TABLE OF CONTENTS

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1 Introduction to business market 2

2 Types of business market 2

3 Characteristics 3

4 Business markets v/s consumer markets 5

5 Buying situations 6

6 Participants in industrial buying 7

7 Stages in industrial buying process 9

8 Figure 11
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Business market:
Definition:

Business market in simple words is business to business market where in the products services of a
particular organization are sold to or purchased by other organization or business. It also happens in support
industries where the products that are manufactured are components required to be assembled into the
products or services offered by some other business organization.

Or

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.

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 Market:
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 Market:
Business-to-business is the type of market where businesses sell their products or services to other
businesses

Examples:
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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.

Service Market
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.

Industrial Market
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.

Characteristics of Business Market

Some of the characteristics of business markets are given below, we’ll discuss them one by one. Here
follows;

1. Market Structure and Demand

⮚ Business markets contain fewer but larger buyers:
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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 buyer 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 is more inelastic:
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.

2.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.

3) Kind of Decisions & the Decision Process

⮚ Business buying process is complex:
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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.
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.

Business markets v/s consumer market:

Business market Consumer market

1 The buying and selling is done for further Buying and selling of products id done for final
production or reselling purposes. consumption.

2 The purchase is made by business to stay The purchased might be made when the products
profitable are not required in day to day activities.

3 The buyer in the business market is much The consumer in consumer market is not much
sophisticated in terms of the process involved in sophisticated.
buying.

4 Business buyer is an information seeker and Consumer only searches information when he/she is
constantly on the lookout for information and required to make a decision.
advice

5 Packaging does not matter in business market. Packaging is important in consumer market.

6 Relationships are developed between buyer and Relationships development is not necessary in
seller because buyer makes a high-value of
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purchase. consumer markets.

7 Expert advice is taken while making a purchase. Expert advice is not necessary to be taken.

8 Products are complicated Products are simplistic.

9 Businesses often hire employ purchasing agents Consumer often lack information while making
or professional buyers whose job is to negotiate purchase decisions and purchase made by them is
the best deals for them. done on impulse and

10 A significant percentage of business buying A large percentage of purchase decisions are made
decisions require the input of many (the buying by a single person.
center)

Business buying situations:

There are three major types of buying situations depending on the purchase and its information.

New task:
The purchase is done for the first time with no purchasing experience, and extensive search is done to
evaluate options. The greater the cost or risk involvement, more the expertise of decision making
participants is needed.

Example: an organization buying raw materials to manufacture laptops for the first time.

Modified Rebuy:
Due to change in preferences or entry of a substitute product in the market, organizations are forced to
modify an existing product to suit the target market. The modifications can be change in product
characteristics, price, quality, suppliers, etc. To meet these production requirements, marketers look for
inventory or raw materials that meet the organizations objectives. The people involved in buying process
have basic information and need to study the alternatives suiting the organization’s needs. This process is
less risky and less time consuming as compared to “New Task” buying situation. The information in this
scenario is gathered on alternatives.

Example: a school buying latest model of school buses with larger capacity to add to the existing fleet of
mini-buses.

Straight Rebuy:
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In this buying the organizations rebuy products and services from the same suppliers. Suppliers usually
proactively visit the organizations to take the orders in advance to maintain their market share. The people
involved in the buying process have relatively good experience of buying and need no additional
information on products and services. There is no risk involved because of past experience of purchasing the
same products and services.

Example: laptop manufacturer buying raw materials from the same suppliers to meet the production
demand.

New task and Modified rebuy situations involve risk taking and hence poses big challenges for the
organizations. More effort and time is required in these situations. The organization has to involve expert
participants from different departments to discuss the requirement. Straight rebuy doesn’t involves much
discussion. The buying is mostly done by the purchase department as per the requirements from the
operations/ production team.

Participants in business buying behavior:

Unlike consumer buying habits, businesses usually have a more formal approach toward purchasing. Rather
than make impulse purchases, businesses will compare prices, compare suppliers and compare the quality of
goods and services before completing a sale. Although some companies may spend more time on specific
steps in the process or they may eliminate certain steps altogether, most business-to-business purchases can
be divided into eight distinct steps.

1. A Problem Is Identified
The purchasing process does not begin until someone identifies a problem within the organization, which
can be solved by purchasing a good or service. Anyone within the organization can initiate this – from a
customer service rep out of printer paper – to the CEO who decides that it's time to expand to a larger
facility. In some instances, a sales person may help someone in the organization to identify a need that no
one had previously recognized.

