Differences between business market and consumer market

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Differences between business market and consumer market

This article examines some of the differences between business market and consumer market. Some people may assume that there is no difference between the two; however, this is a common misconception. These markets have contrasting characteristics clearly showing that they are two different things and need to be approached differently by both marketing students and professionals.

Definition of business market

According to Kotler et al. (2009) the business market refers to all the organisations that acquire goods and services used in the production of the other products or services that are sold, rented or supplied to others.

Types of business market

The business market includes all the individuals and companies who buy products and services for some use other than personal consumption. According to Kotler et al. (2009) the key industries comprising the business market are agriculture, forestry and fisheries, mining, manufacturing, construction, transportation, communication, public utilities, banking, finance and insurance, distribution, and services.

Definition of consumer market

Consumer market is defined as the activity of selling goods or services to people for their own use (Cambridge Dictionary, 2021). Individual customers buy products or services for their personal use, not to sell them to others.

Types of consumer market

The consumer market consists of three major sectors i.e.  fast-moving consumer goods (FMCG), consumer durables, and consumer nondurables. Personal care products, jewellery, and food are examples of these three sectors respectively.

Differences between business market and consumer market

According to Narayandas (2005) business markets are very different from consumer markets. A business market has fewer customers, and transactions tend to be larger. On the other hand, a consumer market has large numbers of buyers and transactions are usually small in value.

While discussing the topic of the business market versus the consumer market, Kotler et al. (2009) have identified several characteristics of the business market that are in sharp contrast with the characteristics of the consumer market. The discussion that follows is mostly in line with their position.

Number of buyers

The business market deals with a small number of buyers. However, these buyers are far larger than those in the consumer market. Imagine the size of buyers in airline or defence industry!

Customer relationship management (CRM)

As the business market has a small number of customers, organisations are often expected to customise their products and services to address the needs of the individual business. However, this has an advantage in terms of communication. For instance, Business A sells computers Business B. An employee from Business A usually deals with the representative from Business B. On the other hand, businesses that have offerings for consumers need to interact with every individual who is a potential end-user.

Derived demand

Business market derives demand from the demand for consumer products and services. Business organisations determine the quantity of items they purchase based on the anticipated demand from the final consumers for those items.

Elasticity of demand

Individual consumers are often sensitive to price changes. Therefore, they may increase or decrease the buying quantity of a particular product/service should the price goes up or down. On the other hand, the demand for many products/services in the business market is inelastic. In other words, a business usually will not increase or decrease the buying quantity of a particular product/service should the price goes up or down.

Number of decision makers

The last point to make in the topic of the business market versus the consumer market is the number of decision makers. Business decisions are usually made by several people who are often experts in their fields. On the other, consumers mostly make their purchase decisions individually, though some of the decisions may be made collectively.

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Last update: 14 December 2021

References:

Cambridge Dictionary (2021) Consumer market, available at: https://dictionary.cambridge.org/dictionary/english/consumer-market (accessed 12 December 2021)

Kotler, P, Keller, K., Brady, M., Goodman, M, and Hansen, T. (2009) Marketing Management, 1st European edition, England: Pearson Education Limited

Narayandas, D. (2005) Building loyalty in business markets, available at: https://hbr.org/2005/09/building-loyalty-in-business-markets (accessed 12 December 2021)

Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.