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BM/U1 Topic 2 Understanding Business Markets

In certain cases the business market is much similar to the consumer market. In both kinds people are involved to assess the needs of products or services & perform different kinds of roles for the satisfaction of those needs. But in general, there are certain factors that distinguish business market from the consumer market. Following are the some of these distinguishing factors.

  • Market Structure & Demand
  • Nature of Buying Unit
  • Kinds of Decision & Decision Process

Now, each one of these distinguishing characteristic is discussed below.

(1) Market Structure & Demand

Usually there are few, but larger kind of business buyer deal by organizations related to business market. Moreover, these buyers are much concentrated geographically. The demand involved in the business market is the derived demand that finally comes from the demands of final consumers. In certain cases the business markets deal with the inelastic demand, which is not influenced by the price changes of the relative products or services especially in the short run.

For example, if the price leather is reduced, then the demand of the shoe producer is not increased unless the price of the producing shoes also reduces which ultimately enhances the demand of the final customers for shoes. The demand of the business market is much more fluctuating. This means that the demand for the business products or service changes more quickly than the demand for the consumer products or services. The business demand is affected greatly by a small degree of increase in the consumer demand. In certain cases only 15% increase in the consumer demand would cause the business demand to be enhanced for about 250% in coming days.

(2) Nature of Buying Unit

In the consumer purchase, the participants involved are less along with relatively little efforts. But in case of business purchase, there are many more participants involved in the purchase process & also the increased professional effort. These purchasing decisions are carried out by the highly professional people of the organizations who have spent many years of their lives in learning the way to purchase the business products effectively.

With purchase of any main items of business market, there is an established buying committee that includes a group of technical experts along with the members of top management who collectively perform the buying decision. The business organizations are spending much on training their brightest employees for dealing with the business customers efficiently & effectively.

(3) Kinds of Decision & Decision Process

The purchasing decisions of the business buyers are more complex than the decisions of the consumer buyers. Complex economic & technical considerations, large sums of money & interactions among different people at various levels have taken place in the business purchase process. As then the business purchase process is longer in duration therefore the decisions of the buyers are also finalized in longer duration.

Moreover, the business buying process is more formalized than the consumer buying process. In the business purchase process occurring in the larger organizations, special efforts are exerted for the specification of the detailed product, writing purchase orders, carefully the identification of suppliers & formal approval. The purchasing process is also detailed through the preparation of the policy manuals by the purchasing organization.

Finally, the buyers and sellers are highly dependent on each other in the business buying process. Normally the customers are present at a distant place from their consumer markets. On the other hand the organizations of the business market are present closer with one another & help their business customers at every step of their purchase.

They assist in the definition of the problems, searching of the solutions & even after sales operations are also supported. Moreover, their offerings are customized according to the needs of their customers. Those business organizations that effectively assist their customers at every step of the purchase are more benefits from a larger portion of sales in the short run.

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