Customer acquisition. The Case for Business to Business combined with Direct to Consumer
Combining both channels can enhance your brand reputation, increase sales and lead to greater innovation.
Selling Business to Business and Direct to Consumer
Businesses have traditionally opted for one sales channel, choosing either to focus on Business to Business (B2B) sales, or a Direct to Consumer (DTC) model.
Both of these business models have distinct advantages and disadvantages, and depending on the type of business, one can certainly be more appropriate than the other.
For businesses that are attempting to run a B2B model, much of the hard work comes in establishing the business and the relationships with other businesses you have as a supplier.
Often, B2B businesses are concerned that integrating a direct to consumer sales channel alongside their existing B2B channels will hurt their relationships with those businesses. In reality, combining both can lead to supercharged
With the increase in consumer accessibility to products brought on by e-commerce, it makes sense to take control of your brand message and increase sales with a DTC and B2B model. Benefits of a DTC model include an increase in brand awareness and trust, increased sales and more accurate consumer data, but there are potential drawbacks to it as well.
In many cases, the weaknesses of each model can, to some extent, be covered by the other model, meaning it makes sense to combine them both into a Business to Many (B2M) model.
Let’s look a little more closely at the two models, to understand how they might work together.
B2B
A B2B business model is arguably harder to establish than a DTC. For starters, B2B models rely on smaller margins to attract large volume orders from customers, which can be hard to set up with a new brand which has yet to establish industry trust. Once trust is established though, those orders can be simpler and easier to fill.
B2B Strengths
Cash Flow - As established, B2B businesses benefit from larger orders, meaning for each order, there is a much greater economical value attached than when compared with DTC sales. B2B businesses would hope to sell product volume in the hundreds, thousands or more, meaning the margin is lower, but there is a significant increase in cash flow in the business.
Convenience - Linked closely with the cash flow increase, larger orders also assist businesses in staying streamlined. Rather than individually selling products, large volumes can be shifted in single transactions, making it far more convenient to conduct volume sales in a B2B environment.
Widespread Market Reach - Typically, B2B businesses choose a particular industry to target their marketing towards. Similarly, all businesses will keep their eye on new products and developments in their particular industry. This means that by targeting marketing at one specific industry, B2B businesses are able to reach large numbers of potential business customers, with a single marketing campaign.
Trust & Security - Businesses are often inherently easier to deal with in terms of trust than individuals. Businesses dealing with businesses usually establish contracts and obligations early on, making trading with them more secure. B2B businesses benefit from the digital tracking of sales, particularly with e-commerce retailers, meaning it’s easier to keep track of finances. B2B businesses will also benefit from reputation and trust in their industry, making it easier to identify reputable companies to trade with.
Of course, it would be hard to find any business that dealt directly to consumers if B2B was purely the . So to see how DTC channels can enhance a B2B business, let us examine some of the pitfalls associated with B2B selling.
B2B Weaknesses
Reputation takes time - When starting a B2B business, establishing reputation can be tough. Many suppliers of particular goods are well established, making challenging for their customers difficult. Gaining industry trust can be a long, time consuming process at the beginning.
Logistics & Setup - B2B businesses require large volumes of products and unless going for a dropshipping model, those products will also need to be stored somewhere as well, requiring large warehouse space. Furthermore, establishing special ordering protocols from a manufacturer can also be difficult to do with reliability. All this requires a sizable financial investment and a strong logistics team.
Lack of brand control - B2B businesses place their product in the hands of third party retailers, whose responsibility it is to market the product to the consumer. This presents a problem, as it relinquishes some control of your brand's message to a third party, meaning you no longer have as much control of how your brand is perceived by the public.
Missing a sales channel - This one seems pretty obvious, but by limiting your sales to B2B channels, you are not capitalising on possible extra sales!
B2B Summary
There are plenty of guides to help new B2B businesses start out, so for the purpose of this article, we will assume your B2B business is already established and running. That means you’ve already addressed the first two weaknesses, Standing out and Logistics.
