Business markets have been expanding and people are investing more money and resource in the business market than the consumer markets. For example, Tesla is planning to invest US$ 5 billion in its new electric car and battery, “Gigafactory” in Europe. After that various suppliers will engage to provide parts and accessories, and then Tesla will be able to offer the finished product to consumers.
Now, the question is what the business market is.
What are Business Markets?
The business market is the process of selling your product and services to other businesses, where those products and services will either be used as a raw material for the manufacturing of other products. Or those businesses buy the products or services and resell them.
We can also say that the business market is where one business sells products or services to the other businesses; it is either to resell or reuse those products or services.
Consumer Markets Vs Business Markets
Consumer Market is where businesses sell their products and services to the tail-end consumers. As compared to the buyer market, the consumer market has many sellers and the selling market is very competitive.
Business buyers would buy the products or services to produce some new products for sales. The business won’t buy the next shipment until the sale of already prepared products.
Unlike the temporary relation of the consumer market, the business market involves a long term interaction of buyer and seller. That’s what makes the relationship very stable and volatile at the same time. It’s good if it keeps working well.
The consumer market is very precise about the demography of its targeted audience like age, gender, beliefs, social status, attitude, and behavior. All of those factors vary in terms of geographical regions, it’s because people in different regions have different preferences, likes, and dislikes.
Characteristics of Business Market
Some of the characteristics of business markets are given below, we’ll discuss them one by one. Here it follows;
Market Structure and Demand
Business markets contain fewer but larger buyers. When it comes to the customers in the business market, then it has very few customers. Those business buyers won’t buy your product or service in small quantities. They’ll buy in large quantities, their orders are big.
Business customers are more geographically concentrated. Our mind is accustomed to the consumer market, where there’ll be shops in the market. People would visit the shop or the market and they’d buy stuff. But the business market doesn’t work that way, business customers and buyers are concentrated at vast geographical distances.
Business buyers demand is derived from final consumer demand. The only reason one business would buy the products and service from the other business, it is because its final products are selling in the market. Once the final products stop selling in the market; then the business stops buying the products.
Demand in many business markets is more inelastic – not affected as much in the short run by price changes. The good thing about the demand in the business market; that the prices don’t usually affect the demands. Prices don’t much change.
Demand in business markets fluctuates more quickly. Businesses usually prefer to buy products at a very low price, because they have to add a value in it to make the final product for the end consumers. When the prices get higher because of number of reasons, the business would stop buying the products. It’s because they know that the final product would be costly. High product price won’t sell in the market.
Nature of the Buying Unit
Business purchases involve more buyers. When it comes to the purchases of business, then a business buys and sells at the same time to other businesses.
Business buying involves a more professional purchasing effort. The purchasing process of the business market is very detail-oriented. Businesses prefer to buy products from those businesses who deliver them the required product. It usually involves many technical professionals who check the sustainability of the product, once they approve, then the company purchases the product.
Kind of Decisions & the Decision Process
Business buyers usually face more complex buying decisions. Business buying decisions aren’t really simple, because they’re usually long terms based. The company makes sure that the person they’re going to be in business with, they should be the right people. Businesses check the backgrounds and histories of each other business before signing the deal.
The business buying process is more formalized. Businesses usually follow the complete chain of command and the protocol of their organization before making the final decision. Having said before that it’s a long term relationship, that’s why both businesses make sure that all sides are covered.
Buyers and sellers work more closely to build a close long-run run relationship. When both companies know that they can be a good buyer-seller after verifying each other’s backgrounds, then they prefer to collaborate to make the final decision. It’s because they both know that it’s in their interest to work together.
Types of Business Markets with Examples
Whether it’s a product business or service, business always sells something to keep things flowing. Here are some of the types of business markets in terms of selling, which are as follows;
Business-to-Consumer is the type of market where businesses and marketers advertise their products or services by using different media channels to reach a large audience. B2C is one of the biggest types of market because it targets the mass audience across at every level.
Examples. Clothing, fashion, grocery stores, and food items are some of the common examples of B2C market where businesses target the large audience, who ultimately consume the product or service.
Business-to-business is the type of market where businesses sell their products or services to other businesses.
Examples. Sale of raw material to the construction company where one business sells products to the other business; office furniture, and an accounting firm is providing services to different businesses.
The service market is the type of market where a business offers intangible (not physical) products, that we call service. It could be business to business or business to consumer.
Examples. Cable operator, telephone lines, internet, plumber, and electrician. These are some of the most common examples of the profession that we see in our daily lives, and they provide services to other businesses and consumers as well.
The industrial market is the market where businesses sell their products or services to the industries. This type of market doesn’t involve consumers or the mass audience because the product or service is none of their use.
Examples. Steel, wood, glass and other raw materials which businesses sell it to the industries; where they furnish it and manufacture something new for the target audience.
Professional Service Market
It is the type of market where businesses have expertise in a certain field and they offer services to other businesses or consumers.
Examples. Doctors, legal and accounting firms are some of the familiar examples of businesses, where one services industry professionals sell their services to the other business.
Now, we have thoroughly discussed the business market and how it differs from the service market. Before jumping into any business, it’s better to know the functionality of the business where it’s the business market or the consumer. It is because both of these businesses have different structures.
Image by Igor Ovsyannykov