevator speeches, and finding much more accurate analytics as you track your customers’ interests online.
Need proof? Just look at Lehman’s, a company that began by selling products to help the Amish continue living the way they so chose.
While the company now has a diverse customer base, the common thread is still there: Lehman’s sells products to people looking to preserve or recreate a certain way of life. And we know it because the company can sum up their entire business model in one sentence, “Lehman’s ships old-fashioned, non-electric merchandise all over the world through our catalogs and website.”
Lesson Learned: Don’t be afraid to narrow your customer base, just like a B2B business. Become a leader of something small rather than getting lost in something big.
While the B2C business model does have several disadvantages, there are many ways to overcome them. Overall, the key is focus, focus, focus. Streamline that business model, narrow that customer base, target that market, and care about your customers, and your business is sure to excel.
Business strategy image provided my Shutter Stock.