Business-to-business (B2B)

A business-to-business trade involves at least two companies coming together as business collaborators. The term “business-to-business” is often shortened to “B2B.”

Jean-Luc Geha is a professor at the HEC Montréal Sales Institute, where he is also Associate Director. According to him, the value chain of a product or service in business-to-business trading starts with the manufacturer and ends with the retailer. The only people excluded from B2B are consumers.

B2B companies often specialize in a particular sector. They can sell through sales offices, call centres and websites.

“As a manufacturer, Samsung specializes in making TVs, not in dealing with 3,000 customers,” says Geha.

Companies like Samsung work with buying and selling specialists for their products and services. The job of these specialists includes, but is not limited to:

• maintaining relationships with other companies
• negotiating purchases and sales
• creating agreements
• closely monitoring inventory

This method of operation can help better anticipate demand. Companies often sign agreements and contracts with other companies to ensure price and quantity stability.

Business-to-business value chain

This image illustrates the business-to-business value chain. The chain ends at the retailer and does not include consumers.

An example of B2B activity 

Jean-Luc Geha gives the example of a company that produces flour. The company sells its flour to a bread maker, who in turn sells the bread to a wholesaler or to retail grocery stores. All of these are business-to-business activities.  

Business-to-business trading actually takes place in all sectors of the economy.  

The challenges of B2B companies  

B2B companies often have indirect access to consumers. According to Geha, this can make it more difficult to understand their customers’ true intentions.  

Businesses often have to rely on information they receive from further down the chain, especially from retailers, to improve their processes.  

Although we talk about B2B trade, all companies remain dependent on consumers.  

“A company that manufactures screws for jet carburetors will have to rethink its strategy if people stop flying,” says Geha.  

How B2B companies can become more efficient 

Jean-Luc Geha has three tips for B2B entrepreneurs.

1. Connect with your customers

Companies must make efforts to obtain information about customer needs and preferences. For example, a manufacturer could ask people who buy its products to register online to validate a warranty. This will allow the manufacturer to obtain consent to collect personal information and send feedback questionnaires.

Businesses can also collect feedback from retailers. In fact, it is important to maintain good relations with your business clients, just as if they were your end customers.

However, it is often best to combine multiple sources of information to tailor your products or services to the needs of the people who buy them.

2. Study the competition

Pay special attention to the businesses around you. “There’s always competition,” says Geha. If you develop an innovative idea, you will have a certain grace period. But competition in the form of a similar product will come sooner rather than later.

Take the time to identify and analyze your competitors. “Stand out by being the leader of the pack,” says Geha.

3. Build your reputation

Geha explains that customer loyalty is not what it used to be but that certain companies know how to win the loyalty game. “For example, most people associate Toyota with reliability,” he says.

In the long term, by listening to your customers, innovating and working on your brand, you will build an enviable reputation.

Next step

Explore different distribution channels and find the most cost-effective ways to get your product to market by downloading our free distribution channel selection tool.