Why and how business market is different than consumer market explain with example?
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Select your languageSuggested languages for you: Imagine you are working from home and setting up your home office. You notice that the chair you currently have is uncomfortable, so you go to the shop and look for a new office chair. You buy the chair that seems most comfortable and looks the nicest for a price you deem appropriate. Now imagine a large corporation setting up its new office in London. It would need hundreds if not thousands of new office chairs. As the purchasing manager, you select a chair from a supplier you have worked with previously. However, the finance director says the chairs you have chosen are too expensive, and the people operations director says the chairs look too uncomfortable and would make employees lose motivation to come to the office. Both of the directors impact your purchase. In business markets, there are numerous influences on the buying process. Read along to find out more. Business Market definitionThe global business-to-business (B2B) e-commerce market was valued at around USD 14 trillion in 2020.2 However, this figure only represents the e-commerce side of business markets. In reality, the business market is enormous and provides numerous opportunities for organisations. A business market is a market in which organisations sell their goods and services to other organisations to use in their manufacturing process or service provision. Business marketers sell products to (see Figure 1 below):
There are two essential elements of business markets to keep in mind when thinking of marketing in the B2B context. Firstly, business buying behaviour differs from that of consumers (end-users). When we, as consumers, buy a product, we do so to use it. For example, if we buy a bowl, we will use it to eat soup, or if we buy a laptop, we use it to take notes, answer emails, and watch YouTube. These actions can be termed personal consumption. On the other hand, businesses buy goods to integrate into their production of a good or provision of a service. For example, a car manufacturer will buy steel and tyres to make a car and buy laptops to help their sales agents provide a service. Another essential factor of business markets is the business buying process. Business buyers go through a lengthy evaluation process to determine what they need. Therefore, the business buying process differs from the consumer buying process. We will discuss the characteristics of the business buying process in further detail in the following sections. For an overview of the business buying process, check out our B2B Marketing explanation. Business Market vs consumer marketAs you may already know, business and consumer markets differ in various aspects. These contrasts are especially prevalent in the buying process and characteristics. Let's now examine them in more detail. Firstly, business markets usually have fewer buyers than consumer markets. However, these few buyers tend to buy larger quantities than individuals. Imagine you are looking to buy a new laptop. As a consumer, you would go to Apple and probably purchase a single MacBook. However, a corporation looking to buy laptops for its new office will likely purchase tens or even hundreds. As a result, business markets are also more complex and professional than consumer buying environments. The business buying process involves significantly more influences on decision-making. As organisations purchase large quantities of goods and services, they also spend significantly more than individual customers. Therefore, many decision-makers like managers, executives, and technical experts may be involved in the process. Similarly, due to the complex nature of the buying process, business markets are also more formal. When searching for new products or suppliers, business buyers often have to go through formal approvals, longer waiting times, and extensive supplier searches. Due to the characteristics of business markets, business marketers aim to create strong, long-term relationships with customers. In business markets, the buyer making a purchase is often just the beginning of a customer relationship. As a result, organisations use various marketing tools to ensure buyers remain satisfied. To learn more about the importance of relationships in business markets, explore our explanation of B2B Marketing. Table 1 below summarises the primary differences between business and consumer markets.
Table 1. Business vs Consumer Market Characteristics Supply Chain Management in Business Markets Supply chain management strategies are crucial in business markets as they significantly contribute to long-lasting customer relationships. As a result, supply chain strategies may vary considerably based on the commercial buyer. These buyers can be classified into three different types:
Business Market characteristicsThe characteristics of business markets differ from those of consumer markets. Let's take a closer look at what these characteristics are:
Business Market segmentationThe goals of segmentation in business markets are similar to that of consumer markets. B2B companies also segment their customers into homogeneous groups to find the most profitable buyers to target. A 'good' customer segment should be:
Thus, business marketers look for segments that are large and heterogeneous (between segments) enough. Segments should have these characteristics for the organisation to justify spending on advertising, product development, and individual strategy development. To learn more about the characteristics of appropriate customer segments, check out our explanation of Demographic Segmentation. However, the segmentation process in business markets is slightly different from consumer markets. Instead of creating individual customer profiles based on demographics or behaviour, B2B marketers profile organisations (e.g. industry or size) and organisational buyers (e.g. decision-making style). Thus, they use two levels of segmentation: micro and macro segmentation. Business marketers start with the macro perspective and then look into the organisation further through the micro point of view. Macro-segmentation is based on the characteristics (i.e. industry, size, location, and structure) and the buying situation of the organisation. Micro-segmentation is based on the characteristics of the decision-making style within each macro-segment. Therefore, we can outline the two stages of segmentation in business markets:
The variables or factors marketers may use for each segmentation type are outlined in the table below.
