The business market is comprised of organizations that, in some form, are involved in the manufacture, distribution or support of products or services sold or otherwise provided to other organizations. The amount of purchasing undertaken in the business market easily dwarfs the total spending by consumers. Because the business market is so large it draws the interest of millions of companies worldwide that market exclusively to business customers. For these marketers understanding how businesses make purchase decisions is critical to their organizations’ marketing efforts.
In some ways understanding the business market is not as complicated as understanding the consumer market. For example, in certain business markets purchase decisions hinge on the outcome of a bidding process between competitors offering similar products and services. In these cases the decision to buy is often whittled down to one concern – who has the lowest price. Thus, unlike consumer markets, where building a recognizable brand is very important, for many purchase situations in the business market this is not the case.
However, in many other ways business buying is much more complicated. For instance, the demand by businesses for products and services is affected by consumer purchases (called derived demand) and because so many organizations may have a part in creating consumer purchases, a small swing in consumer demand can create big changes in business purchasing. Automobile purchases are a good example. If consumer demand for cars increases many companies connected with the automobile industry will also see demand for their products and services increase (we will later refer to these companies as supply chain members). Under these conditions companies will ratchet up their operations to ensure demand is met, which invariably will lead to new purchases by a large number of companies. In fact, it is conceivable that an increase of just one or two percent for consumer demand can increase business demand for products and services by five or more percent. Unfortunately, the opposite is true if demand declines. Trying to predict these swings requires businesses to not only understand their immediate customers but also the end user, which as we will discuss, may be well down the supply chain from where the business operates.
This section of our highly detailed Principles of Marketing Tutorials discusses the unique characteristics of the business market. We will see that marketers must appeal to business customers in ways that are distinct from how they would approach consumers. While marketers selling to other businesses operate with most of the same marketing tools used by marketers of consumer products, how they employ these tools to reach their marketing objectives may be quite different.