MM/U1 Topic 2 Types of Market
The types of market you are in determine the type of business strategy you need to have. Strategies for consumer markets are completely different from that of industrial markets. Industrial markets deal in bulk product selling whereas consumer products generally involve breaking the bulk. Costing and marketing is a critical function for both types of markets.
Furthermore, with the rise of globalization, companies have themselves gone global and thus their marketing strategies have adapted accordingly. There are several factors which are added to normal business strategies when you are considering going global. And last but not the least, the Government and Institutional business which are the real revenue generators because of their huge orders. Lets discuss each of these type of markets one by one.
Types of market
(1) Consumer Markets
As the name suggests, the consumer market involves marketing of consumer goods such as Television, Refrigerator, Air conditioners etc. As awareness and knowledge of consumers rises, marketing of consumer goods gets tougher. Today a lot of focus has shifted to consumer goods marketing because a consumer has a lot of choices. The brand loyalty is at its lowest and the worst fear a brand can face now is a high rate of brand defection.
Along with the branding part, the costing part too needs to be considered in the consumer market. The cost of operations is too high with various departments and specialties coming together to form a consumer goods companies. There is inventory management, logistics, manufacturing, promotions, strategies and whatnot. The presence of a tangible product increases the importance of proper planning without which a consumer goods company is sure to fail. Consumer durable market is characterized by the presence of high competition, penetration pricing, dynamics of channel management and finally a high expense on manufacturing and distribution.
(2) Business Markets
Similar to consumer markets, nowadays even the organizational buyer has numerous options in his kitty. Just at the number of software and hardware services providers in the Market. For software there’s IBM, Accenture, Oracle and several other top brands. For hardware there’s Microsoft, Dell, and others. The competition is increasing. Furthermore, the organizational buyer will think 4–5 times before purchasing a product because of the cost involved. An order for computers for a multinational company’s office will probably go in crores.
Because of the cost involved, Organizational buyers make it a point to be much more knowledgeable than any average customer. Organizational buyers have a group of dedicated people who form the “Purchase department”. These people are responsible for buying at the lowest possible price they can. The other characteristics of business markets are the time taken to close the deal. Business markets involve selling of projects too. Projects take time to be analyzed and to fix up a price as they consider the cost of inflation while the project is in progress. Thus they need proper planning else the cost of the project would take a hit on the profits for the company.
Finally, In case of business markets, the sales force, the price and the product have a much upper value than the promotions. This is absolutely opposite to consumer markets where promotions make a huge difference to the consumer buying process. Some services such as Accenture and Intel hardly advertise their products nowadays. They just advertise their presence in the market. The rest is done by the quality of products they have. Same goes for Microsoft. Of the 4 P’s of the marketing mix, promotions are the most ignored in case of business markets.
(3) Global Markets
The changes in the cost of transportation, government policies and the overall need for expansion have given an impetus to globalization. The strategies of global market companies may differ from each other but the core concept is the same. Most global marketing companies work on one fundamental. “Think local, act global”. The company which comes at the top of my mind is McDonalds and Coca Cola. Both known for their global presence as well as for the way they customize their message based on the country they are in.
Companies may be global on the basis of both – business to business as well as business to consumers. The challenges faced by global companies are much more than those faced by local companies. Firstly lets look at the options they have for modes of entry. How do they enter a country? Do they partner with some local company? Do they export their product? Or they shift a part of their operations in the country to directly establish their presence? Multiply these questions with the cost of operations involved as well as the amount of information which needs to be accessed. Now you know the difficulties!!
Nonetheless, Global expansion is an excellent option for any company provided it has deep pockets to sustain the initial expenditure required to establish yourself in another country.
(4) Government or Non profit Market
The government market mainly involves Government offices, ordnance factories, army, navy and other government departments. The non profits on the other hand may involve groups based on different beliefs some of which really have an excellent brand name and are recognized by several companies. Both of these entities have a limited purchasing budget and hence the price of products is important. Accordingly the purchase process is organized.
Most government and non profit organizations involve the issuance of tenders and bids. The one to bid the lowest is known as L1 and the one to bid the highest is known as H1. Naturally, L1 wins the bid. There are several companies which have modified their products specifically for the government markets to come L1 in these tenders and bids. The products may be a bit inferior, nonetheless they do meet the government’s requirement and that is what matters in the end.
Each of these markets can be tapped separately by companies. In fact, some consumer durable companies have different departments for corporate sales and government sales. Tapping each of these markets provides an avenue for the company to expand their market share and overall revenue generated by the company.