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What Is Customer to Customer?

Article Details
  • Written By: Osmand Vitez
  • Edited By: PJP Schroeder
  • Last Modified Date: 17 July 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Customer to customer represents a business model where a company allows for more interaction between customers. Rather than using a traditional customer to employee or customer to business model, customer to customer promotes the exchange of goods and ideas between people outside of the company. A few examples of these business models include online auction sites or individual door-to-door sales activities. Each of these models provides a purposeful interaction where customers get to interact with each other about a business. In some cases, the model allows for greater financial returns due to low initial investment.

The Internet is typically an essential part in the customer to customer style of business model in current markets. These websites allow for the maximum interaction between customers from a wide range of locations. The company simply has to provide the online meeting place and ability for individuals to exchange goods or services. These sites can use an auction format or a standard price model where a fixed price for goods exists. The customer relations occur between each party rather than the business.

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A membership may be necessary for individuals to engage in customer to customer activities. Individuals sign up with the business and agree to a variety of legal stipulations prior to using the service. Liability agreements can help prevent legal issues from impacting the business providing the area for interaction. The agreements may also state that any abuse or misleading activities on the site or through the medium of exchange will result in termination from the site's privileges. Agreements like this help create a safe environment for the customer to customer model.

Companies often use a customer to customer model in order to lower the overhead associated with certain business activities. For example, rather than having large warehouses or retail stores to sell goods, the company simply uses customer interaction as its sole focus of business income. Small fees may be necessary for a customer to use the service or when a customer sells goods to another individual. These fees — though small on a per transaction basis — help the company make profit through volume. Costs for running the business are those necessary to maintain the website among others.

Though customer to customer models can be wildly successful, there are also some drawbacks. For example, customers can often leave the service whenever they choose. Problems with the website or new marketplaces can turn off customers from using the service. Over time, the business may experience stiff competition from traditional businesses, reducing profitability. In short, a company has to create a competitive advantage to have a successful customer to customer business model.

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