What are the differences between business and consumer markets? b. Why is it argued that these differences are not always valid
For part (a), students were required to mention the key differences, which include:
• Specific needs of business markets – such as obligations towards their shareholders (e.g. making profit) or customers (e.g. legal obligations).
• Decision-making procedures in business markets usually involve more people than in consumer markets, and tend to follow formal policies and procedures.
• Demand for goods in business markets is derived by the demand from end users, as well as the general health of the business of the firm’s customer.
• Business markets tend to be more price-inelastic than consumer markets.
• Business transactions usually involve a large number of people, sometimes professional buyers.
As an additional point, candidates should have mentioned that business transactions are likely to take longer and involve more negotiation and bargaining than transactions in consumer markets.
Length: 1 and a half page
For part (b), students should have been ready to invoke authors such as Wilson (1998, 2000), among others, who question the assumptions informing the differentiation debates in the marketing literature. These include:
• The assumption that organisation buying behaviour is rational, and consumer buying behaviour is not.
• The assumption that consumers buy only for themselves and, therefore, respond only to their own perceptions and needs, and are not influenced by society.
• The assumption that individuals behave differently when they are embedded in a organisational context vs. a social one.
Furthermore, candidates could have mentioned that critics note that arguments supporting the differences between consumer and business markets usually compare two extreme buying situations, which are a) consumers’ purchase of impulse goods and b) organisations’ purchases of strategic goods. In addition, comparisons that stress differences are often based on a limited set of industries and/or national markets.
For these reasons, students should have mentioned that critics argue that differences are more likely to be a matter of degree rather than an either/or situation. Such authors also note that developments in information technology, communication and competition change the way consumers behave, making them closer to firms in buying decisions – e.g. the Internet allows consumers to emulate firms regarding information gathering.
Length: 1 and a half page