Table 1. Macro and Micro-Segmentation Variables. Source: Hutt and Speh (2021).1 Business Market examplesLet's now look at a business market example through a well-known electric vehicle (EV) manufacturer, Tesla. One of the main components of a Tesla car is the battery. Generally, in the industry, the supply chain is as follows:
However, Tesla has taken a new approach to this process. The company began sourcing raw materials like lithium, cobalt, and nickel directly from miners. Tesla sources these materials from a dozen different miners and refiners internationally. As a result, Tesla builds long-term relationships with miners to ensure the constant flow of materials in its production process and avoid potential battery shortages.3 Business Market - Key takeaways
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Frequently Asked Questions about Business MarketThe four types of business markets include commercial enterprises, governmental bodies, institutions, and global markets. A business market is a market in which organisations sell their goods and services to other organisations to use in their manufacturing process or service provision. The business market is often referred to as business-to-business or B2B markets. The main characteristics of business markets come from demand: derived demand, changing demand, and demand elasticity. Additionally, business markets can be characterised by having an international outlook and often marketing to end customers. There are several differences between business and consumer markets. Firstly, business markets usually have fewer buyers than consumer markets. However, these few buyers tend to buy larger quantities than individuals. The buying process is also more formal and complex in business markets, in addition to there being many influences on decision-making. There are many different types of markets. The two main market types are consumer and business markets. Within business markets, there are commercial, government, and institutional markets. Another type of market includes global markets, which provide huge opportunities for businesses. Final Business Market Quiz
Question __________ studies how organisations buy goods and services to include in their production process or to supply them to other consumers. Show answer Answer Business buying behaviour Show question
Question Business-to-business (B2B) marketing refers to marketing goods or services to ______ and organisational buyers. Show answer
Question B2B decision-makers are always rational; therefore, B2B advertisements are boring and emotionless. Show answer
Question Are the B2B stereotypes still valid today? Show answer
Question Outline an example of a commercial buyer and the type of product it is likely to buy. Show answer Answer For example, a manufacturing firm that requires industrial goods (e.g. parts or tools) to use in its manufacturing process, which it then turns into final products. Show question
Question A local council might buy industrial goods to deliver certain ______ or facilitate ________. Show answer Answer A local council might buy industrial goods to deliver certain services or facilitate operations. Show question
Question Demand in business markets tends to be _____ in the short run. Show answer
Question The business buying process is more formal and more complex. Show answer
Answer Deriveddemand is the idea that demand in business markets ultimately comes from the demand for consumer products. Show question
Question What are the three main buying situations? Show answer Answer 1. Straight rebuy 2. Modified rebuy 3. New task buy Show question
Question 'The buyer acts out of routine and looks for no or very little information' is usually the case for a: Show answer
Question What is the first step of the buying process? Show answer Answer Problem recognition or opportunity identification. Show question
Question During the 'description of needs and product specifications' phase, the buyer chooses the supplier, date, and terms of the order. Show answer
Question What is a key account manager? Show answer Answer Key account managers work with the company's most important (largest) customers to build long-term relationships. Show question
Question ________ is the act of purchasing products electronically (most often online). Show answer
Question ________, in the B2B context, is about aligning your digital marketing efforts with the buyer's decision-making and buying process. Show answer
Question What is the main goal of inbound marketing? Show answer
Question What should the seller focus on to retain profitable customers? Show answer Answer
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Question A business market is a market in which organisations sell their goods and services to other organisations to use in their _________ or service provision. Show answer Answer manufacturing process/production process Show question
Question Business marketers sell their products to:
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Question Business buying behaviour shares the same characteristics as consumer buying behaviour. Show answer
Question Business buyers go through a lengthy evaluation process to determine what they need. Show answer
Question Business markets usually have _______ buyers than consumer markets. Show answer
Question Business buyers tend to buy _____ quantities than individuals. Show answer
