As the COVID-19 pandemic continues to shatter lives and finances – it’s expected to slash GDP by $7.9 trillion through fiscal 2030, according to published reports citing Congressional Budget Office projections – business owners are trying to adapt to the “new normal” of constrained budgets and periodic government-mandated shutdowns.
In some cases, shrinking or disappearing markets may force some service providers and others to reconsider their strategies, including basic ones like whether to focus on a business-to-business (B2B) or a business-to-consumer (B2C) model.
The pandemic has “stimulated significant changes” in the business services environment, according to Michael Williams, dean of the School of Business and Management at Thomas Edison State University.
“On the one hand, companies with robust sets of products and services may be able to address the B2B and the B2C markets—that’s not new,” he said. “However, the essential question is whether or not their client bases and target markets are still viable.”
Pandemic-related mandatory business closures have wreaked havoc on entire industries, such as restaurants, hospitality, and fitness, Williams added. “Corporate leaders, business owners, and consultants need to assess their markets and determine if they remain feasible for business. If not, these professionals may have to evolve and focus on a changed or new client base.”
The current market conditions are challenging, but they also provide opportunities for reimaging and reinventing business, he said. “During harsh conditions, people are forced to innovate. Consider the way that wine and spirit producers pivoted, leveraging their expertise with alcohol to produce hand sanitizers.”
Provident Bank successfully navigates both markets despite the pandemic-prompted challenges, according to Josephine Moran, Provident’s executive vice president and director of retail banking.
“On the B2B and B2C side, we’ve focused on highlighting business and personal services in part by connecting with centers of influence like trade publications, social media and traditional media, and sponsorship with teams like the New York Red Bulls, Sky Blue [a women’s professional soccer team], and Rutgers Athletics,” she said. “On the consumer side, our outreach programs include targeted social media, email and direct mail marketing campaigns.”
As companies move more of their activities to digital platforms, “we’ve introduced partnerships with fintech companies like Autobooks (a small-business payment and accounting services platform); and we continue to enhance our own online and mobile banking apps,” said Moran. “At the same time, we’re balancing that by maintaining the personal touch that Provident is known for.”
Businesses should consider the underlying differences between the B2B and B2C markets, advised Omer Topaloglu, an associate professor of marketing in Fairleigh Dickinson University’s Silberman College of Business.
Beyond goods and services
“In the B2B space, the company’s owners should recognize that they’re not simply selling a product or service,” he said. “They have to consider what’s called derived demand, which means their demand depends on the success of their client. They should understand how they can help the business customer and its bottom line. For example, if a client buys machinery or equipment and it breaks down, it’s not just an inconvenience—the malfunction could lead to a loss of revenue for the client.”
So how can a business owner determine whether a dual-market strategy is a good fit?
“It takes some research,” Topaloglu counseled. “First, consider whether you have the resources to create separate market offerings for these different types of client segments. Your offerings for the B2C market could be less complicated and more based on convenience. On the other hand, what you offer in the B2B market could be more complex including high-quality products, with better service, training, and support. There’s no single answer since it depends on the individual company’s goals, abilities, and resources.”
Companies should think about short- and longer-term trends, like where the markets are likely to be in the next six months, as well as the next two-to five-year period, according to Stanislav Mamonov, a serial entrepreneur and an associate professor in the Department of Information Management and Business Analytics at Montclair State University’s Feliciano School of Business.
“Also consider issues like how much it will cost to acquire a customer—and weigh that against how much revenue you expect to generate from each customer,” added Mamonov, whose entrepreneurial activities have included B2C startups like Kniga.com, an online Russian-language bookstore, and B2B outfits like MintFinder, a since-sold and rebranded product recommendation service. “The customer acquisition cost tends to be higher in the B2B market, since multiple decision makers are often involved, adding to the time it takes to close a deal.”
A business provider isn’t necessarily limited to an either-or choice, he added, “but it can be difficult to successfully navigate the B2B and B2C markets,” Mamonov said. “One race is tough, and it’s tougher to be involved in two races.”
He did it, though.
“Back in the early days of ecommerce, I helped to start up a B2B food supplier,” Mamonov recalled. “I like the food segment because it’s recession resistant. As ecommerce gained traction, we formed a separate partnership and set up a B2C ecommerce site, leveraging our existing relationships and adding a digital marketing expert. So a dual-track approach is possible.”
Still, a business’s ability to navigate B2B and B2C “largely depends on the skills and resources available” to the individual business, according to Vincent Vicari, regional director of the New Jersey Small Business Development Center at Ramapo College of New Jersey.
“While there is definitely overlap with regard to both strategies, there are a lot of unique considerations associated with each specific strategy,” he explained. “An institution generally has different needs than a person, and vice versa. The one chance to get it right now is important because aligning with bad publicity caused by a channel partner may not be forgiven by stakeholders no matter what public relations do later on.”
Some businesses were able to switch markets in response to changing events. In 1997, when Timothy H. Guim started PCH Technologies, “ the IT industry was completely different than how it is now,” said Guim, who serves as the company’s president and chief executive officer. “At that time, the company was called PC Helpers and I worked out of my basement after just graduating from Drexel University.”
He started by targeting and servicing local businesses and residents, and soon moved to larger quarters as the business expanded. But by 2015, demand for residential repairs declined as the price for new computers fell. “In 2015 we moved to a new state-of-the-art facility and built an advanced network operations center,” Guim related. “We did a complete rebrand of PCH Technologies to match our new facility, and now we are focusing solely on B2B IT services and cybersecurity.”
Understand the music
In both the business-to-business market and the business-to-consumer space, “Companies have to understand the perspective of their customers,” counseled Dale Caldwell, a Fairleigh Dickinson University professor and executive director of FDU’s Rothman Institute of Innovation and Entrepreneurship. “For example, not everyone is capitalized the same way; so keep that in mind when you structure your payment terms.”
Services providers and other businesses should also be aware of the personality and goals of their customers’ CEO and other points of contact, advised Caldwell, who’s also the founder and CEO of the management consulting firm Strategic Influence LLC.
“If you’re selling B2B, you want to add value to your customers’ business,” he said. “It’s easy to just think in terms of the general benefits of your product, but the B2B provider should also advise customers about how their goods or services will help the customer’s company to grow.”