Most of us are familiar with the business models of B2B (Business-to-business) and B2C (Business-to-consumer), and our knowledge stops there. But, did you know that there are also quite a few more models which you should be aware of? One of which is quickly getting more and more popular and it’s called C2B or Consumer-to-Business. That may seem like a very strange idea to begin with, but as statistics show, this model of commerce is extremely useful for both parties. Let’s look at this business model more in-depth and figure out what’s what!
Is C2B new and how does it work?
Consumer-to-business models aren’t something super innovative. In fact, they’ve been around for a very long time. Pawnshops are the thing that comes to mind first. But, let’s use a well-known service provider as an example. Let’s take a Fortune 500 company – CarMax. It's a prime example of how a proper C2B business model functions and works. Well, actually, only a part of CarMax’s business
If you aren’t familiar with the way CarMax works, it’s like a network of used car lots where you can also trade in your current vehicle. If you want to sell a car, you can take it to CarMax, they’ll give you an appraisal (estimate the value) and provide you with an offer. You’re then free to sell at that price or not take the offer. This business model clearly shows that the consumer is bringing value to the company, not the other way around.
CarMax is a member of the Fortune 500 list and probably one of the most successful commercial enterprises in the world, working with the Consumer-to-Business business model.
In general, the clearest definition would be to label a C2B business as an organization
where consumers give a product or provide a service to the company which then can be used for commercial benefit
. There are more common online when consumers are asked for part-take in reviews or research and provide their insights which are then used by the business to tailor their products and/or services and improve.
Usually, online Consumer-to-Business is done with the help of a 3rd party or an intermediary. It’s super time-consuming to organize a search for consumers, willing to exchange information (which is valuable for the business) for incentives, like discounts and rewards (valuable to the consumer). The chart below best indicates how an online C2B business model with an intermediary works.
It’s also worth mentioning that it’s very challenging to create a sustainable business model which only relies on C2B operations and transactions. Only a handful of niches can offer an environment where a standalone Consumer-to-business model is sustainable long-term. Usually, businesses have it as a part of their operation but not rely on it entirely. This helps them utilize resources for R&D or advertising because they gather insightful knowledge from current or potential consumers.
How to implement C2B operations in your business?
As we figured it out, C2B isn’t the most sustainable business model. But that doesn’t mean that it isn’t helpful to implement these kinds of operations. The fact of the matter is if you own an online brand or product that you wish to commercialize (earn money from), C2B can be the best way to do so.
Just a reminder of all the business models which are the most popular and best-known. C2B is one of the four main ideas of organizing a commercial activity (e.g. business).
If you utilize it in the right way, you can definitely reap the rewards. Whether you are Business-to-Business or Business-to-Consumer, C2B transactions can help you gather valuable knowledge about consumer perception and their wishes. If you seek to implement C2B, begin by looking at what you do, sell or provide and try to find the areas of your business that you’d like to improve. If you create a module or a platform for users to share their insights and reviews, they can personally, proactively initiate the transaction. Otherwise, you’d be stuck with having to automate cold emails or ask for their opinions in other ways.
And that’s the main idea, really. The simplest way for you to implement C2B is by allowing current or potential consumers to provide insights and opinions in exchange for rewards. Make sure that the reward is worth it because very few people bother with something like a 2% discount. If you offer 2$ - that’s a whole different story. Gathering 1000 insights and reviews would only cost you 2000$, but the benefit that they will bring is likely to totally outweigh the initial outset costs.
Best sources of inspiration and most successful Consumer-to-Business models online
If you want to better understand how the Consumer-to-Business model works and what are successful examples of such organizations, you don’t have to look far. Amazon Associates, Google AdSense, eBay, etc.
Amazon Associates is probably the largest affiliate marketing program in the whole world. Bloggers, influencers and website owners can advertise products and if people buy them through their links, they can earn a solid commission. A classic example of a C2B model!
In Amazon Associates, people can refer and recommend and advertise products to their audiences on their websites or platforms and earn up to 10% in commission. So, for example, if you were to advertise a product and 500 people buy it for 50$, you could be eligible for up to 2.500$ in commission. That’s an excellent business model to follow if you’re a blog, digital brand or an up-and-coming social media personality.
Ever tried to hire a freelancer? Or maybe you were trying to earn some cash by doing side gigs? Well, Upwork can be a prime example of what a sustainable Consumer-to-Business model is. Over a long period of time, this platform has evolved and changed the way it looks but the core of the business remained the same – users (e.g. consumers) listing their services and businesses, who were looking for their services and bidding. In the end, we have a huge platform that runs on the idea that businesses want to find high-quality service providers without having to hire someone in-house.
How C2B works in the real world
The C2B business model is great for when you want to expand and grow as a business. Insights and information gathered, can allow you to create more persuasive ad campaigns, refine product weaknesses (e.g. improve the packaging) and better consumer relations. All in all – C2B is super important and can do wonders for your organization. However, online B2C is definitely the sector that can benefit from the C2B model more so than any other.
Why is that? Well, mainly because the success of retailers heavily relies on the consumer’s perception of their product. Let’s say that you have a 0% consumer churn rate and your loyal consumers are 100% loyal. Yes, that’s a bit of a utopian example, but let’s just think about it. In a world, where you have a 0% churn rate, all you have to do is persuade new consumers to come on board. How do you do that? Well, by allowing and giving the incentives for your existing consumers to praise your product or service, of course.
Stats show that between 85 and 90% of first-time buyers of a product or service read the reviews before buying. In general, around 88% of consumers say that reviews impacted their decision. If reviews were overwhelmingly positive, potential consumers were 90% (!) more likely to buy. Whilst if they were more negative than they expected, the likeness of purchase plummeted down by a staggering 86%. If you need any more indication on why it’s important to invest in good consumer reviews – we just can’t help you…
By incentivizing reviews (e.g. solid discounts for next-time purchases or straight cash-back), you can greatly improve the way your product is perceived by potential consumers. And that’s how C2B can work for you in the real world.
So, as we have discovered, C2B is a business model that’s gaining more and more traction. It’s a great way for all kinds of businesses to improve their efficiency and gain an edge over their competitors. There are a lot of great examples online, like Upwork and Amazon Associates – platforms that efficiently utilize the Consumer-to-Business model and offer benefits from it.
If you want to implement it into your own business, you can do that by incentivizing reviews of your products and services. You can utilize that information to tailor them for higher consumer satisfaction and/or higher profitability. It’s established that positive consumer rewards can increase the likelihood of a first-time purchase almost twice a fold. So, as we can see, C2B is something that should definitely interest all e-commerce and online entrepreneurs!