What is Business Market?

Business Market

The business market is huge. In fact, business markets involve far more dollars and items than do consumer markets. For example, think about the large number of business transactions involved in the production and sale of a single set of Good year tires. Various suppliers sell Goodyear the rubber, steel, equipment, and other goods that it needs to produce the tires. Goodyear then sells the finished tires to retailers, who in turn sell them to consumers. Thus many sets of business purchases were made for only one set of consumer purchases. In addition, Goodyear sells tires as original equipment to manufacturers who install them on new vehicles, and as replacement tires to companies that maintain their own fleets of company cars, trucks, buses, or other vehicles.

In some ways, business markets are similar to consumer markets. Both involve people who assume buying roles and make purchase decisions to satisfy needs. However, business markets differ in many ways from consumer markets. The main differences, shown in table, are in market structure and demand, the nature of the buying unit, and the types of decisions and the decision process involved.

Market Structure and Demand 
The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does. Even in large business markets, a few buyers often account for most of the purchasing. For example, when Goodyear sells replacement tires to final consumers, its potential market includes the owner of the millions of cars currently in use in the United States and around the world. But Goodyear’s fate in the business market depends on getting orders from one of only a handful of large automakers. Similarly, Black & Decker sells its power tools and outdoor equipment to tens of millions of consumers worldwide. However, it must sell these products through three huge retail customers-Home Depot, Lowe’s, and Wal-Mart-which combined account for more than half its sales.

Business markets are also more geographical concentrated. More than half the nation’s business buyers are concentrated in eight states: California, New York, Ohio, Illinois, Michigan, Texas, Pennsylvania, and New Jersey. Further, business demand is derived demand-it ultimately derives from the demand for consumer goods. Hewlett-Packed and Dell buy Intel Microsoft processor chips because consumers buy personal computers. If consumer demand for PCs drops, so will the demand for computer chips.
Therefore, B-to-B marketers sometimes promote their products directly to final consumers to increase business demand. For example, Intel advertises heavily to personal computer buyers, selling them on the virtues of Intel microprocessors. The increased demand for Intel chips boosts demand for the PCs containing them, and both Intel and its business partners win.

Marketing Structure and Demand 

1. Business markets contain fewer but larger buyers.
2. Business customers are more geographically concentrated.
3. Business buyer demand is derived from final consumer demand.
4. Demand in many business markets is more inelastic-not affected as much in the short run by price changes.
5. Demand in business markets fluctuates more, and more quickly

Nature of the Buying Unit

1. Business purchases involve more buyers.
2. Business buying involves a more professional purchasing effort.

Types of Decisions and the Decision Process

1. Business buyers usually face more complex buying decisions.
2. The business buying process is more formalized.
3. In business buying, buyers and sellers work closely together and build long-term relationships.
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