Business Markets Types & Examples | What is a Market in Business? – Video & Lesson Transcript | Study.com

Business Market vs. Consumer Market

Many people assume that business and consumer markets have no significant difference, but the two have contrasting characteristics. The business market can be described as organizations that acquire goods and services that are, in return, used in the production of other goods that can be sold, supplied, or rented. There are different examples of business markets vs. consumer markets. Business markets include agriculture, finance, banking, communication, mining, construction, and transportation sectors.

On the other hand, the consumer market includes clothes, electronics, beverages, and accessories sectors. The consumer market involves the selling of goods and services for consumer consumption. In this type of market, products bought are for a customer’s personal use. The consumer market consists of consumer durables, nondurables, and a fast-moving consumer goods market. Food, jewelry, and personal care products are some of the sectors in the consumer market. Business and consumer markets differ in various capacities. Business markets have few customers but tend to handle larger transactions. On the other hand, in the consumer market, there are large numbers of consumers, and the transactions are usually smaller.

In terms of demand elasticity, the customer market tends to be affected more by small changes in prices and hence affects demand for commodities. An increase or decrease in price affects the buying quantity. In the business market, there is inelasticity in demand which means that no price change affects the quantity of a particular product being purchased. In the business market, there are several decision-makers who are usually experts in their field, while in the consumer market, decisions are made by individuals, although in rare circumstances, there is collective decision-making. Consumer markets are not categorized as an example of business markets.

Types of Markets in Business

Business buyers can either be profit or nonprofit businesses. Types of markets in business include:

• Producer markets – In the business market, producers are an organization that purchases goods and services to make a profit by using them in the production of other goods. For example, a restaurant has to purchase a particular product to produce goods and services that sell to make some profit.
• Institutional markets – These include nonprofit organizations such as charities, hospitals, churches, etc. Such organizations buy goods in huge quantities while keeping their costs down. The lower the price of good acquisitions, the more people they can provide them with. Another example of an institutional market is a university.
• Government markets – These are the biggest purchasers of goods and services. Different types of governments purchase goods and services to help in their daily operations. They buy anything one can imagine, including weapons, buildings, and medical supplies. They purchase such by contracting companies that all kinds of services.
• Reseller markets – Resellers are intermediaries who purchase finished products and resell them to the final consumer for a profit. There are various factors that resellers need to consider. These factors include suppliers’ ability, resale price, demand, and availability of technological assistance.

It is possible to have a product being sold in all the above markets. In these markers, the purchasing decision-makers differ. Decision-making can either be individual or collective. The different types of business markets differ, and it is crucial for marketers to understand them so that they can change their messages effectively to reach each market. The four markets buy goods differently, and knowledge of the markets helps them understand how to make sales successfully.

Business Market Characteristics

Business and consumer markets are similar in the sense that they both are involved in the assessment of the need for goods and services. The following are some of the factors that distinguish the business market from the consumer market.

• Demand and market structure – The business market is characterized by fewer but larger buyers. In the business market, demand comes from final consumers’ demand. In some cases, the demand is usually inelastic, which means that it is barely influenced by a change in prices. Take an example of an increase in leather price; the demand for the shoe is not increased. Business demand is affected by a small increase in consumer demand. It is also characterized by a small number of consumers who account for a large portion of the economy.
• Nature of buying a unit – In the business market, participants make large amounts of purchases. There is increased professional effort in making purchases. Purchasing decisions are made by professionals in an organization. These are people who have spent a good number of years learning ways of purchasing goods and services.
• Decision-making process – In the business market, purchasing decisions are complex as they include consideration of technical and economic factors. It involves interactions of different stakeholders to make certain decisions. The process of business purchase takes a long period of time. In the busying process, organizations in the business market are involved in every step of decision-making. They help in problem definition and solution search. Business markets are also characterized by a formalized buying process.

In the business market, there is no direct association between business buyers’ sales and business marketers’ sales. Business buyer sales are more volatile to demand change that is experienced by consumer markets.

Business Market Examples

Different business markets advertise products differently depending on the target market. So, what are the different markets in business? Different markets in business include:

• Professional service market- this includes businesses that provide specialized professional services. A good example is an accountant, a lawyer, and a doctor. These service providers require certification to practice and to qualify as professional services. Such businesses offer their services to other companies.
• Business-to-business market – A company falls under this category when they sell their products from other businesses that resell or reuse them. An example would be a business that sells construction materials to construction companies. Another example would be a business that sells furniture to office spaces.

These two examples facilitate the sale of goods and services through the sale from one business to the other. Branding and promotion are among the business marketing examples employed by various business markets. Branding involves the creation of a positive perception of a particular product and service, while promotion involves informing and persuading customers to purchase certain products and services.

Lesson Summary

A business market involves the exchange of goods and services between businesses. Government, institution, producer, and reseller markets are examples of business markets. Consumer markets are exempted from business markets. Business markets are characterized by few buyers, professional involvement in making purchases, and a complex decision-making process. Government markets and institutional markets buy goods and services to support their internal operations. Hospitals and universities fall under the institutional market. Producer markets transform their bought goods and services.

In the business market, selling to government and institutional markets differs from selling to producers and resellers. It is crucial for marketers to identify the four business markets as this information is crucial in understanding how to deliver messages to each market effectively. Each business market buys goods and services differently.