The business markets are the platforms and processes of offering your goods and services to other businesses in order for them to be used as a raw material for the manufacturing of additional items, or to resell them.
Business markets are the arenas in which companies seek to sell their goods and services. It is the market that caters to the needs of other businesses. Assume that you run a business that creates paper bags. You may modify your items based on what the other company plans to do with them when selling.
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What are business markets?
Definition: Business markets are defined as the platform where businesses can offer their products or services to other businesses. These marketplaces are ideal places to trade goods and services with other businesses that may use them as a source of raw material for further manufacturing or resell them to their target audiences.
Business markets usually involve businesses that have a direct link to each other, unlike the consumer markets that involve the sale of goods and services from businesses to end-users or customers. Businesses in these marketplaces are linked to each other through different business relationships such as supplier-customer, distributor-manufacturer, and so on.
Characteristics of Business Markets
Some of the characteristics that business markets have are
- Business markets usually involve a smaller number of buyers as compared to the consumer markets.
- Business market buyers are more influenced by their business objectives rather than personal objectives.
- Businesses in these marketplaces tend to have a higher level of bargaining power as compared to consumers in the marketplaces.
- Business market transactions are mostly based on credit rather than cash.
- Business markets tend to be more complex than consumer markets due to the presence of different types of business buyers such as government organizations, resellers, and so on.
Types of Business Markets
There are different types of business markets based on the products and services offered and the type of business buyer involved in the transaction. Let us have a look at those-
1. Business-to-business (B2B) markets
Business-to-business markets are the ones where businesses offer their products or services to other businesses. The goods and services traded in business-to-business market places are used by the business buyers for further manufacturing or resale to their target audiences. Businesses such as wholesalers, industrial suppliers, and so on operate in these marketplaces.
2. Business-to-consumer (B2C) markets
The business-to-consumer market is the one where businesses offer their products or services to end-users or customers. Businesses such as retail stores, online retailers, and so on operate in these marketplaces. The transactions in these marketplaces are mostly based on cash.
3. Industrial market
Industrial markets are the ones where businesses offer their products or services to other businesses that use them as raw materials for further manufacturing or processing. Businesses such as steel manufacturers, oil refineries, and so on operate in these marketplaces.
4. Services market
The service market is the one where businesses offer service-based products such as maintenance, repairs, and so on to other businesses. Services industry professionals sell different services to other business customers. Businesses such as repair shops, housekeeping services, and so on operate in these marketplaces.
5. Global market
Global markets are the ones where businesses offer their products or services to other businesses in different countries. Businesses such as multinational corporations, export-import firms, and so on operate in these marketplaces.
6: Professional service market
Business markets where businesses offer their professional services to other businesses, such as consultancy, marketing, and so on are known as professional services marketplaces. Businesses such as advertising agencies, law firms, and so on operate in these marketplaces. In this one, services industry professionals may offer services to other businesses or consulting services.
Business Market Segmentation Variables
Business market segmentation is the process of dividing a business market into smaller groups of buyers with similar characteristics. The purpose of business market segmentation is to enable businesses to target their marketing efforts at the most promising groups of buyers. Businesses can use various variables for business market segmentation such as
1. Industry
Businesses can segment their markets based on the industry to which the target buyer belongs. For example, a company that manufactures construction equipment can segment its market based on the construction industry, mining industry, and so on.
2. Business size
Businesses can segment their markets based on the size of the target business. For example, a company that manufactures office furniture can segment its market based on small businesses, medium businesses, and large businesses.
3. Business location
Businesses can segment their markets based on the geographic location of the target buyer. For example, a company that provides IT services can segment its market based on local businesses, national businesses, and international businesses.
4. Business type
Businesses can segment their markets based on the type of business involved in the transaction. For example, a company that manufactures computer hardware can segment its market based on businesses that resell the hardware, businesses that use the hardware for their own operations, and so on.
5. Business need
Businesses can segment their markets based on the needs of the target buyer. For example, a company that provides web design services can segment its market based on businesses that need simple websites, businesses that need complex websites, and so on.
6. Business buying process
Businesses can segment their markets based on the way target buyers go about making purchase decisions. For example, a company that sells office supplies can segment its market based on businesses that make purchase decisions through the formal request for proposal (RFP) process, businesses that make informal purchase decisions, and so on.
7. Business buying criteria
Businesses can segment their markets based on the criteria that target buyers use to make purchase decisions. For example, a company that sells software can segment its market based on businesses that make purchase decisions based on price, businesses that make purchase decisions based on functionality, and so on.
8. Business relationship
Businesses can segment their markets based on the nature of the relationship they have with the target buyer. For example, a company that provides maintenance services can segment its market based on businesses that are current customers, businesses that are former customers, and so on.
9. Business risk profile
Businesses can segment their markets based on the risk profile of the target buyer. For example, a company that provides financial services can segment its market based on businesses that are high-risk, businesses that are moderate-risk, and so on.
10. Business financial condition
Businesses can segment their markets based on the financial condition of the target buyer. For example, a company that provides leasing services can segment its market based on businesses that are financially sound, businesses that are financially challenged, and so on.
Examples of Business Markets
A business sells products and materials to construction companies for construction projects would be in the business market segment of construction is an example of a b2b market. Businesses that sell to consumers are in the consumer market segment.
Businesses that provide services to other businesses, such as accounting or legal services, are in the business-to-business (B2B) market segment. Legal and accounting firms function in the services market. Businesses that supply materials or components to manufacturers who use them in the products they produce are in the industrial market segment.
Businesses that resell products or services to other businesses are in the wholesale market segment. And businesses that serve the government, such as defense contractors, are in the government market segment.
Consumer Markets Vs Business Markets
Some of the differences between consumer markets and business markets are-
- Business markets usually involve more complicated decisions than consumer markets.
- Business markets are usually smaller in terms of the number of buyers than consumer markets.
- Business markets are more geographically concentrated than consumer markets.
- Business buyers usually buy for business purposes, while consumers usually buy for personal consumption.
- Business buyers usually have more information about the products and services they buy than consumers.
- Business markets are more price-sensitive than consumer markets.
- Business buyers usually have more power than consumers in the marketplace.
- Businesses usually buy in larger quantities than consumers.
- Business buyers are usually more loyal to their suppliers than consumers.
- Business markets are more segmented than consumer markets.
- Business markets are more complex than consumer markets.
- The buying process in business markets is usually longer and more complicated than in consumer markets.
- Businesses usually have a larger budget for purchasing products and services than consumers.
- Business buyers are usually more sophisticated than consumers.
Business markets usually involve more complicated decisions than consumer markets. This is because businesses have to take into account many factors such as price, quality, and service when making purchase decisions. Businesses also have to consider the impact of their purchase decisions on their bottom line.
Business markets are usually smaller in terms of the number of buyers than consumer markets. This is because there are fewer businesses than consumers in the marketplace. Businesses are also usually more geographically concentrated than consumers. This is because businesses tend to be located near their suppliers and customers. Business buyers usually buy for business purposes, while consumers usually buy for personal consumption.
Conclusion!
On the final note, it is clear that business markets are useful for businesses to identify and target potential customers. Business markets are usually more segmented than consumer markets and have more buying power. Business buyers also tend to be more loyal to their suppliers.
Business markets are also more complex than consumer markets. The buying process in business markets is usually longer and more complicated than in consumer markets. Businesses usually have a larger budget for purchasing products and services than consumers.
Business buyers are also usually more sophisticated than consumers. All of these factors make business markets a valuable tool for businesses to use in order to increase sales and profits.
What do you think about Business markets? Let us know in the comments below!
