THE BUSINESS MARKET VERSUS THE CONSUMER MARKET
The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. The major industries making up the business market are agriculture, forestry, fisheries; mining; manufacturing and construction; transportation; communication ; public utilities; banking, finance, and insurance; distribution ; and services.
More dollars and items are involved in sales to business buyers than to consumers. Consider the process of producing and selling a simple pair of shoes. Hide dealers must sell hides to tanners, who sell leather to shoe manufacturers, who sell shoes to wholesalers, who sell shoes to retailers, who finally sell them to consumers. Each party in the supply chain also has to buy many other goods and services.
Business markets have several characteristics that contrast sharply with those of consumer markets.
Fewer but larger buyers:
The business marketer normally deals with far fewer but much larger buyers than the consumer marketer does. The fate of Goodyear Tire Company and other automotive part suppliers depends on getting contracts from a few major automakers. A few large buyers do most of the purchasing in such industries as aircraft engines and defense weapons. Although it should be noted that as a slowing economy has put a stranglehold on large corporationsâ€™ purchasing departments, the small and mid-size business market is offering new opportunities for suppliers.
Close supplier-customer relationship:
Because of the smaller customer base and the importance and power of the larger customers, suppliers are frequently expected to customize their offering to individual business customer needs. Business buyers often select suppliers who also buy from them. An example would be a paper manufacturer that buys chemicals from a chemical company that buys a considerable amount of its paper.
Business goods are often purchased by trained purchasing agents, who must follow their organizationsâ€™ purchasing policies, constraints, and requirements. Many of the buying instruments for example, request for quotations, proposals and purchase contracts are not typically found in consumer buying. Professional buyers spend their careers learning how to buy better. Many belong to the National Association of Purchasing Managers (NAPM), which seeks to improve professional buyersâ€™ effectiveness and status. This means that business marketers have to provide greater technical data about their products and its advantages over competitorsâ€™ products.
Several buying influences:
More people typically influence business buying decisions. Buying committees consisting of technical experts and even senior management are common in the purchase of major goods. Business marketers have to send well-trained sales representatives and sales teams to deal with the well-trained buyers.
Multiple sales calls:
Because more people involved in the selling process, it takes multiple sales calls to win most business orders, and some sales cycles can take years. A study found that it takes to four and a half calls to close an average industrial sale. In the case of capital equipment sales for large projects, it may take multiple attempts to fund a project, and the sales cycle between quoting a job and delivering the product is often measured in years.
The demand for business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increases in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output. Economists refer to this as the acceleration effect. Sometimes a rise of only 10% in consumer demand can cause as much as a 200% rise in business demand for products in the next period; a 10% fall in consumer demand my cause complete collapse in business demand.
Business buyers often buy directly from manufacturers rather than through intermediaries especially items that are technically complex or expensive (such as mainframes of aircraft, petrochemicals, fiber intermediates etc.).
Business marketing and Consumer marketing have their own advantages and disadvantages. The marketers in these segments would have acquired the necessary marketing expertise. No segment can be considered as superior or inferior. Consumer products which entail consumer marketing may be well known to common public due to their brand names, sales promotion, advertisement etc. On the other hand business marketing products and the marketers are known well in the business or industry circles.