Business marketing is the marketing of products to organizations for the direct use of the product in the production of another product, for use in the general daily operations of the organization, or for reselling the product to other businesses or the final consumer. Marketing goods and services to businesses and organizations, while sharing some similarities with consumer markets, is different in many ways. The nature and characteristics of the business market, the types of consumers, the different buying situations that occur in businesses and organizations, who is involved in the decision-making process and the business-to-business buying process all differ significantly from the consumer market. These differences often make the normal purchasing process more involved and complex.
The first obvious difference is that there are significantly fewer customers in the business market than in the consumer market. These customers also buy in significantly larger quantities (e.g., tires by the thousands) and the prices of some of their single item purchases far exceed those of an individual consumer (e.g., millions of dollars for a new bridge). Finally, business customers in the same industry often tend to be located in a concentrated geographic region. For example, the Silicon Valley in California has a high concentration of firms in the high-tech industry.
The nature of the demand for products differs from consumer demand because it is often derived from consumer demand. A derived demand means that the demand for original equipment leather seat covers installed in new cars depends on the demand for the models of automobiles that use those seat covers. They have a more inelastic demand curve because the demand for the seat covers depends on the consumer demand for the automobiles, not on the price of the seat covers. Another factor influenced by derived demand is that it may cause large fluctuations in the demand for the seat covers. If the demand for the automobiles drops, it may have a small effect on the sales figures of the auto manufacturer, but if this particular contract represents a large share of the seat cover vendor's production, that vendor could suffer a significant loss of revenue.
Finally, the products and the buying process may differ from the consumer market to varying degrees. While some products purchased in the business market are the same or very similar to the products bought by consumers (e.g., office supplies), the buying process may be much more involved because of negotiated contract and unique or customized needs. Product specifications, price, quantity, service requirements, length of the contract, and delivery schedules are just a few of the terms that may need to be negotiated. On the other hand, many of the products are very complex and often custom-made to agreed-upon specifications. The complexity of the buying process is further complicated because a given purchase will need to satisfy a number of different individuals and departments within the company. Because of these factors, the buying decisions in businesses and organizations are often determined by a group of individuals known as the buying center, which is discussed later in this entry.
Market research is a key part of developing your market strategy. It is about collecting information that provides an insight into your customers thinking, buying patterns, and location. In addition, market research can also assist you to undertake an initial sales forecast, monitor market trends and keep an eye on what your competition is doing.
Trying to promote your product or service to everyone can be costly and ineffective. Grouping or segmenting your potential customers based on certain characteristics will help to focus your marketing efforts.
A USP is the unique reason your customers buy from you and not your competitors – it’s what makes your business stand out from the crowd. It is important to define what you do differently and be able to convey that to potential customers. Commonly, this reflects your special knowledge or skills.
Your USP may be having a new or unique offering or providing exceptional service. Start developing your USP by answering the following questions:
Every business, regardless of size, is likely to need a brand. A brand is more than a logo, colour or tagline. A well-articulated brand emotionally connects with your target customers and conveys who you are, what you stand for and what you can deliver.