Without B2B companies and the supply chain, the goods and services we take for granted as consumers and business owners would not exist.
B2B companies create products and services for other businesses, organizations, and charities.
B2B companies face unique challenges, including cash flow management, and must constantly innovate and maintain customer loyalty.
To maximize profits and increase market share, B2B companies should consider optimizing their websites and try out lead generation services to help them connect with decision makers.
This article is for business owners and aspiring entrepreneurs who want to better understand the B2B business model.
B2B is short for business to business. It is a business model in which participating companies create products and services for other companies and organizations. B2B companies can include software as a service (SaaS), marketing companies, and companies that create and sell various consumables.
Regardless of the size of your business, at some point you will need to buy goods or services from B2B companies. We will explore the B2B business model and how B2B companies can maximize their profits and market share.
What is B2B?
In the business-to-business model, businesses and organizations exchange goods and services. For example, a company may enter into an agreement with another company to supply it with raw materials needed to produce a product.
Another company may need to purchase another company’s products to fill their shelves, while other companies hire companies to promote their products and services, secure their operations, design their logo, or write content for their website.
Consumers are not a direct factor in B2B transactions, but they are an important component of why B2B companies work together.
B2B is not the only business model involved in the supply chain. While B2B companies sell products and services to other private companies, public sector organizations, and charities, B2C (Business to Consumer) or DTC (Direct to Consumer) companies sell products and services directly to consumers.
Where are B2B companies located in the supply chain?
If you want to understand how B2B companies affect the supply chain, it is important to consider three sectors of the economy: primary, secondary, and tertiary.
Primary Market: The primary market is exclusively B2B. Companies in the primary sector are responsible for the extraction or production of raw materials, such as farmers or oil and gas companies.
Secondary Market: The secondary market is almost exclusively B2B. Aftermarket companies manufacture and assemble products. They increase the value of the raw material they buy in the primary market by turning it into something else. Think of manufacturers turning oil into plastic or jewelers cutting and polishing diamonds. Aftermarket assembly companies include car manufacturers and construction companies. Sometimes secondary market enterprises use the B2C model, such as farmers selling products in the market.
Tertiary Market: The tertiary market is a mixture of B2B and B2C models. Some companies in the tertiary market supply goods or services that companies or consumers need. These businesses include plumbers, online retailers, flooring installers, supermarkets, commercial financial brokers, home improvement professionals, tutors, and the hospitality industry.
What are some examples of a B2B tertiary market?
Some third party companies only work in the B2B industry. They provide goods and services that other tertiary customer-facing companies need to do their job. Here are some examples:
Plumbing companies sell plumbers the equipment they need.
Point of sale (POS) vendors sell POS systems to retailers.
Business finance brokers need lenders to finance small business loans, equipment leasing packages, and asset-based loans.
– Management and business consultants help companies survive and grow.
– Retailers need credit card processors to process customer payments.
– Businesses ned advertising companies to help them achieve higher sales.
– Businesses need payroll providers and financial services companies to manage payroll and optimize taxes.
– Businesses need lead generation services to create revenue opportunities.
– Organizations need insurance companies to protect employees, customers, and their own interests.
Problems of managing a B2B company
Perhaps the biggest challenge most B2B companies face is finding businesses to buy their products and services from. B2B marketplaces are much smaller than consumer-facing models. For example, a B2C clothing e-commerce website will have a wide audience of potential buyers.
However, businesses often spend more on purchases than consumers and have much more generous budgets. So while a B2B company may generate fewer sales, it is likely to generate much higher profits than a B2C company.
Here are some of the unique challenges that B2B companies face.
1. B2B companies must constantly innovate and maintain customer loyalty.
Innovation is a critical issue for many B2B companies, especially those that sell products and services on a monthly subscription model, such as SaaS packages and online accounting software.
B2B companies must find new ways to continuously improve the functionality and usability of their products in order to increase their chances of gaining market share and maintaining customer loyalty. And your competitors are also in the same continuous development cycle, striving to create an even better product.
2. B2B must create a strong online presence.
B2B companies should invest in a well-designed and constantly maintained business website so that their customers can easily find them and navigate through their offerings. Search engine optimization is critical to achieving top rankings on Google, as is optimizing your website for mobile devices.
Your website content, including blogs, guides, product descriptions, and white papers, should engage current and potential customers through all three stages of the sales funnel: awareness, research, and action.
– Understanding Stage (Top of the Funnel): In this stage, the potential customer understands that there are friction points or opportunities in your business that do not currently have the staff, technology, or knowledge to take advantage of.
– Research Stage (Middle of the Funnel): In this stage, the potential customer is actively looking for a solution and knows that there are many solutions and vendors. During the research phase, customers look at various solutions and vendors, often relying on website content to make decisions.
– Action Stage (Bottom of the Funnel): After a prospect makes a short list of solutions and vendors, they contact prospects to begin the sales discovery process.
3. B2B companies must manage cash flow and delinquency.
Many B2B companies bill customers within a 30-day or 60-day billing window. For example, an invoice issued on February 1 cannot be paid until April 1. Even so, some customers do not make payments on time despite generous loan terms.
If your company issues a lot of bills, the effect of late payments can be mitigated by the regular flow of money into your account. However, some manufacturing companies can only issue a few large invoices per year, so late payment jeopardizes the company’s future.
While business loans are available, consider invoice factoring if late payments are a problem for your business. Invoice factoring (sometimes called invoice discounting) means you sell your invoices to a financial company and receive 80% or more of the invoice value the next day. When the client makes a payment, you receive the remaining 20% minus factoring fees.
How B2B Companies Can Increase Market Share
Running a B2B business comes with many challenges, but there are ways to maximize revenue and market share.
1. Join supply and purchase exchanges.
Procurement and Purchasing refers to the business that purchases the goods and materials needed to operate profitably.
Profitable acquisition is a constant problem for many companies. In larger organizations, different departments and locations may have different budgets and agreements with different vendors. This could mean that one department pays $3 for a light bulb and another pays $30.
Online procurement and supply sites provide pre-approved lists of goods and services with an upfront price for large enterprises and public sector organizations. By registering with one of these e-procurement sites, your business will be immediately visible to buyers and specifiers at some of the world’s largest companies.
2. Use keyword-driven marketing.
B2B companies prioritize high quality websites and high search engine rankings. To maximize your website’s ranking potential, use certain keywords that your competitors might overlook.
For example, if you’re a broker competing for the term “commercial loan”, according to Ahrefs’ SEO marketing platform, your site would need 202 backlinks from third-party sites to have a chance of appearing on the first page of search results. Search.
There are over 640 “business loan” keywords that might suit you, including “small business loan”, “business loan calculator”, and “starter business loan”. Try to use effective terms with less competition to drive traffic to your site and increase its position in Google over time.
3. Try direct marketing campaigns.
To help your sales team generate leads, consider building or purchasing email lists of decision makers in the types of businesses you’re targeting.
CRM software can easily run and monitor email marketing campaigns. Contact decision makers once a month to introduce them to your company and how you have helped other clients. Over time, you’ll build familiarity and trust, and these campaigns will start generating strong, closable incoming leads.
