The business market is huge. In fact, business markets involve far more dollars and items than do consumer markets. For example, think about the large number of business transactions involved in the production and sale of a single set of Goodyear tires. Various suppliers sell Goodyear the rubber, steel, equipment, and other goods that it needs to produce tires. Goodyear then sells the finished tires to retailers, which in turn sell them to consumers. Thus, many sets of business purchases were made for only one set of consumer purchases. In addition, Goodyear sells tires as original equipment to manufacturers that install them on new vehicles and as replacement tires to companies that maintain their own fleets of company cars, trucks, or other vehicles.
In some ways, business markets are similar to consumer markets. Both involve people who assume buying roles and make purchase decisions to satisfy needs. However, business markets differ in many ways from consumer markets. The main differences are in market structure and demand, the nature of the buying unit, and the types of decisions and the decision process involved.
The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does. Even in large business markets, a few buyers often account for most of the purchasing. For example, when Goodyear sells replacement tires to final consumers, its potential market includes millions of car owners around the world. But its fate in business markets depends on getting orders from only a handful of large automakers.
Further, many business markets have inelastic and more fluctuating demand. The total demand for many business products is not much affected by price changes, especially in the short run. A drop in the price of leather will not cause shoe manufacturers to buy much more leather unless it results in lower shoe prices that, in turn, increase consumer demand for shoes. And the demand for many business goods and services tends to change more—and more quickly—than does the demand for consumer goods and services. A small percentage increase in consumer demand can cause large increases in business demand.
Finally, business demand is derived demand—it ultimately derives from the demand for consumer goods. For example, demand for Gore-Tex fabrics derives from consumer purchases of outdoor apparel brands made from Gore-Tex. And consumers buy Corning’s Gorilla Glass only when they buy laptops, tablets, and smartphones with Gorilla Glass screens from producers such as Apple, Samsung, Lenovo, Dell, HP, Sony, and Microsoft. If consumer demand for these end products increases, so does the demand for the Gore-Tex fabrics or Gorilla Glass they contain.
Therefore, B-to-B marketers sometimes promote their products directly to final consumers to increase business demand. For example, Corning’s long-running “Tough, yet beautiful” consumer marketing campaign features a family of gorillas who are out to convince final buyers that it makes sense to choose digital devices with screens made of Gorilla Glass rather than a less-tough competitor. Such advertising benefits both Corning and the partner brands that incorporate its durable, scratch-resistant glass. Thanks in part to the consumer marketing campaign, Corning’s Gorilla Glass has to date been featured in more than 40 major brands and more than 4.5 billion devices worldwide.2
Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort. Often, business buying is done by trained purchasing agents who spend their working lives learning how to buy better. The more complex the purchase, the more likely it is that several people will participate in the decision-making process. Buying committees composed of technical experts and top management are common in the buying of major goods. Beyond this, B-to-B marketers now face a new breed of higher-level, better-trained supply managers. Therefore, companies must have well-trained marketers and salespeople to deal with these well-trained buyers.
Business buyers usually face more complex buying decisions than do consumer buyers. Business purchases often involve large sums of money, complex technical and economic considerations, and interactions among people at many levels of the buyer’s organization. The business buying process also tends to be longer and more formalized. Large business purchases usually call for detailed product specifications, written purchase orders, careful supplier searches, and formal approval.
Finally, in the business buying process, the buyer and seller are often much more dependent on each other. B-to-B marketers may roll up their sleeves and work closely with customers during all stages of the buying process—from helping customers define problems to finding solutions to supporting after-sale operation. In the short run, sales go to suppliers who meet buyers’ immediate product and service needs. In the long run, however, business-to-business marketers keep customers by meeting current needs and by partnering with them to help solve their problems. For example, consider agricultural and food giant Cargill’s Cocoa & Chocolate division:3
Cargill’s Cocoa & Chocolate division sells cocoa and chocolate products to business customers around the world, including giants such as Mars and Mondelēz. But its success lies in doing much more than just selling its products to such customers. Instead, Cargill partners closely them, applying its deep expertise to help customers use its products to serve their own customers better and more profitably. For example, Cargill’s researchers keep customers up to date on the latest global consumer food trends. Its research and development teams give customers personalized product development support. And its technical services specialists provide help in resolving customer ingredient and applications challenges. “Whether you need laboratory or pilot work on finished products or help with production start-up,” says the company, “Cargill’s applications experts can assist you—from developing new end-product recipes, achieving better pricing for your products, or getting to market more quickly.” Thus, more than just selling cocoa and chocolate, Cargill sells customer success in using those products. Its goal is to “[apply] our deep chocolate expertise and broad food knowledge…to provide you with more opportunities to grow your business across a wide range of cocoa and chocolate products and applications . . . helping you thrive, today and into the future.”4
As in Cargill’s case, in recent years, relationships between most customers and suppliers have been changing from downright adversarial to close and chummy. In fact, many customer companies are now practicing supplier development, systematically developing networks of supplier-partners to ensure a dependable supply of the products and materials that they use in making their own products or reselling to others. For example, Walmart doesn’t have a “Purchasing Department”; it has a “Supplier Development Department.” The giant retailer knows that it can’t just rely on spot suppliers who might be available when needed. Instead, Walmart manages a huge network of supplier-partners that help provide the hundreds of billions of dollars of goods that it sells to its customers each year.
3.144.114.223