I am no longer actively blogging on this website.
This week at ReAgent we took the decision to stop supplying B2C. This is a pretty big step given that we have supplied thousands of private individuals over the years, but there is method behind the madness.
Firstly, we won’t be missing much. I always knew the AOV (Average Order Value) was much lower in B2C than B2B but it wasn’t until our Sales Director, Darren Wilson, pointed out how little turnover actually comes from private individuals that I realised the extent. Here’s a breakdown of ReAgent’s turnover last year showing the split between B2B and B2C:
Less than 1% of our turnover comes from B2C
Secondly, B2C customers require a disproportionate amount of time and effort to manage. This table shows the split of complaints from B2B and B2C over the same period:
15% of our complaints come from B2C
And the split of refunds is even more apparent. That’s a lot of noise being made by a small group of customers!
17% of our refunds are B2C
So not only are B2B customers easier to manage, they aren’t as price sensitive, either.
Business customers don’t mind paying a premium to get products and services from accredited, reputable sellers. Think about it – if you run a company it’s essential to have a reliable supply chain – because any delays or failings will only inhibit your company from adding value in whatever way it does. Basically businesses buy from other businesses to keep their business in business
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Companies also have deeper pockets than private individuals. And most people doing B2B purchasing will not be spending their own actual cash, which only serves to lessen price sensitivity further.
Add all this up and the decision to cut off the entire B2C end of our market is a no-brainer for us .
I see too many companies restrict their horizons by imaging they will ‘grow’ simply by doing more of what they already do. But the truth is that most companies would be better off spending a larger amount of time managing a smaller number of key accounts.
Most businesses would be better off spending a larger amount of time managing a smaller number of key accounts #CommonSense
— Rich Hudson (@RichHudsonUK) January 26, 2014
It’s the Pareto Principle aka The 80/20 rule – it’s common for 20% of customers to generate 80% of revenue. This is why we are now focusing solely on B2B. Granted, the barriers to entry are often higher with B2B because you need infrastructure to manage customers and deal the with the scale, but these can be developed over time and ReAgent has been developing these for the last 35 years.
One of my favourite quotes from one of my favourite authors is:
“All animals are equal, but some animals are more equal than others” GEORGE ORWELL
The same is also true of customers. It’s amazing more people don’t understand this.
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