The 3 Basic Customer Models

In this article we’ll go over the 3 basic customer models, the advantages/disadvantages of starting a company with each customer, and tips to gain a competitive advantage in each segment.

B2C - Business to Consumer

By far the most crowded entrepreneurial space and for good reason.  Consumer preferences and trends shift so often that opportunities to take or create market share are endless.  Not to mention the sheer size of the population makes for an endless amount of niches. 

Most marketing tools exist to cater to this customer model.  This is for good reason too.  When selling to this segment of the population, marketing and brand positioning are the most important factors of success.

Advantages

  • Endless amount of niches

  • Low(er) barriers to entry

Disadvantages

  • Potentially large customer service cost

  • Rapidly changing consumer preferences

B2B - Business to Business

While less crowded, there are also less businesses to sell to.  Don’t let that sway you though. The contract dollars are almost always higher in a B2B environment.  Check out this article on using B2C marketing best practices to market in a B2B environment. 

Advantages

  • Bigger purchases

  • More stable revenue

Disadvantages

  • High(er) barriers to entry

  • Longer buying cycle

B2G - Business to Government

Oh the proverbial black hole that businesses don’t know how to tap into!  Luckily I spent several years working in a federal procurement office.  I’ll tell you from experience and empirical data that there is significantly less competition in this space than the others. While the Federal, State, and Municipal procurement process is all different, the key is to figure out the bureaucratic red tape and jump through the hoops as fast as possible.  The entire process is much more formal and there are three main differences in getting your product or service sold.

Registering to do business with the government.  

You have to go through a lengthy process to even be able to bid on a contract.  We at The Astute Entrepreneur have pulled the process into one short article Here.  It's a shame that with all of the government resources and the enormous need the government has for competition, that it's not an easier process.  Pro Tip: DO NOT PAY FOR HELP IN DOING THIS!!  There are plenty of free resources, step by step guides (here), and government funded entities to help you through this process.  There are plenty of firms willing to charge you 10k-20k dollars just to help you do something that you can do in 10 hours with the link above.

Bidding on contracts.  

This differs mainly in the fact that (legally) there is no leeway in your proposal.  If you skip one thing that was asked for, you’re automatically disqualified for the contract.

Who you know in the government.  

This is out of the scope of this article because it focuses on some really really grey areas.  If you’re reading this article, you’re probably not there yet in the realms of government (almost) corruption.

Advantages

  • Potentially very large contract dollars

  • Limited competition

  • Highest barrier of entry

Disadvantages

  • Difficult to learn the process

  • Longest buying cycle

  • Highest barrier of entry

4. Through 100.

Are hybrid models of the above. Selling the same product to consumers as well as businesses as well as governments.  

An interesting model that has flourished in the past few years, ie the Internet.  Is providing a service for free to consumers while selling exposure (and data) on that service to businesses and governments.  The issue with this model is that most consumers don’t realize that their information and time is being sold in exchange for the free service.  While I’m morally oppose to this model, it is the way the internet works...

If you’re interested in learning more, checkout our resources at the B2C, B2B, and B2G pages.