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by • June 8, 2011 • Business models, Lean startup metaComments (1)73

B2B vs B2C is the wrong dichotomy

Instead of categorising startups along the traditional B2B/B2C divide, the startup genome report reframes the critical distinction as sales vs marketing. Sales is personal and high touch while marketing is automated and self-serve (with smales in the middle). It’s a useful perpective shift which more accurately reflects current tech startups.

I was initially tempted to explain the change in terms of companies being able to make large purchases in a self-serve manner via websites, but I can’t think of good examples of them actually doing that (except Adwords). Instead, we can attribute it to the new category of B2B products which are both low-cost and self-serve.

What’s relevant, though, is that marketing vs. sales is a more useful distinction for web startups than B2B vs B2C. And I think the reason is this:

It’s easier to switch your customer type than your acquisition channel type.

An organisation with a self-serve consumer product will have a fairly easy time switching to target small (or large) businesses. However, that same company would then find it practically impossible to make another leap from marketing B2B to sales-driven B2B. They’d need a different team, management, KPI, timelines, cashflow… everything needs to be re-invented.

It’s an easy trap to fall into. Imagine: you’re selling to ad agencies and growth is slow. Sales take 3-6 months to close, but the sales roadmap isn’t predictable enough to scale by adding salespeople. You start fantasising about pointing prospective customers toward a self-serve website and letting them educate themself and come to a buying decision. Maybe you’ll have to answer a phone call or email somewhere along the way. You’ll set your suits on fire and wear sandals to the office.

So you overhaul the product to be entirely self-serve. It takes a while, but the easy growth will justify the investment. And now the problems start in. Your price point is way too high for a self-serve product. So you need to overhaul the revenue model. Your team is used to working around pitches and demos, so you need to fix your process. Your investors and budget are accustomed to big cash injections followed by dry months. Your plan for growing the company is completely irrelevant.

But you can fix all that. The dealbreaker is that certain types of customers are used to being sold to. Or, put another way, certain types of products are high-risk and need to be sold personally.

You started down this windy road to find a more efficient way to reach your current, high-value customers. But you’ve now disqualified them. Not ideal!

So I agree with the genome’s use of channel as the major classifier of startups (rather than the more traditional customer type). It’s useful, and it works. I can’t think of anything that impacts a startup as significantly as changing the channel. Doing so is not a pivot — it’s a reboot.

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