Business Marketing

• Author: Thomas Baird
• Pages: 66-68

Page 66

Business marketing is the marketing of products to organizations for the direct use of the product in the production of another product, for use in the general daily operations of the organization, or for reselling the product to other businesses or the final consumer. Marketing goods and services to businesses and organizations, while sharing some similarities with consumer markets, is different in many ways. The nature and characteristics of the business market, the types of consumers, the different buying situations that occur in businesses and organizations, who is involved in the decision-making process and the business-to-business buying process all differ significantly from the consumer market. These differences often make the normal purchasing process more involved and complex.

Page 67

NATURE AND CHARACTERISTICS OF THE BUSINESS MARKET

The first obvious difference is that there are significantly fewer customers in the business market than in the consumer market. These customers also buy in significantly larger quantities (e.g., tires by the thousands) and the prices of some of their single item purchases far exceed those of an individual consumer (e.g., millions of dollars for a new bridge). Finally, business customers in the same industry often tend to be located in a concentrated geographic region. For example, the Silicon Valley in California has a high concentration of firms in the high-tech industry.

The nature of the demand for products differs from consumer demand because it is often derived from consumer demand. A derived demand means that the demand for original equipment leather seat covers installed in new cars depends on the demand for the models of automobiles that use those seat covers. They have a more inelastic demand curve because the demand for the seat covers depends on the consumer demand for the automobiles, not on the price of the seat covers. Another factor influenced by derived demand is that it may cause large fluctuations in the demand for the seat covers. If the demand for the automobiles drops, it may have a small effect on the sales figures of the auto manufacturer, but if this particular contract represents a large share of the seat cover vendor's production, that vendor could suffer a significant loss...