2. General Need Description

After a problem is identified, the organization determines which product or service is required. When an
office is out of printer paper, the office manager may decide that more paper is needed. However, software
engineer in the same company might suggest that the organization become paperless by providing all
employees in the office with tablet computers.
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3. Product or Service Specification

Once the general need is agreed upon by those who have purchasing authority in that organization, they will
then narrow down the options by specifying what the product or service must offer. If they have decided on
tablets, they would then specify the size they want, how much memory the tablets offer, and so on. If they
decide on paper, then they would determine the quantity and quality of paper required.

4. Potential Supplier Search

The third step of the buying process involves looking for potential suppliers. If the company doesn't already
have an established relationship with a vendor that offers the product, then often the company must look
online, attend trade shows or contact suppliers by telephone. Purchasers determine if the suppliers are
reputable, financially stable and if they'll be around for future requirements.

5. Request for Proposals

For large purchases, organizations usually write out a formal RFP, a Request for Proposal, and then send it
to their preferred suppliers. Alternatively, they may make the process public so that anyone can send in a
proposal. For smaller purchases, this could be as simple as looking at the price on a website.

6. Supplier Evaluation and Selection

In this part of the process, supplier proposals and prices are evaluated to determine who is offering the best
price and the best quality. Often, price alone is enough to win an organization's business, as many businesses
will weigh the price against financing options, supplier reputation and whether or not a supplier can provide
the organization with future goods and services.

7. Establishing Credit and Order Specification

Once the winning supplier has been selected, the organization places the order. This may involve
establishing credit with the supplier, agreeing on terms, as well as reviewing shipment times and any other
deliverables that may come with the sale, such as installation or product training.

8. Supplier Performance Review

After the product has been delivered or the service has been performed, the organization will review the
purchase to see if it meets acceptable standards. For larger purchases, this could be a formal review
involving key decision makers in the organization and the supplier's sales staff. For smaller purchases, it is
often informal. For example, if the company ordered a box of paper that arrived late or was damaged, the
company may decide not to buy from that supplier again, without ever informing the supplier of a problem

Business buying process:

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A buying center is comprised of all those individuals and groups who participate in the buying decision-
making process, who share some common goals and the risks arising from these decisions. Before
identifying the individuals and groups involved in the buying decision process, a marketer must understand
the roles of buying center members. Understanding the buying center roles helps industrial marketers to
develop an effective promotion strategy.

Within any organization, the buying center will vary in the number and type of participants for different
classes of products.

But on an average a buying center of an organization has the following seven members or a group of
members who play these roles:

1. Initiators:
Usually the need for a product/item and in turn a supplier arises from the users. But there can be occasions
when the top management, maintenance or the engineering department or any such recognise or feel the
need. These people who “initiate” or start the buying process are called initiators.

2. Users:
Under this category come users of various products. If they are technically sound like the R&D, engineering
who can also communicate well. They play a vital role in the buying process. They also act as initiators.

3. Buyers:

They are people who have formal authority to select the supplier and arrange the purchase terms. They play
a very important role in selecting vendors and negotiating and sometimes help to shape the product
specifications.

The major roles or responsibilities of buyers are obtaining proposals or quotes, evaluating them and
selecting the supplier, negotiating the terms and conditions, issuing of purchase orders, follow up and
keeping track of deliveries. Many of these processes are automated now with the use of computers to save
time and money.

4. Influencers:

Technical personnel, experts and consultants and qualified engineers play the role of influencers by drawing
specifications of products. They are, simply put, people in the organization who influence the buying
decision. It can also be the top management when the cost involved is high and benefits long term.
Influencers provide information for strategically evaluating alternatives.

5. Deciders:

Among the members, the marketing person must be aware of the deciders in the organization and try to
reach them and maintain contacts with them. The organizational formal structure might be deceptive and the
decision might not even be taken in the purchasing department.
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Generally, for routine purchases, the purchase executive may be the decider. But for high value and
technically complex products, senior executives are the deciders. People who decide on product
requirements/specifications and the suppliers are deciders.

People who authorise the proposed actions of deciders or buyers are approvers. They could also be
personnel from top management or finance department or the users.

7. Gate Keepers:

A gatekeeper is like a filter of information. He is the one the marketer has to pass through before he reaches
the decision makers.

Understanding the role of the gatekeeper is critical in the development of industrial marketing strategies and
the salesperson’s approach. They allow only that information favourable to their opinion to flow to the
decision makers.

By being closest to the action, purchasing managers or those persons involved in a buying center may act as
gatekeepers. They are the people whom our industrial marketer would first get in touch with. Hence, it so
happens that information is usually routed through them.

Figure: