B2B e-commerce
Understanding the growing role of business-to-business e-commerce
The Internet has brought about massive changes in marketing, from the creation of new products to providing more effective and efficient marketing communications, as well as assisting with the actual distribution of certain products. This is particularly true in business markets.
Business-to-business (B2B) e-commerce refers to an online exchange between two or more businesses or organizations. It includes the exchange of information, products, services and payment.
B2B e-commerce is not as flashy as consumer e-commerce, but it has changed the way businesses operate. Multinational enterprises are now saving significant amounts through obtaining supplies over the Internet. For sellers, e-commerce also provides remarkable advantages. Boeing, for example, received orders worth over €100 million in spare parts in the first year that its website was established.
Using e-commerce allows business marketers to link directly with suppliers, factories, distributors and their customers. It radically reduces the time necessary to order and deliver goods, track sales and obtain customer feedback. |
In the simplest form of B2B e-commerce, the Internet provides an online catalogue of products and services that businesses need. Companies find that their website is important for delivering online technical support, product information, order status information and customer service to corporate customers. Many companies, for example, save thousands each year by replacing hard-copy manuals with electronic downloads.
As with the growth of social network sites such as Facebook and LinkedIn, many businesses have experienced success through the growth of online networking in business markets.
Sites such as Alibaba.com provide a comprehensive range, linking industrial suppliers to business customers, and others such as ConnectBuzz.com provide the opportunity for businesses, investors and entrepreneurs to network with one another. As social media continues to expand in consumer markets, it will also become more prevalent in business markets with time.
Intranets, extranets and private exchanges
Although the Internet is the primary means of B2B e-commerce, many companies maintain intranets, which provide a more secure means for conducting business.
An intranet is an internal corporate computer network that uses Internet technology to link company departments, employees and databases.
Intranets give access only to authorized employees. They allow companies to process internal transactions with greater control and consistency because of stricter security measures than those they can use on the entire web. Businesses also use intranets for video-conferencing, distributing internal documents, communicating with geographically dispersed branches and training employees.
In contrast to an intranet, an extranet allows certain suppliers, customers and others outside the organization to access a company’s internal system.
A business customer that a company authorizes to use its extranet can place orders online.
Extranets can be especially useful for companies that need to have secure communications between the company and its channel members, such as dealers, distributors and/or franchisees.
Intranets and extranets can prove to be very cost efficient. Prudential Health Care’s extranet allows its corporate customers to enroll new employees and check the eligibility and claim status themselves. This saves Prudential money because it can hire fewer customer service personnel. There are also no packages of insurance forms to mail back and forth, and Prudential doesn’t even have to input policyholder data into the company database.
In addition to saving companies money, extranets allow business partners to collaborate on projects (such as product design) and build relationships. Hewlett-Packard and Procter & Gamble swap marketing plans and review and campaigns with their advertising agencies through extranets. They can exchange ideas quickly without having to spend money on travel and meetings.
Some of the most interesting online activity in the B2B world is taking place on private exchanges.
These are systems that link a specially invited group of suppliers and partners over the web. A private exchange allows companies to collaborate with suppliers they trust – without sharing such sensitive information with others.
Walmart developed the Retail Link system, which allows invited suppliers to access its sales data and other important information to help drive efficiencies through the supply chain.
Security threats
There are several security threats related to B2B e-commerce. As a consumer, you may be concerned about someone obtaining your credit card number and charging money to your account. However, companies have even greater worries. When hackers break into company sites, they can destroy company records and steal trade secrets.
Both B2C and B2B e-commerce companies worry about authentication and ensuring that transactions are secure. This means making sure that only authorized individuals are allowed to access a site and place an order. Maintaining security also requires firms to keep the information transferred as part of a transaction, such as a credit card number, from criminal’s hard drives.
Well-meaning employees also can create security problems. They can give out unauthorized access to company computer systems and be careless about keeping their passwords secret. For example, hackers can guess at obvious passwords, such as nicknames, birth dates, hobbies or a spouse’s name.
To increase security of their websites and transactions, most companies now have safeguards in place – firewalls and encryption devices, to name the two most common methods.
Firewalls
A firewall is a combination of hardware and software that ensures that only authorized individuals gain entry into a computer system. The firewall monitors and controls all traffic between the Internet and the intranet to restrict access.
Companies may even place additional firewalls within their intranet when they wish only designated employees to have access to certain parts of the system. Although firewalls can be fairly effective (even though none is foolproof), they require costly and constant monitoring.
Encryption
Encryption means scrambling a message so that only another individual (or computer) that has the right “key” for deciphering it can unscramble it. Otherwise, the message is unreadable.
The message is inaccessible without the appropriate encryption software. Without encryption, it would be easy for unethical people to get your credit card number by creating a “sniffer” program that intercepts and reads messages.
B2B and social media
Although most of us associate business use of social media such as Facebook, LinkedIn and Twitter with consumer marketing, B2B organizations are increasing their use of and their budgets for social media:
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As with consumer marketing, a number of strategies can be successful in using social media marketing for B2B firms. First, social media sites are good sources of information to identify target audiences. It’s helpful to know which potential customers your competitors interact with on social media.
And, one of the most important uses of social media for both consumer marketers and business marketers is to monitor what your customers and others say about your product, your firm and your competitors.
A number of tools, such as Google Analytics, Radian6 and Social Mention, have been developed for this purpose. Social media provide platforms for marketers or consumers to join in conversations, get answers to their questions and share experiences. Marketers who understand social media contribute to conversations on Twitter, Facebook and blogs. They give good answers to questions and establish their credibility and a leadership position in the industry.
