B2B vs. B2C Product Management

Reposted from the Product Man blog.

I hear this question a lot by friends who are looking for jobs in PM. Should I do B2B or B2C? What’s the difference?

Short answer, there shouldn’t be any difference between Product Management at a B2B company and a B2C company. The long answer is more nuanced, but it’s not the job function, it’s the nature of the customer base.

The process of Product Management hinges on two axes: audience and iteration speed.

You can imagine products to fit in this graph.

For the purposes of this discussion, I’ll collapse the graph to the single dimension of audience. Audience has a huge impact on a company’s business model and is the greatest disparity between B2B and B2C companies.

Why? Well, your audience drives your monetization strategy.

Let’s assume current and future customers C, the price of your product P, and gross revenue R.

R = C x P

Now assume all companies want the same R . Their ability to do this is based on the balance of C and P. C is some percentage of audience. So, finally, the larger your audience, the cheaper your product can be*.

How does this relate to Product Management? Great question.

If you sell to very few customers at a very high price, you have to understand that group deeply. If you don’t intend to grow your audience, you are more or less at the whims of that group. Product Management in these situations can be frustrating, because strategy can take a back seat to making that group happy.

If you sell to everyone at a very low price (or totally free and monetize based on ads), macro trends and data trumps any constituency’s requests or objections. You might’ve assumed from any Facebook redesign that everyone hated the new look. But while blog posts ranted against this color or that font, the silent majority were voting for the redesign with their clicks.

By now you’re probably seeing how this relates to Product Management, but not necessarily why this would impact B2B vs. B2C. You are an astute reader, thanks for keeping with me.

B2C is a broad spectrum. Facebook is for anyone. Louis Vuitton is exclusive.

But if you’re just talking software, there are few (if any) large software B2C software companies selling expensive software anymore. Facebook and Google monetize on ads, Windows and Mac OS upgrades are free, Dropbox’s consumer service is pretty cheap, etc.

On the flip side, the vast majority of B2B companies make products aimed at a small user base of people in specific roles.

Two things follow from this:

1. B2B is more expensive
2. B2B product managers are more beholden to their customers than their B2C counterparts

So it follows, that the challenge of building a product for everyone, inherently the challenge of B2C, is reaching everyone and convincing them of your unique value. The challenge of the majority of B2B** is the ability to execute on strategy and not just becoming order takers for Sales.

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* There are subtleties here. An iPhone feels expensive, for example, but it’s really not. It’s very cheap due to the manufacturing efficiencies in building a ton of them. If only four people wanted iPhones, they would be horrendously expensive.

* The exception being B2B2C or inherently viral/freemium SaaS.