Characteristics of business market

A: On the basis of market structure and demand:

1. Fewer but larger buyers: The business marketer normally deals with fewer but larger buyers than the consumers market does. For example, the tire company’s fate/market share depends upon getting contracts from a few major automakers and few large buyers of aircraft engines.

2. Demand is derived: The demand for business goods is ultimately derived from the demand for consumer goods. For example, the US General Motors alone purchases 7% of domestic steel which indicates that the demand of steel is derived from the ultimate car buyers.

3. Inelastic demand: The total demand for many business goods and services is inelastic that is not much affected by price changes especially in the short run because producers cannot make quick changes in production method. For example- a drop in the price of sugar cane will not cause sugar manufacturers to buy much more sugar cane unless it results in lower sugar prices that in turn will increase consumer demand for sugar.

4. Fluctuating demand: The demand for business goods tends to be more volatile/unstable than that of consumer goods. The demand of business markets fluctuate more and more quickly. For example, Sometimes a rise of only 10% in consumer demand   as much as 200% rise in business demand for products in the next period.

B. On the basis of nature of the buying unit:

1. More decision participants: Business purchases involve more buyers. In case of business buying process, they have to consider the price, quality, delivery date etc very highly. All the things may not be done by a single person.

2. More professional purchasing effort: Business buying is done by trained purchasing agents who spend their working lives learning how to buy better. Buying committees made up of technical experts and top management is in the buying of major goods.

C. On the basis of types of decision and the decision process:

1. More complex buying decision: Business buying decision is more complex than consumer buying decision. Business purchases often involve large sums of money. In business buying decision, buyers have to take some important and complex decision.

2. More formalized buying process: Business buying process is more formalized than any other buying process. In businesses buying process,                                                                       it has to maintain some formalities which are not to be followed in any other buying process. It calls for product specifications, written purchase order, careful supplier search etc. So this buying process is more complex.

3. More dependent: Personal selling is very much effective in business buying, because buyers and sellers are very much close in this buying. They work more closely together. As a result they maintain a long term relationship.

Industrial/Business Customer

Business marketing organizations normally serve three types of industrial customer. They are:

1. Commercial enterprises.

2. Governmental organization.

3. Institutions.

1. Commercial enterprises: Commercial enterprises are the organizations which buy the products for business, further production etc with a view to earning profit. It can be classified into three categories:

a. Users: Users purchase industrial products or services to produce other goods and services and sell them to the industrial or consumer markets. When purchasing machine tools from general motor then the auto manufacturer is the users.

b. Original equipment manufactures (OEM): OEM Purchases industrial goods to incorporate into the other products and sell them in the industrial or ultimate consumer market. For example: Intel produces the micro processors, and then IBM would be classified as OEM.

c. Dealers and distributors:  Dealer and distributor include those commercial enterprises that purchase industrial goods for resale without changing its form. The distributors accumulate, store and sell a large assortment and goods to industrial users.

2. Governmental organization: To lead the nation govt. needs a lot of material and immaterial resources like office supplies, arms and weapons, fuel, food products, technological know how etc which can be a large market to the industrial marketer.

3. Institutions: Public and private institutions constitute another class of industrial customer such as churches, hospitals, colleges and universities etc. They have different buying patterns, some institutional customers such as public universities have specific purchasing procedures that are rigidly/strictly followed and others follow less standardized approaches. 

Classification of industrial goods

There are three types of industrial goods. They are:

1. Entering goods.

2. Foundation goods.

3. Facilitating goods.

Classifications of these goods are identified below:

1. Entering goods: Entering goods are those which become a part of finished product. Their cost is an expense items that is assigned to the manufacturing process. This category of goods consists of raw materials and manufactured materials and parts.

a: Raw materials: they enter the production process of the buying organization basically in their natural state. It includes both farm products and natural products.

  

i. Farm products are wheat, cotton, livestock, fruits and vegetables.

ii. Natural product are fish, lumber, crude petroleum, iron etc.

b. Manufactured materials and parts: Manufactured materials and parts undergo more initial processing. It includes component materials and components parts.

    

 i. Component materials are steel, cement and wire.

           ii. Components parts are small motor, tiers and castings.

2. Foundation goods: Foundation goods are those which help the production process for the long time. It is the capital items. Their cost is depreciation expenses that are assigned to the production process as original cost. It includes-

a. Installation: It includes long term investment items which help the manufacturing process. Such as building, land, rights and fixed equipment (ex-generators, computers, elevators)

b. Accessory equipment: These products are generally less expensive and shorter lived capital items than installation and not considered as a part of fixed plant. Example; Portable or light equipment that means hand tools, lift trucks or office equipment such as type writer, desks.

3. Facilitating goods: Facilitating goods are those which not become part of finished product. It just supports organizational operation. It includes supplies and business services.

a. Supplies: Every organization requires-

         

i. Operating supplies like typing paper, lubricants.

          ii. Maintenance and repair items like paint, cleaning materials.

b. Business Services: Sometime organizations go outside for specialist to perform specific functions. It includes-

         

i. Maintenance and repair support like window cleaning machine.

          ii. Business advisory services like legal & management consulting, advertising etc.

Types of industrial demand/ characteristics of industrial marketing demand:

There are three types of industrial demand. They are:                                                                                                                                                                                                                                                                       

1. Derived demand

2. Environmental forces influence demand

3. International competition

1. Derived demand: The demand of industrial products is derived from the ultimate demand of consumer demand that means the demand of industrial products is depends on the consumer demands. Industrial customers like commercial firms, governments, institutions purchase goods and services to produce other products and services which will be consumed by their potential customers. So here demand is derived from the ultimate consumers

 2. Environmental forces influence demand: In monitoring and forecasting demand, the industrial marketer must look after carefully some factors like; competitive, economic, political and legal environment that directly or indirectly influence the final demand. For an example Japan has competitive advantages over technology based production for that she produces technological product as it has demand.

3. International competition: Now-a-days an increasing number of industries are not domestic but world wide market share. As a result competition in industrial is increasing. So, the companies should target those markets whose needs can be satisfied and whose competitors can be handled.

Difference between industrial marketing and consumer marketing

The fundamental difference of industrial goods marketing and consumer goods marketing is the purchasing practice of the customers. Industrial marketer do not target to a single consumer but to a wider group of buying influential. These influential may bring different criteria to bear on the purchaser decision. Some common distinguishing features are as follows:

Key features	Industrial goods marketing	Consumer-goods marketing
Products	More technical in nature.	Finished product
Services	Related service  is very important	Service is less important
Price	Competitive bidding for unique items and list prices for standard items	List prices
Promotions	Emphasis on personal selling	Emphasis on advertising
Distribution	Short distribution channel	Long distribution channel
Customer relation	Durable and complex	Relationship of a shorter time.
Consumer decision process	Diverse group of organizational members involved in purchase decision	Individual or house hold unit makes decision.

Though there are some differences between industrial goods marketing and consumer goods marketing, industrial marketers can often benefit from using some of the creative marketing strategies found in consumer goods marketing.

What is Business Marketing?

As a marketer we are concerned with two types of marketing process i.e. consumer marketing and industrial marketing. In industrial marketing customers are organizations rather than individuals. Industrial marketing is different from the consumer marketing on the view point of the nature of the customers and how that customer uses the product. Industrial marketing is the process of determining the needs and requirements of the commercial enterprises, governments & institutions and developing the appropriate products, services, prices, distribution channels and communications to satisfy their requirements.

    

Industrial marketing lies between supplier and industry.

So, at last we can say that the process by which industrial marketer sale goods to industrial buyers according to their needs and demands and satisfy them with their requirement is called industrial marketing.