Question The business buying process involves significantly more _______ on decision-making. Show answer
Question Business markets are more complex and professional than consumer buying environments. Show answer
Question In business markets, the buyer making a purchase is often just the beginning of a customer relationship. Show answer
Question What are the three categories of commercial buyers? Show answer Answer Users, original equipment manufacturers, and distributors. Show question
Question ______ purchase goods and services to support their production processes. Show answer
Question ________ purchase industrial goods to use in their own production. Show answer Answer Original equipment manufacturers Show question
Question Business buyers try to produce goods and services that satisfy end user wants and needs. This is known as Show answer
Question _________ is based on the characteristics (i.e. industry, size, location, and structure) and the buying situation of the organisation. Show answer
Question Micro-segmentation is based on the characteristics of the decision-making style within each ________. Show answer
Question What are the two stages of segmentation in business markets? Show answer Answer
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Question E-procurement means purchasing supplies, work, or services via ________. Show answer
Question E-procurement employs software and networking systems to ________, track inventory, handle invoices, and trigger payments. Show answer
Question Automating the procurement process is not a main function of e-procurement. Show answer
Question There are _______ main stages in Procure-To-Pay Process. Show answer
Question Which stage involves buyers and sellers exchanging information before e-procurement? Show answer
Question Which stage of e-procurement involves evaluating and shorting potential suppliers? Show answer
Question ___________ means placing bids to acquire a contract. Show answer
Question In e-procurement, after a supplier is chosen, __________ will be sent to request goods or services from them. Show answer Answer an electronic purchase order (PO) Show question
Question Vendor onboarding is the process where the company sends questionnaires to gather data from multiple vendors. Show answer
Question EDI's main task is managing inventory and supply chain. Show answer
Question __________ requires lot of phone calls and in-person negotiations. Show answer
Question What is not a benefit of e-procurement? Show answer
Question An e-procurement system can ______ orders, bidding, invoicing, and payment. Show answer
Question Older vendors may have trouble collaborating with companies using e-procurement tools. Show answer
Question Even when e-procurement is employed, companies still need to handle a lot of paperwork. Show answer
Question Field marketing puts marketers in the field to ____________. Show answer Answer Introduce the company's product and persuade people to make a buying decision Show question Discover the right content for your subjectsNo need to cheat if you have everything you need to succeed! Packed into one app!Study PlanBe perfectly prepared on time with an individual plan. QuizzesTest your knowledge with gamified quizzes. FlashcardsCreate and find flashcards in record time. NotesCreate beautiful notes faster than ever before. Study SetsHave all your study materials in one place. DocumentsUpload unlimited documents and save them online. Study AnalyticsIdentify your study strength and weaknesses. Weekly GoalsSet individual study goals and earn points reaching them. Smart RemindersStop procrastinating with our study reminders. RewardsEarn points, unlock badges and level up while studying. Magic MarkerCreate flashcards in notes completely automatically. Smart FormattingCreate the most beautiful study materials using our templates. Sign up to highlight and take notes. It’s 100% free. Why business market is different from consumer market?Business markets refer to organizations, businesses or entities that acquire products and services for use in the production of other services and products. On the other hand, consumer markets refer to markets whereby businesses or producers sell their products or services directly to the final consumers.
What is business market and its example?A business market is a method a company uses to sell products or services to a specific group of consumers. Typically, business markets facilitate sales from one business to another in cases where one business plans to reuse or resell another company's products or services.
What is the difference between a business and a consumer?Businesses buy what they need, while consumers often buy discretionary items. If you sell to businesses, you will need to focus your marketing messages on benefits and values. If your product is a discretionary purchase for most consumers, you can send messages that appeal to desires.
How is the consumer market different from industrial market explain with example?While consumer marketing deals with product markets (think finished goods that are largely bought by individuals, like shoes, clothing, books, etc.) industrial marketing deals with factor markets, or highly specialized products and services for select consumers (think labor, machinery or unfinished products (1).)
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