Developers of the SaaS already at the initial stage of application design should understand for which sector of the digital economy the product is being developed. There are two main areas of service delivery: business to business services and business to customer services. In this article we will explore what are the differences between B2B and B2C approaches and in favor of which approach is best to choose.
Basic concepts: SaaS, B2B and B2C
Software as a Service (SaaS) represents the way of licensing and delivery of software based on subscription. SaaS is centrally hosted, offering its customers web-based services with a bunch of advantages. To learn more about Software as a Service, read our article SaaS product: how to find a product-market fit?.
Business to Business (B2B) and Business to Client (B2C) are the major types of economic interaction classified by the type of interacting entities, the main difference is in the consumer of the final product. B2B interacts with other companies, while B2C interacts with individuals as the end consumers.
B2B includes any activity of one legal entity providing any services to another legal entity, including the development of B2B SaaS.
There are two types of B2B SaaS:
- B2B SaaS focused only on business clients;
- B2B SaaS focused on both business clients and natural personals.
The best way to explain what B2B Saas is and how it works is to use specific examples of well-known companies from this industry.
Perhaps one of the most well-known B2B SaaS development companies is Slack. In fact, this is a corporate social network, a kind of digital hub or office, where it is convenient for employees to maintain professional communication using various customizable channels. At first glance, it may seem that this is just another messenger, but Slack has become very popular in the business environment precisely because it separated messengers for personal and professional communication. This made it possible to more clearly preserve work-life balance and separate different types of communications in the workplace, allowing employees to focus on work tasks.
Another example of B2B SaaS is mass emailing service MailChimp. This B2B SaaS tool allows businesses to notify employees or customers about company news, new products and services, sales, and more. It is the most popular service provider in this segment: more than 60% of entrepreneurs and companies create their mailings with the help of this service, sending out about 4 billion emails a year.
As for the second type of B2B SaaS, which provides services to both the business clients and the natural persons as the end customer, there are many more well-known examples. The brightest of them are Google and Microsoft. These companies provide both business solutions like Microsoft Office 365 Business or Google Ads, as well as solutions for regular customers, providing them with software for personal use, search engines, and so on. Based on these examples, it can be seen that the mixed type of B2B SaaS mainly includes technology giants, since this approach requires a large amount of resources and an even larger client base. However, a good turn of events can transform even a small B2B SaaS product into an important player on the technology market. This is how Zoom became the main tool for corporate and personal video calls in the conference format amid the pandemic.
What is the major difference between B2B and B2C e-commerce?
As was noted above, the main difference between B2B and B2C SaaS lies in who the SaaS is designed for: for a business or for an individual end user.
At the same time, there are a number of additional features that clearly differentiate these two business models. First, B2B SaaS involves a much narrower range of potential customers compared to B2C SaaS. This is primarily due to the fact that there are simply fewer companies than individuals, and the range of tasks that can be solved using SaaS for business is even more limited compared to the range of tasks for individuals.
Secondly, B2B SaaS implies higher prices despite the lower sales. This point is closely related to the first: a solution sold to a business will provide a flow of individual customers and profit, therefore such a product or service cannot be cheap. This brings us to the third difference: B2B SaaS allows some bargaining within reasonable limits, which is almost completely eliminated in the B2C SaaS segment.
And fourthly, one of the most important strategic differences, which sums up all the previous ones: B2B SaaS is focused on much longer-term cooperation compared to B2C SaaS. This is due to the cost of development and a rather slow sales cycle.
Summing up, we can say that B2B SaaS allows to make a business more successful, while B2C SaaS allows to make a client happier.
Why is it preferable to choose B2B SaaS?
It is important to take into account that according to statistics and scientists, the volume of the B2B market is larger compared to the B2C market. It is easier for app developers to understand business’ needs and offer effective solutions, as market research and consumer profile in the case of B2B require less effort, while giving more accurate results.
In addition, there are universal constants for B2B SaaS that will always be relevant for any business:
- Time saving
- Business process optimization
- Cost reduction
- Income increase
An effective B2B SaaS product offers a solution for at least one of these constant needs, while market leaders offer solutions far beyond those needs.
Conclusions
What is B2B SaaS?
B2B SaaS refers to the way of licensing and delivery of the centrally hosted software based on subscription, developed specially for resolving business tasks.
What is the difference between B2B and B2C e-commerce?
The main difference is whether the product or service is designed for a business or an individual as the end consumer. In the case of B2B SaaS, developers are designing an application that helps to improve business’ processes, work and its results. In the case of B2C SaaS, developers design an application that helps the natural person to improve the quality of life by facilitating certain processes in everyday life.
Why is B2B SaaS more profitable?
According to statistics, the volume of the B2B market is larger compared to the B2C market. In addition, business solutions are more stable in terms of requests from business owners, while the requests of individual users change much faster and it is more difficult to adapt applications to quickly changing requests.