Ans. Characteristics of Organizational Market
After discussing various types of organizational market we now describe briefly the distinguishing - - characteristics of organizational market - which make it different from consumer market. These characteristics are more or less applicable to all types of organizational market, but these are more applicable to industrial or business market. These are:
Fewer Buyers : Normally organizational buyers are less in number compared with consumers. Therefore, an industrial marketer normally deals with fewer buyers than does the consumer marketer. For instance, if a MRF a leading tyre manufacturing company wants to sell its tyres in the industrial market, it may concentrate on one of the big automobile manufacturing concerns. When the same company wishes to sell tyres to consumers (vehicle owners) it has to contact lakhs of vehicle owners.
Larger Buyers : Organizational buyers normally require large quantities of goods whereas personal consumers require smaller quantities. Thus industrial buyers are large scale buyers. Even among industrial buyers a few large buyers normally account for most of the purchasing. In such industries as automobiles, telephone, soaps, cigarette, synthetic yarn etc., a few top manufacturers account for more than a substantial part of total production. Such industries account for a major share of 1 raw material bought in the market.
Geographical Concentration : Organizational buyers are mainly concentrated in few places like, Mumbai, Kolkata, Delhi, Chennai, Bangalore, Pune, Hyderabad, etc., whereas consumers are spread throughout the country. For example, most of the companies in textile sector are located in the western belt of India. Because of this geographical concentration of industrial markets, the marketers need not establish distribution network throughout the country. This helps in reducing the cost of distribution.
Derived Demand : The demand for industrial goods is ultimately derived from the demand for consumer goods. For instance, Maruti Udyog Ltd. purchases steel and produces cars for the consumer market. If the consumer demand for cars drops, so will the demand for the steel and all the other products used to make cars. Therefore, industrial marketers sometimes promote their products directly to final consumers to increase business demand. For example, Intel Corporation, the largest supplier of computer processors engages in mass media advertising quite often.
Inelastic Demand : Demand for many industrial goods and services is inelastic and not much affected by price changes, especially in the short run, because producers can not make quick changes in production schedules. For example, footwear manufacturers will not buy much more leather if the prices of leather fall. Nor will they buy less leather if the prices rise unless they can find satisfactory substitutes. In case of price increase of industrial product such as key raw material, the manufacturers will increase the price of the finished product. In this way they pass on the price increase to the ultimate consumers.
Fluctuating Demand : The demand for industrial goods and services tends to be more volatile than for consumer goods and services. This is especially true of the demand for new plant and equipment. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for necessary plant and equipment to produce the additional quantity in order to meet the increased demand. Economists refer to this as the acceleration principle.
Professional Purchasing : Most of the organizations have professionally trained personnel in the purchasing division. Goods are purchased by these specialists. There are professional journals which provide information for the benefit of these professional buyers. Consumers, on the other hand are less trained in the art of careful buying. In industrial purchasing, if the buying decision is complex; it is likely that several persons will participate in the decision-making process. Purchase committee comprising experts and top management are common in the purchase of major goods. In addition to this, many of the buying instruments-such as purchase contracts-are not found in consumer buying.
Close Supplier-Customer Relationship : With the smaller customer base and the importance and power of the larger customers, industrial sellers are frequently required to customize their offerings, practices, and performance to meet the needs of individual customers.
Multiple Buying Influences : More people typically influence business buying decisions. Buying committees are common in the purchase of major goods; marketers have to send well trained and experienced sales people and often sales teams to deal with these well-trained buyers.
Multiple Sales Calls : With the more people involved in the process, the sales representatives or sales teams from the industrial supplier are required to call many times before getting an order from an industrial buyer. A long period, ranging from a few weeks to few months is required to get an order for major capital equipment from an industrial buyer.
Direct Purchasing : Organizational buyers particularly business buyers often buy directly from manufacturers rather than through intermediaries, especially products that are technically coinplex or expensive.
Reciprocity : Organizational buyers often select suppliers who also in turn buy from them. For example a paper manufacturer who buys chemicals from a chemical company that is buying a considerable quantity of its paper. Even in this reciprocal buying situation the buyer will make sure to get the supplies at a competitive price, of proper quality and service.
Leasing : In case of major and expensive equipment many industrial buyers lease rather than buy in order to conserve funds, get the latest products, receive better service, and gain tax advantages. The lessor often makes more profit and sells to customers who could not afford outright purchase of equipment, There are certain income tax benefits according to Indian Income Tax Act given to both lessor and leasee.
No comments:
Post a Comment