Forget B2B and B2C. The Real Startup Money Is in B2X.
As the line between business and consumer continues to blur, more and more startups have been asking whether they should be targeting B2B or B2C with their new products. The forward-thinking companies among them are already working on new and unique product strategies that cater to both at the same time.
Welcome to the era of B2X.
What Is the B2X Model?
As with most recent new-business trends, this is another phenomenon grounded in the pre-pandemic that wound up accelerating during the lockdowns. A relatable example of this acceleration can be found in the viral growth of Zoom.
We Were Using Zoom Before Zoom Went Mainstream
Pre-pandemic, Zoom was an up-and-coming video conference app known mostly for offering a free version that ran unencumbered in a browser. You didn’t require a download, user technical aptitude or any other hassle on the receiving end. Send a Zoom link and you could schedule a presentation-style meeting in seconds with anyone in the world.
When the lockdowns hit, those same competitive strengths propelled Zoom to become the go-to meeting (pun intended) software for any company that hadn’t already locked themselves into a video-conferencing solution. It also became the standard for a newly minted B2C market — namely, for personal, leisure and entertainment use cases.
Zoom’s B2B-focused counterparts (for example Microsoft Teams and WebEx) scrambled to stop the bleeding of their market share in the B2B world , leaning on the fact that Zoom was always sketchy when it came to important business concepts like security and privacy. But it was too late: The tradeoff between secure communications and instant communications had a clear winner, and Zoom dominated the term war, especially in the B2C and C2C world.
In other words, we don’t put an adhesive bandage on a scratch, we use a Band-Aid. We don’t search the Internet, we Google. We don’t video-conference a meeting, we Zoom.
That is a huge win, for now, and for what that’s worth.
Many Startups Start Out Selling to the Wrong Customer
In my experience, almost all startups miss their target market at least once — and by a lot. We might aim at the wrong demographic, the wrong use case or even try to solve the wrong problem. In some extreme cases, we’ll miss the B2B versus B2C distinction entirely. And when that happens, we need to make a huge pivot just to survive.
Or do we?
Recently, I got a question from a founder who needed to make a decision about the future of their product. They originally went to market as a B2B offering, but they just weren’t seeing much traction in a slow-to-change industry.
They were getting a lot of SEO-fueled inbound traffic from consumers, however: people who wanted the same type of product in a more consumer-friendly package, and those consumers couldn’t find a B2C company that would fill that need. So the founder of this B2B company threw together a quick MVP of a B2C version, and it looks to be a more compelling play.
The question the founder posed to me was : Which flavor of product should they run with?
The long-sales-cycle, high-dollar, high-margin B2B?
Or the more mass-market, quick-selling, low-margin B2C?
But when I looked at the core of the product and the packaging around each offering, the only question I had was: Why choose? Why not instead offer both? Or either? Or anything in between?
Those have been options for SaaS software companies for a while now: a free or low-cost version for personal use and pro and enterprise versions for business use. This allows the startup to catch the inbound consumer with a more automated sell and delivery, while also cashing in on those beefy B2B sales when famine becomes feast.
Walking the Fine Line of B2X
This founder’s scenario was unique, but it isn’t as rare as it used to be. I work for what I’d call a B2X company. At our core, we can serve consumers, businesses, several kinds of hybrids and we’ve even got a little B2B2C in there.
Our B2B business has certain strategies and advantages and disadvantages. Our sales cycles are longer, but our sales are mostly larger and recurring with higher margins, and our customers are stickier. Once we’re in, we’re in for a good long time.
Our B2C is a much broader target of course, with shorter, sometimes automated sales cycles and customers that can be transient and need a lot of support.
B2B2C is sort of the best of both worlds, but it can also be the worst. It takes a little from Column A and a little from Column B, but it only works efficiently when a product is designed specifically for a B2B2C market. Otherwise, B2B2C is only a good option for marketing partnerships and bulk sales.
To Succeed With B2X, Blur the Business and Consumer
The barriers for entry to start a B2C company — even outside of the tech sector — have fallen pretty quickly. And the barriers to get in front decision makers in the B2B world have also shrunk as our digital reach has expanded.
In fact, B2C can often be an entry point for B2B. One employee uses a free or low-cost version of the product, one that doesn’t require budget approval, succeeds with it and brags to their co-workers. Suddenly the product becomes part of the company fabric, leading to a B2B multi-unit enterprise purchase.
That’s exactly what Slack does.
Now we’re seeing startups launch B2X products out of the gate, developed using the same strategies that produce ultra-flexible, always-pivoting MVPs early in a product’s lifecycle.
The question then becomes: Why stop pivoting at the product level? Why not grow by pivoting to new markets and expand along horizontal axes (same problem, different industry) and vertical axes (different problem, same industry) by getting a small, sometimes single foothold and then scaling into the organization?
It’s a sustainable way to grow, especially when it’s baked into the product from the get-go. Just keep in mind that when that isn’t the case, it can be tough to retrofit a monetization strategy into the B2C side.
For example, Zoom has just begun testing ads on its free consumer product . That’s an old-school solution to a new-school problem. This breaks the B2X paradigm and firmly splits the product back into B2C versus B2B.
That kind of separation could have consequences for both sides, alienating their consumers on one side and devaluing the product for their business customers on the other side. It may prove to have been a better idea to stick with a B2X strategy and either keep the free product free or limit free access even further.