Which IoT Market Makes Money? B2B or B2C?

Once you have decided to venture into the Internet of Things business but you still don’t have any specific problem to solve, you need to decide which market segment to target. Will it be a Business-to-Business (B2B) or Business-to-Consumer (B2C) market?

An example of B2B is Smart Agriculture, Smart Building, or Smart Parking, whereby your primary customer will be corporate. An example of a B2C market would be to offer end-customers or individuals with an IoT product such as Smart Wearable, Smart House, or Personal Tracking, whereby the primary customer buys directly from you.

Both business models require different skills, product development, and go-to-market strategy. 

Let’s explore the advantages of both B2B and B2C:

Advantages of B2B

1. A single project can be very profitable due to the scale of the deployment. Margins are higher when you know the ROI.
2. B2b allows offering various business models. Checkout the “Seven (7) IoT Business Models“
3. Once you are in, you can stay forever if you provide quality products/services. Furthermore, with the amount of data collected, you can value-add the product with data analytics.
4. The installed IoT devices can remain there for the device’s lifetime, and only yearly maintenance is required.
5. By understanding the earlier customers’ problems, you can repeat the exact solutions for future customers. The insights into the business problems are valuable to find a similar customer.

Advantages of B2C

1. An individual is making a decision making. Thus, the decision-making process is faster.
2. Products can sell directly from your website or a marketplace. Thus, customers are reachable worldwide easily.  
3. Payment is instant when customers make a purchase or can be recurring with a subscription model.
4. No requirements for installation – it can be done by the customers themselves with proper instructions.
5. You can maintain a successful product for years with a single roadmap. However, it needs to enhance with better features with the launch of a new model.

However, both models have disadvantages too:

Disadvantages of B2B

1. The sales cycle can be very long – between 6 – 12 months.
2. Requires experienced business development team that can identify opportunities and build potential solutions to convince customers.
3. The company requires a multi-disciplinary team such as business development, marketing, sales, solutions architect, software developer, system integrator, installer, and partnership manager.
4. Build a reputation as a trusted and experienced company. Thus, it requires reference sites to convince customers. For a new company, it’s challenging to get the first couple of customers.

Disadvantages of B2C

1. Consumer IoT products are trendy, and customers are always hungry for new models every 1-2 years. Thus, it can be costly to keep up with the demand to keep the loyalty of customers.
2. Although the consumer market is large, it isn’t easy and costly to reach the targeted customers. 
3. Fulfilment can be a nightmare if not handled properly.
4. Need good customer service to handle the sudden surge of complaints (if any), returns, or refunds.
5. Profit margin can be small when including many other cost factors, including resellers and distributors.

These are among the factors that need consideration when embarking on your IoT venture. The amount of investment and resources depends on which model that you choose.

Please leave your comments or thoughts below.