Adding a direct to consumer channel can help address the two remaining weaknesses, enhancing your brand control and capitalising on an extra sales channel. But there are plenty of other benefits in adding a DTC channel as well.
DTC
As with B2B, Direct to Consumer businesses have their own problems, but they also provide excellent opportunities for an already established B2B business. Many of the weaknesses of DTC are negated when considered by an already established B2B business.
DTC Benefits
Brand Message - Marketing to consumers allows businesses to control their brand message closely.
Greater Innovation - Business customers tend to be cautious about new products, only interested in well established, top selling products. Consumers on the other hand, are more predisposed towards trying new products, meaning a DTC channel is great for innovation.
Clear Data - Selling to consumers means you also have better data on who your customers are. In a B2B model, the business retailing to the consumer retains customer data. Consumer data is an extremely important tool for businesses.
Higher Margins - Businesses want to place large orders and expect a discount for doing so. As established, this creates good cash flow, but with DTC included, higher margins are possible as well.
DTC Weaknesses
Lower Volume - Customers are unlikely to buy in the same volume as businesses.
Tougher Retention - Linked to the potential weakness above, once a customer has your product, it can be hard to retain them, with stiff competition in many markets.
DTC Summary
We can see there are many benefits offered by adding a sales channel direct to the consumer to your business. Indeed, some of the weaknesses of the B2B model are counteracted by the addition of DTC.
The lower volume and tougher retention of a DTC model are also somewhat negated by a B2B model.
If it’s possible to supercharge your business with better data, higher margins, greater innovation and a strong brand message, why is there still sometimes a reluctance to add a DTC channel to B2B businesses?
Pervading Myths
The continued reluctance to incorporate B2B and DTC channels into a single business is due in part, to a commonly held mindset.
It has long been believed that a B2B business should focus on their business customers, and leave those businesses to interact with the consumer. The belief is that adding a DTC channel will disrupt the existing B2B channels, potentially harming important, established relationships between businesses.
It’s easy to understand why this belief is held. As a B2B business, you don’t want your business clients to feel you are going after their customers, especially as the original manufacturer of the product can carry a perceived legitimacy for customers when selling directly to them.
However this ignores some absolute titans in both traditional retail and e-commerce who have successfully integrated a B2B and DTC model, known as a B2M.
Successful B2M Models.
As we’ve mentioned, there are successful examples of companies in both traditional retail and e-commerce that have combined B2B and DTC channels to reap the benefits of both models.
In e-commerce, the undisputed king of online shopping Amazon, runs a B2M model, without disrupting the two channels or conflating them. It does this, by focussing on them separately, allowing businesses the convenience, volume order capacity and appropriate discounts through its Amazon Business platform.
Individual consumers are still accounted for on their better known site, and neither platform affects the other one.
In traditional retail, there are also examples of B2M models which successfully utilise dual channels of sale. In fact, there is an entire industry which has successfully done so: Publishing!
Publishers focus on selling high volumes to retailers, who in turn focus on the individual consumer for sales. Publishers also market books directly to consumers themselves, yet their B2B channel is not considered cannibalised.
Keys to success
Looking at these two examples, they both combine the success of B2B with DTC utilising the same philosophy; they consider both avenues of business as separate, meaning they don’t disrupt one another.
This separation of concerns helps to keep established B2B channels running smoothly, whilst allowing businesses to reap the benefits of DTC channels as well.
Combine DTC with your established B2B business and supercharge your results.
Establishing a B2B business is tough. It’s not necessarily an easy market for a DTC business either, but if your B2B business is up and running, adding a considered avenue for DTC sales can drastically improve your sales and supercharge the growth of your business.
WQA provides supercharged digital product development for growth driven companies around the world. Working with Startups, Scale-ups and Enterprise, we design, build and scale digital products, experiences and platforms used by millions of people.
If you want to learn more about how we can help establish a new DTC channel without disrupting your existing B2B channels, increase sales, improve customer data, control your brand and innovate with a B2M model, you can chat to us or email us for a conversation and assessment of your unique digital context.