Has anyone been at that point where you have to decide if the business is B2B or B2C?

AmyLiu·Jul 06, 2020

Posted in:Advice

Hey everyone!Looking for some advice from founders who've also gone down this path. What made you choose one over the other? And are there successful companies that are both B2B or B2C? We looked at Dropbox and Skype which both started as B2C but switched to B2B after a certain time. Is there a way to "test" B2C? I.e. a survey or getting a lot of people to try it and see what they think?Any thoughts would be super helpful! 😊Thanks!!

Maebellyne·Jul 06, 2020

Not a founder but a marketer who helped re-orient a data transformation startup from B2C to exclusively B2B. I basically tested B2C by generating demand using search engine ads, focusing on keywords related to our offering with clear buying intent. As soon as the customer volume started to come in, we learnt that 1. our cost to serve was too high, 2. consumers were too sensitive to price, 3. too much diversity in the types of customer data coming in but at small volumes, which meant our training models were insufficient. That learning coupled with resizing the market and Proof of Concept contracts with B2B led us to conclude that B2B is more profitable. Also, I do believe that generating peaks in customer volumes at certain points post MVP launch is a good test in general. It reveals a lot, especially problems within the operations or software that you might not have accounted for when all you were fulfilling were a few sales/orders at a time. Happy to chat about this in more detail and how you could design a test for Rally if you’re interested!

asebold·Jul 06, 2020

B2C typically takes longer to reach profitability because it relies on having a looot of customers. Where as with B2B, you can charge a higher price from the get go, so you don't need as many customers to reach the same level of revenue. Customer acquisition is costly, so it takes a while for B2C to see the same level of income as a B2B, if ever. If you have the chance to target businesses as a customer, do it. You'll be profitable faster and in general businesses are easier to sell to. Then, when your business is established, you can experiment with B2C. I started as B2C but have pivoted to B2B because it is much more predictable and financially secure.

Lola·Jul 06, 2020

I agree with what has been said if you can sell b2b, then definitely do that it can be tough to sell to consumers, and you generally need a ton more customers (which equals a ton more support staff etc etc) and a larger investment in brand and community which can take time to establish.Depending on your product you could later experiment with a consumer offering and an enterprise one or explore b2b2c (an example would be open table, the restaurant is open table's customer, but the restaurant-goer is the end-user). Best of luck!

shaneebenzur·Jul 06, 2020

Former Dropbox marketer and current head of marketing at Crunchbase. At Dropbox the model was a hybrid. It became less about the person and more about the use case. For example we evolved from backing up photos of your family to being tbt place where you could get work done. We know that some of that work would be used for personal pursuits and we also had many independent contractors who did both personals and professional work in Dropbox. The biggest driver of the shift was: who will pay for better quality service. Knowing Google and Apple can commodify storage, we ultimately had to compete on something else which was collaboration tools. For your solution: what’s the problem you’re solving. And, what audience would be willing to pay to solve that problem? You may find that your tools work for people who have the consumer version of a problem, and they may not be willing or cannot pay. But those same people also probably have the corporate version of that problem and they will be willing and able to solve it. Crunchbase for example works for sales people who are looking for new accounts to prospect. Their companies want to pay for tools that help them make more money. Job seekers (aka B2C) also want to prospect but they cannot pay because they’re out of work. So Crunchbase builds tools that work for sales people and offers a subset for free which helps the consumers / job seekers who ultimately end up at a business. Dropbox users were similar. They had a big file they needed to share with a friend. They found Dropbox because it was free and extremely easy to use. Then when they had the same problem at work their first thought is Dropbox. But the work file is bigger and their needs are more frequent / team based, so they upgrade to Dropbox Business. To me this B2C2B model is the most lucrative because you have a large top of funnel and a smoother growth path wherein users can discover value on their own timeline. Hope this helps!