Characteristics of B2C Markets - Essay Example

Markets can be analyzed via the product itself, or the end consumer, or both. The most common distinction is between consumer and industrial markets.Consumer markets are markets for products and services purchased for personal consumption. Goods bought and sold in such markets include: Fast Moving Consumer Good (FMCG's) e.g. toothbrushes, candies etc; Consumer Durables: e.g. refrigerators, DVD players, personal computers etc; Soft goods: e.g. clothes, shoes; Services: e.g. hairdressing, dentists etc. I strongly agree that these two markets are very different in nature. Industrial markets deals with customers who purchase in order to make or sell their own products or services. These goods are not aimed directly at consumers and include selling finished goods: e.g. office furniture, computer systems; selling raw materials or components: e.g. steel, coal, wood; selling services to businesses: e.g. security, financial consulting, and legal services In recent times, business buying has become an important part of the overall strategy for at least three reasons: Businesses are making less and buying more Firms are under intense quality and time pressures and so are outsourcing their work Firms are concentrating their purchases and dealing with a few long term suppliers. In both types of markets there is a distinction between consumers and buyers. Whereas buyers actually make the purchase, it is consumers who use the product. For e.g. if a father buys a Kia Carnival for his daughter, he is the buyer while the actual consumer is the daughter who will drive it. In B2C marketing, marketers have to consider the needs of the consumer and for what purpose will the product be used. If a man buys a Toyota Land Cruiser for his son then it will be classified as a b2c sale. However if a man buys a pickup truck for his factory use it will be a b2b sale. Industrial organisations' buying differs from that of consumers because they have additional needs, for example, the making of profits and legal obligations to their customers. Characteristics of B2C markets Generally consumer buying is a brief process where they can be affected by situational factors like point of purchase advertising, consumer moods, promotional offers etc. Their sources of information are limited often including commercial factors (car ads on TV, television, internet etc) or reference groups. Buying behavior is largely determined by cultural, social, personal and psychological factors. Consumers can make routine purchases, complex purchases (high involvement products) or simply indulge in impulse buying. Purchasing a car would typically be a high involvement purchase which will be made after much deliberation. Characteristics of B2B markets Business markets contain relatively few buying units as compared to consumer markets. B2b market is even more limited because most companies sell to only a small segment of the total market. Despite this, buying power in many business markets is highly concentrated in a relatively few firms. Not every business will have the buying power to purchase eighteen wheeler trucks. Purchasing power is usually estimated using an activity indicator of buying. There is also a substantial regional concentration in many major industries and among business users as a whole. Businesses start with the evaluation of market size attractiveness which takes into consideration some macro- and micro-economic variables along with some firm related variables; and the second stage is based on the evaluation of a market's structural attractiveness which takes into consideration some cost, structural compatibility, government policy variables etc. Buying behavior can be influenced by the economic environment, environmental factors, organisational factors, interpersonal factors and characteristics of the individual. Buying is less frequent in industrial markets and includes three types of buying situations: New task buying: first time purchase of a major product (buying a heavy duty Volvo truck for the first time) Straight rebuy: routine low involvement purchase with minimal information needs (buying car seat covers for a car used to transport financial auditors) Modified rebuy: this situation is somewhere between the other two in terms of time and people involved, information needed and alternatives considered. In industrial markets, demand for goods is ultimately derived, in that it depends on the demand for what the buyers are producing. For this reason, marketers need to pay attention to the markets served by their customers. Sellers of engines used by buses need to see the overall market changes instead of simply knowing what their buyers ask for. Marketers of industrial products can play a proactive role in stimulating derived demand by advertising their product directly to final consumers (e.g Phillips advertising sale of new car headlights. Since demand depends on the health of the customer's business, it is liable to fluctuate more than is the case in consumer markets. However, demand is also more inelastic and for these reasons demand may be insensitive to the product's price. Since large amounts of money are involved in b2b selling, buyers and sellers try to form a long term close relationship. Nurturing of this relationship poses a special challenge to marketers. To deal with the marketing environment and make purchases, consumers and businesses engage in a decision making process: Need recognition: in both markets consumers are moved to action by a need. In b2c the need may be personal while in b2b the need may be personal or organizational. For example, auto manufacturers realize that there was a need for cars using gas cylinders rather than petrol after the recent price hike of petroleum. Identification of alternatives: in b2c marketing consumers typically identify alternative products and then alternative brands. This is usually a brief stage (especially in low involvement products) and consumers do not go into a profound search for alternatives. In b2b however, this is a much longer procedure because of high costs involved in the buying process. Evaluation of alternatives: For most low involvement products consumers are armed with little information and may evaluate the alternatives incorrectly, basing their judgment on word of mouth, advertisements and other limited sources. In industrial markets, the production, research and purchasing people jointly evaluate both the alternative products and sources of supply. Suppliers are often invited to make presentations and factors such as product performance, price as well as suppliers' ability to meet delivery schedules and provide consistent quality are considered. Purchase and related decisions: Once the consumer decides to make a purchase he needs to decide when he plans to buy the product, where he will buy from, how he will make the payment, how he will take the delivery or possession etc. Whereas in b2b, the buyer decides a specific brand and supplier, after which the purchasing department negotiates the contract. As large amounts of funds are involved, such contracts are detailed and a lot of administrative paperwork is involved. Post purchase behavior: marketers aim to reduce post purchase cognitive dissonance in consumers so that they may be satisfied with their purchase and may come again to the same seller. In b2b all future dealings depend on how well the supplier handles any problems that may arise involving his product. Business buying is an increasingly important market. Many companies buy a large proportion of their product from third parties. A number of car manufacturers buy a sizable proportion of components from independent manufacturers. Such transactions have lead marketers to emphasize on the importance of long term cooperative relationship between industrial buyers and sellers. The buying process is lengthy and involves several people who can be described as users, influencers, deciders, gatekeepers and buyers. It is important to keep a close network of all these participants. Industrial marketers form target markets by searching for potential purchasers. Customers can also be segmented in terms of numbers of employees and size of turnover. Whether demand is 'vertical' or 'horizontal' is also an important factor. If a company faces a vertical business market, the demand for its product will not extend beyond a couple of different industries and it must ensure that there is sufficient demand. The firm may find it profitable to customize its products to the needs of that industry. In contrast, where there is a horizontal business market, firms can sell into a number of different industries, though they will face more diverse competition. In short, industrial marketing is very different from consumer marketing and poses many challenges for marketers. Bibliography Kotler, P. and Armstrong, G. (2004) Principles of Marketing, 10th edition. Upper Saddle River, NJ: Pearson Education. Lehman, K. (2004) Symbols and meanings in product names: The case of Australian Car Manufacturers, Retrieved on October 12th 2007, from University of Tasmania website: http://130.195.95.71:8081/WWW/ANZMAC2004/CDsite/papers/Lehman1.PDF. Pursell, G. (1999)Australia's experience with local content programs in the auto industry, The World Bank Articles Riemen, W & Marceau J. (2005) Running on Empty Innovation in the Australian Automotive Industry, Retrieved on October 12th 2007 from Webiste: www.univ-evry.fr/labos/gerpisa/rencontre/S05Riemens-Marceau.pdf Stanton, W. Etzel, M. Walker, B. Marketing, 12th Edition, International Edition p.p 96-134 Women driving change in the Australian Automotive Industry (2006) Retrieved on 11th October 2007, from Carsguide Website: http://carsguide.news.com.au/story/0,20384,18005281-5001400,00.html Read More