The necessity to observe market, business spending separately is the result of specific features that separate it from the market of personal consumption.
Specifics of Business Markets
- A number of businesses in a particular territory
- Smaller number of consumers
- Higher value cash transactions
- Shorter and simpler distribution channels
Business market is the area of exchange between the provider of business arrangements and commercial petitioner-both sides realize some business, which is not the case in the market of individual consumers. It consists of all the organizations that buy goods and services for the production of further products and services for sale and for-profit and non-profit organizations and institutions that buy for their own use or to provide services to others. The value of cash transactions is high (50% above the value of transactions in the market of personal consumption).
Type of Business Markets
Given the objective of buying, market business spending is divided into three types:
- Market producers
- Market intermediaries
- Government and institutional market
1. Market of producers
It is the most important segment of the business market. This is the market that requires a large, pre- planned purchase of the product, semi-products and raw materials etc. For example, manufacturers in the United States only for raw materials annually spend 1,500 Billion (nearly 400,000 manufacturing companies).
2. Market of intermediaries
The main function is buying intermediaries from producers or other suppliers with a view to resale in the same form. Wholesalers, retailers, manufacturers and different government agencies perform the functions of intermediaries. Retailers-buy products continue to sell them to end users.
3. Government and institutional markets
Government Market is the largest single market. Government and institutional markets offers products or services by sealed bids (tender) on a contract basis as a result of negotiations (Negotiated contract). Government institutions like hospitals, schools, foundations, houses usually buy by the principles of state.
Specifics of Purchasing Process
Industrial buying process - The process of deciding which formal organization determines the need for the purchase of products and services and identifies, evaluates and selects alternative products (services) and suppliers.
Decisions about the purchase - It is a process of gathering and processing information, and the process of selecting targets and criteria that influence the selection of brands and suppliers. The complexity of the industrial process of decision-making is much more than buying at the market of private consumption due to the numerous factors that influence the decision.
Types Business Buyer Behavior
The complexity of buyer behavior is reflected in the numerous factors that influence the result of the buying decisions. All the factors can be classified into four types:
- Environmental factors
- Organizational factors
- Mutual ( Interpersonal, Social factors)
- Individual ( Psychological factors)