Fundamentals of industrial B2B markets
The Industrial B2B markets cover commercial activities between companies. In this business model, customers are commercial enterprises. Many people think of industrial sectors as large-scale production of goods in manufacturing facilities. The industrial B2B sales concept is not only limited to this. Industrial markets are extensive business areas and embrace all business activities outside of the final consumer markets (B2C). All companies have to implement the industrial B2B business model to continue their activities. Industrial B2B business systems comprise three activity areas: products, raw materials, and services.
Roles of companies in industrial B2B markets
In industrial B2B markets, one company plays a seller (vendor/supplier) role; the other company plays a buyer (customer) role. Supplier companies in the industrial market specialize in selling the products (goods or services) needed to help buyers produce final products. Supplier companies don’t prefer to sell their products to the consumer because they are likely not beneficial to the end-users. Even if they sell, consumers’ order volume will not be enough to cover the costs of a vendor company.
Structure of industrial B2B markets
Industrial B2B markets are much more organized structures than consumer markets. There are significant differences between the expectations and requirements of a man who buys a car for himself and a company that purchases cars for usage in daily operations. They both buy something and create a market, but companies show different buying behaviors from consumers. They go through a specific procedure while purchasing a commodity, equipment, or raw materials. Companies use procurement procedures even for the consumables, for example, pens and paper, that a consumer takes and uses without consideration in daily life.
Technical knowledge is essential
Technical features of the products and the sales expert’s knowledge play a significant role in industrial sales activities. Decision mechanisms and purchasing behaviors of the companies operating in industrial markets differ from each other. Companies (aka vendors) that sell to other companies must follow the correct paths and develop effective strategies to be more successful.
B2B and B2B sales models
Let’s define the “Industrial B2B Sales” and the “Consumer B2C Sales” models.
- B2B (Business to business): B2B sales model comprises all commercial activities between companies. The buyer company —aka customer— buys a product from the seller company —aka vendor— to continue business activities. The product referred to herein may be a good, service, or customized solution.
- B2C (Business to consumer): B2C sales model comprises sales activities from businesses to the general consumer segment. Consumers buy products for personal use with their own decisions.
Washing machine example showing the main difference between B2B and B2C.
In comparison to consumer markets, industrial markets have a smaller client base and tend to acquire huge quantities. Thus, industrial clients delve into the nitty-gritty of product specifications and make final purchasing selections collectively.
Industrial customers include manufacturers and service providers, distributors and resellers, as well as governments and institutions. Therefore, some aspects of market segmentation that apply to consumer markets also apply to industrial markets.
Segmentation of industrial B2B markets
Industrial B2B marketers always claim that segmentation is a significant challenge for them. They are right because the analysis is also more complicated than it is for B2C consumer markets. The objective is to determine the most appropriate variables for segmenting industrial markets.
Nested approach to market segmentation
Marketing authorities suggest a “nested” technique to segmenting industrial B2B markets. Separated by the degree of inquiry required to find and analyze specific criteria, the layers are organized in ascending order, beginning with demographics, the most accessible area to assess.
Then more tough measures, such as company variables, situational circumstances, and personal qualities, are included. However, the authors caution that a nested strategy cannot be adopted for all industrial customers. Instead, the segmentation of industrial B2B markets must be tailored to specific scenarios and circumstances.
While segmenting consumer markets can be challenging, it is significantly more manageable than segmenting industrial markets. For example, the same industrial product can frequently be used in various applications; similarly, multiple items can be utilized in the same application. In addition, customers vary significantly, and it’s challenging to determine which distinctions are significant and which are insignificant when designing a marketing strategy.