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Traditionally, business markets were referred to as industrial markets.

Manufactures constitute a major portion of the business market, but there are

also six other components — agriculture, resel ers, government agencies, service companies, nonprofit organizations and international.

3.2.1 THE AGRICULTURE MARKET

The high level of income from the sale of agriculture products gives farmers,

as a group, the purchasing powers that make them a highly at ractive market.

Moreover, world population forecasts and food shortages in many countries

undoubtedly wil keep pressure on farmers to increase their output.

Agribusiness — farming, food processing, and other large-scale farming—related

business — is big business in every sense of the word.

Agriculture has become a modern industry. Like other business executives,

farmers are looking for better ways to increase their productivity, cut their expenses

3.2.2 THE RESELLER MARKET

Intermediaries constitute the resel er market. The basic activity of resellers

— unlike any other business market segment- is buying products from supplier

organizations and resel ing these items in essential y the same form to the

resel ers' customers. In economic terms, resel ers create time, place and pos-

session utilities, rather than form utility.

It is their role as buyers for resale that differentiates resellers and at racts

special marketing attention from their suppliers. To resel an item, you must please your customer. Do you know that it is more difficult to determine what

wil please an outside customer than to find out what wil satisfy someone within your own organization?.

3.2.3 THE GOVERNMENT MARKET

The government market includes Federal, state, and local government units

that spend bil ions of naira a year buying for government institutions such as schools,

offices, hospitals and military bases.

Government procurement processes are different from those in the private sector of

the business market. Try to support this statement by finding out how governments

make their purchases in at the various ministries and parastatals.

3.2.4 THE SERVICES MARKET

Currently, firms that produce services greatly outnumber firms that produce goods. The services market includes al transportation carriers and public utilities and the many

financial, insurance, legal and real estate firms. This market also includes organizations that produce and sel such diverse services as rental housing, recreation and

entertainment repairs, health care, personal care and business services.

Service firms constitute a huge market that buys goods and other services. And al

these service firms buy legal, accounting, and consulting advice from other service

marketers. Try to identify some service firms in your locality and determine what they buy.

3.2.5 THE "NON-BUSINESS" BUSINESS MARKET

The non-business market includes such diverse institutions as churches, colleges and

universities, museums, hospitals and other health institutions. Political parties, labour

unions, and charitable organizations. Actual y, each of these so — cal ed non-business

organizations is a business organization. These organizations do virtual y all the things that

business do — offer a product, col ect money, make investments, hire employees -and

therefore require professional management.

Nonprofit organizations also conduct marketing campaigns — in an effort to at ract

mil ions of Naira in contributions. In turn, they spend mil ions of Naira buying goods and services to run their operations. When you look closely at your NG0s, your church or

mosque you will tend to agree to the fact that they are business organizations.

3.3 CHARACTERISTICS OF BUSINESS MARKET DEMAND

Four demand characteristics differentiate the business market from the consumer market: (i) Demand is derived, (i ) demand tends to be inelastic, (i i) demand is widely fluctuating, and (iv) the market is well informed

3.3.1 DEMAND IS DERIVED

The demand for a business product is derived from the demand for the consumer

products in which that business product is used. Thus the demand for steel

depends partial y on consumer demand for automobiles and refrigerators. But it also

depends on the demand for butter and CD players This is because the tools machines, and

other equipment needed to make these items are made of steel There are two significant marketing implications in the fact that business market

demand is a derived demand. First to estimate the demand for a product a business marketer must be very familiar with how it is used. Second the

producer of a business product may engage in marketing efforts to encourage the sale of its buyers' products. The idea is that increases in consumer demand

wil in turn trigger increases in derived demand for these business products.

3.3.2 DEMAND IS INELASTIC

Another characteristic of the business market is demand elasticity of business products. Elasticity of demand refers to how responsive demand is to a change

in the price of a product.

The demand for many business products is relatively inelastic, which means

that the demand for a product "a" responds very lit le to changes in price.

The demand for business products is inelastic because ordinarily the cost of a single part or material is a smal portion of the total cost of the finished product.

The cost of the chemical is a smal part of the price a consumer pays for paint.

As a result, when the price of the business product changes, there is very lit le change in price of the related consumer products. From a marketing point of view, there are three factors that can moderate inelasticity of business demand.

i. Price change must occur throughout an entire industry, not in a single firm

The second marketing factors that can affect the inelasticity of demand is time.

Much of our discussion here applies to short-term situation. Over the long run the demand for a given industrial products is more elastic. The third factor is the relative importance of a specific business product in the cost of the finished good. The greater the cost of a business product as percentage of the total price

of the finished good, the greater the

elasticity of demand for this business product.

3.3.3 DEMAND IS WIDELY FLUCTUATING

The market demand for most classes of business goods fluctuates considerably

more than the demand for consumer products

The main cause of these fluctuations is the individual businesses concern about having a shortage of inventory when consumer demand increases or being caught with excess inventory should consumer demand decline. Thus they tend to overreact to signals from the economy, building inventories when they see signs of growth in the economy and working inventories down when the sign suggest stagnation. When the action of al the individual firms are combined the effect on their suppliers is widely fluctuating demand. This is known as the acceleration principle. One exception to this generalization is found in

agricultural products intended for processing. Can you explain why this is so?

3.3.4 BUYERS ARE WELL INFORMED

Typical y, business buyers are better informed about what they are buying than ultimate

consumers. They know more about the relative merits of alternative sources of supply and competitive product for three reasons.

(i) there are relatively few alternatives for a business buyer to consider.

(i ) the responsibility of a buyer in an organization is ordinarily limited to a few products;

and

(i i) for most consumer purchase, an error is only a minor inconvenience. However, in business buying the cost of a mistake may be thousands naira or even the decision

maker's job!

In document A convex optimisation approach to optimal control in queueing systems (Page 67-71)