Meaning of Industrial Market
Industrial market is a market in which one business sells products or services to another business. It is also known as business-to-business market or a producer market. In this market, industrial products are acquired by one business from another business which are used in production process of various end products. The industrial market does not serve the needs of general public looking for final products but only provides goods or services that are used for creating a separate end product.
There are small numbers of consumers in industrial market who demands big quantity of industrial products. All processes in industrial market involves several complexities as it includes large orders in between the producer and client. Industrial purchasers are highly professional and knowledgeable about the products they are willing to purchase. Mining, agriculture, fisheries, construction, manufacturing, transportation, forestry, communication and various public utilities like insurance, finance and banking services are major types of industries that make up the industrial market.
Segmentation of Industrial Market
Segmentation is a process of determining the most likeable customers that will make purchases with business. It enables in categorizing the whole market structure into homogenous segments which assist in designing more effective marketing and promotional campaigns by business. Industrial market is mainly segmented on the basis of 4 variables that are as listed below: –
- Geographic variables
- Demographic variables
- Purchasing variables
- Operational variables
Climate, area and topography are 3 major factors that are composed in geographic variables under the market segmentation.
Climate- Industrial market on the basis of this geographical factor is categorized into temperate, tropical and alpine.
Area- Local, national, regional and international are four segments for categorization of industrial market on the basis of geographic area.
Topography- Under this factor, market is divided as rural market, sub-urban market, fully urban market, hilly market, Himali market, Terai market etc.
Under the demographic variables, industrial market is categorized on the basis of type, size and location of business firm.
Types of Business- There are distinct types of organizations that operates in industrial market. They are mining, construction, insurance, finance, agriculture, manufacturing, government organizations etc. A distinct type of marketing mix is required for these each type of organizations and industries. Therefore, industrial market is categorized on the basis of type of business that enables in fulfilling all demands effectively.
Size of Business- There are large numbers of organizations or industries that operates in industrial market. Size of these organization can be a major factor of segmentation of whole industrial market. On the basis of size, these are of following types: – Very small customers (Footpath vendors), small customers (Small industries), Medium customers (medium size industries), large customers (Huge industries) and Very large customers (Government organizations).
Under the purchasing variables, market is segmented on the basis of factors like purchase organizations, purchase methods, contract duration, negotiation period etc.
Purchase organizations- The nature and size of business organization influence its purchasing pattern. In some organizations, a single person is authorized to make all the purchases whereas many organizations give this power to purchase department or committee. Selling of goods to a single individual is quite easy in comparison to making sales with purchase committee. Therefore, segmenting of industrial market on this basis enables in developing an effective marketing mix.
Purchase procedures and methods- Every organization follows different procedures for making purchases. Many of them purchases via contract while others via tender. In the same, the purchase method also varies from one organization to another. Centralized and decentralized are two types of purchase methods adopted by organizations for making their purchases.
Negotiation period- Negotiation period is another key factor under purchasing variables for market segmentation. Negotiation period becomes too long if there are large number of individuals involved in purchase decisions of organization. In case if there are small numbers of peoples involved, then the negotiation period will be short.
Operating variables comprises of various factors like technology, service requirements, rate of usage etc. that becomes the basis of industrial market segmentation.
Technology- Industrial market can be segmented on the basis of technology. There are distinct technological variables which need to considered while doing this segmentation like capital incentive technology, labor incentive technology, computer technology and ultramodern automatic technology.
Service requirements- Various types of services are required by industrial users which need to be considered while designing an effective marketing mix. Major factors of segmentation on the basis of service requirements are machinery installation, products warranty and repair service of machinery etc. that are all after sale services.
Rate of usage- Different customers uses the industrial products in a distinct way. The quantity and continuity of these products is affected by their usage rate. All the usage variables should be taken into consideration while developing a marketing mix. Light users, medium users, heavy users and non-users are some of the major variables.