What is B2B?
Business-to-business (B2B) describes a transaction where one company sells a product or service to another company. B2B can also describe a company that sells to other companies or refer to the general concept of business between companies. B2B transactions are different than business-to-consumer (B2C) transactions, where a business sells to an individual customer.
Recognizing B2B Business
Common examples of B2B transactions include:
A business sourcing materials for production from another business, like a garden hose manufacturer buying rubber from a supplier.
A business using the services of another business, like a company hiring an accounting firm to audit their finances.
A business buying products from another business before reselling them, like a clothing shop buying shirts in bulk and then retailing them one-by-one.
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What is B2B SaaS?
Software-as-a-service (SaaS) is the business model software providers use to make software accessible online, on-demand. With SaaS, you can subscribe to a software application without having to install it locally on your computer. SaaS can also refer to the software itself.
B2B SaaS, meanwhile, is the SaaS one business sells to another. Many businesses rely on SaaS applications to make their marketing, sales, customer service and other processes more efficient. DocuSign is an example of a B2B SaaS company, which sells its online platform to other companies so they can collect digital signatures on important documents.
How is B2B different than B2C?
Key differences between B2B and B2C transactions include:
The decision-making process. The process of planning and approving B2B sales is more complex. Companies doing business with each other typically have multiple internal stakeholders that have a say in a potential business exchange. B2C sales, on the other hand, only need to be decided on by an individual customer.
Pricing. B2C purchases are generally the same price for everyone while in B2B, the same product may be offered to companies at different price points for a number of reasons, such as: - Whether the company buying the product or service is a high-value customer. - How many products the buyer purchases. - Whether the company buying the product or service will do so on a recurring basis.
Time required. With multiple decision-makers involved in each transaction and the potential for negotiation over the price and makeup of a sale, B2B transactions often take longer than B2C.
Size. Because businesses generally purchase more of a product or service than individual consumers, B2B transactions are also larger in size and scope.
Examples of B2B
General Electric is an example of a B2B company because it sells LED lighting systems to other businesses, like hotels and office spaces.
B2B commerce is also essential to the construction industry. The materials needed for a building, like concrete, steel and plumbing equipment, are often manufactured by separate companies, and construction companies purchase them in order to provide their services.