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Startup 101 warmup: the B2B2C model

Jessica Tayenjam is a consultant at Rapid Innovation Group, where she helps high potential, technology-enabled companies mitigate market risk and create scalable growth. She is one of the speakers at our Startup 101 course on Saturday 9th March (tickets still available – download the free preview book here). Here, she shares her thoughts on the B2B2C model.

Many definitions of B2B2C businesses focus on e-commerce relationships where the ‘C’ is the buyer. However, I think there is a more interesting segment of B2B2C: a business selling a product to another business which its customers will engage with. B2B sales for products with a consumer angle.

And that is why I think B2B2C is more interesting than B2C: businesses have a lot more money than consumers (obviously). You can still build a “consumer” product, but with an actual chance of making money from it.

Examples of B2B2C in action

Virtual fitting room technologies (e.g. Fits.me, Metail, Poikos) are a prime example of what I would consider to be a B2B2C play. The technology benefits the business – an online clothing retailer – by reducing returns rates and improving the customer experience. The consumer benefits from greater confidence in their purchases and less hassle with returns.

Another category of technology with B2B2C potential would be networking tools for conferences. This might be an app (Shhmooze comes to mind) or a device, such as those produced by Blendology. While the product itself focuses on the individual’s experience and improving the way end users connect, it can be sold to conference organisers to provide them with better data on attendees (customers) and their interactions.

A B2B2C business model

A business model is about three things:

  • Creating value
  • Delivering value
  • Capturing value

For B2B2C to work, the product must have create value for both the business and the consumer. I would suggest, however, that the business benefits are of greater importance, and must be sufficiently compelling that a business is willing to pay for them.
Delivering value is about the experience of those benefits – have they been realised in a measurable fashion? Can the value be defined?

Value may be captured from this relationship in ways that may or may not relate to the ways in which the B2B2C product touches upon the consumer.

Two examples:

A subscription model may be applied, in which case the ‘B’ pays their annual rate regardless of the reach to ‘C’ (although they are unlikely to continue subscribing if the crucial step of delivering value to the business from their use of the product is not accomplished).

A utility model may be applied, whereby the business is charged for each contact point with the customer. A fitting room technology might charge for each time a consumer ‘tries something on’ using their technology; a networking tool might charge per connection made.

An interesting point to consider for the business is whether they pass a utility cost along to the consumer, expanding the cycle of creating, delivering and capturing value through to the ‘C’ end of B2B2C.
In the spirit of business model innovation, there are probably many other ways of generating revenue from a B2B2C situation, too!

Marketing a B2B2C concept

The usual challenges of B2B apply: understanding and targeting the buying centre, managing a more complex sale (varied, as ever, based on the cost and complexity of the product), and so on.

There can be a twist, however, in that although the consumer is not the “customer” (i.e. the buyer), they may still need to be marketed to. Consumers may need to have an awareness of the product to drive demand through to businesses, meaning the marketing strategy may need to have both consumer and business elements to it.

Many have lamented the fact that the start-up scene currently seems to be awash with B2C internet start-ups with no strategy for actually generating revenues. User acquisition is nice, but has no value if it cannot be monetised. B2B2C companies have a much clearer path for making money while still being able to serve the consumer.

If you’re interested in discussing further or learning more, check out our Startup 101 course on Saturday 9th March (tickets still available - download the free preview book here). 

  • hhaldre

    Jessica, I’m one of the co-founders of Fits.me and wanted to thank you for mentioning us.

    You are absolutely spot on with your analysis!
    I’d like to expand on what you wrote.

    Indeed, it is possible for the retailers to pass the cost on to the customers. For example, a clothing retailer may offer a “free return shipping” only to those customers who use the virtual fitting tool. Hence – they charge the customers who are more likely to return garments; the discount can be calculated such that the benefits the business receives are higher than the utility cost of the fitting tool – the discount will effectively pay the cost of the technology.

    When it comes to fitting tools, for “B”, they have ultimately much higher value. It is not only reducing returns and improving the customer experience – by capturing the data on customers, the analysis of this data helps the retailer improve their product selection, provide a better fit, and ultimately sell more not just in their online channel, but also in their brick-and-mortar stores. Customers win, but businesses win twice.

    • http://twitter.com/JessicaTayenjam Jessica Tayenjam

      Heikki, thanks for the great comment. Definitely agree with the points you have made. I think the data aspect is key to many B2B2C offerings – the question is how it can be monetised or generate ROI. For a clothing business the path is clear!