Unit 3: Market Opportunity

Lesson 3.4
Consumer and Business Markets
Contents
Introduction 1

Learning Objectives 2

Quick Look 3

Learn the Basics 4

Consumer Market 5
The Individual Buyer Decision Process 7
Types of Buying Decision Behaviors 9
Business Market 11
The Business Buyer Decision Process 13
Types of Business Buying Situations 14

Keep in Mind 16

Try This 17

Practice Your Skills 18

Challenge Yourself 19

Photo Credits 20

Bibliography 20
Unit 3: Market Opportunity

Lesson 3.4

Consumer and Business Markets

Introduction

Observe a coffee shop near your school or residence. You will see that the enterprise serves
customers looking for a good cup of coffee and some pastries. Occasionally, you will see a
truck parked in front of the store, delivering inventory or other things needed by the coffee
shop. In this scenario, the coffee shop is both a provider and receiver of products and
services.

The products and services created and offered by businesses do not only target individual
consumers, but also other businesses. Some businesses target both types of markets, while
others focus only on consumer markets or on business markets.

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Unit 3: Market Opportunity

In this lesson, you will learn about the difference between consumer and business markets.
You will be introduced to their respective buyers’ journey and the varying marketing
decisions related to it.

Learning Objectives DepEd Competencies

● Describe the consumer and business

At the end of this lesson, you should be able to
markets (ABM_PM11-le-i-12).
do the following:
● Differentiate the buying behavior and
● Define the consumer and business decision making of
individual/household customers versus
markets.
the business (organizational)
● Analyze business situations concerning customers (ABM_PM11-Ie-i-13).
the decision process of individual and
business customers.
● Explain the difference between individual
buyers behavior and business buyers
situations.

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Unit 3: Market Opportunity

Quick Look

Constructing Meanings
In this activity, you will construct the meaning of two important concepts that will be
discussed in this lesson: consumer markets and business markets.
1. Examine the phrases found inside the box.
2. Create a Venn diagram that compares and contrasts consumer markets and
business markets.
3. Decide which part of the Venn diagram each phrase belongs to.

Consumer goods
Business goods
Individuals and households
Firms and organizations
Purchases involve large sum of money
Purchases involve lesser sum of money
More people participate in the buyers’ decision
One person or few people are involved in buyers’ decision
Responds to market stimuli
Influenced by political, cultural, and economic factors

Draw the diagram here.

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Questions to Ponder
1. How will you define consumer markets using the concepts provided in the activity?
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2. How will you define business markets using the concepts provided in the activity?
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3. Based on the activity, what is the major difference between consumer markets and
business markets?
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Learn the Basics

Consumers and businesses are both economic units in a society. They both have needs and
want to be satisfied. Like any customer, they undergo a buying decision process before they
arrive at a purchasing decision. Although their buyer’s journey has strong similarities,
marketers have to be familiar with varying market structures and demands. There are also
important differences in the nature of buying units, the types of decisions they make, and
the decision process involved. These pieces of information are vital inputs in examining the
marketing environment and anticipating the customer response: factors which are important
in marketing planning.

In the previous lesson, you learned that companies' conduct market research to gain insights
on consumers and the market needs and preferences. Part of understanding the market
more deeply requires the understanding of the buying decision process and the buying
decision behavior of consumers. This knowledge allows businesses to create marketing
strategies that specifically target the consumer or business markets that they identified.

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Unit 3: Market Opportunity

One of the most important aspects of the market is the customers. The marketing
department and the management aim to engage effectively with customers. Through proper
understanding of customers' needs and wants, marketers can translate their problems into
market offerings. Another objective of marketing is to affect how customers think and act. To
realize this, marketers must also understand the customers' buying behavior and buying
decision process. It is also vital in identifying business opportunities.

Essential Question

How do differences between consumer markets and business markets

affect the marketing plans and strategies?

Consumer Market
The consumer market consists of people who buy products and services for their own
consumption and not for resale. When you buy food items, clothes, and other goods meant
for your own use, you are functioning as part of the consumer market. Most people,
especially those not engaged in running a business, are final consumers of a product or
service.

You will understand the characteristics of the consumer market if you look at the products
offered to them. The products produced for the consumer market are called consumer
goods or products. Table 1 summarizes the types of consumer goods offered in the
consumer market.

Table 1. Types of consumer products.

Classification Description Examples

Convenience goods purchased more frequently, goods found in the

inexpensively, and do not require grocery stores and retail
much effort and evaluation stores

Shopping goods purchased less frequently, relatively clothing, gadgets, shoes,

more expensive, and require some accessories
amount of information search and
evaluation before purchasing

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Classification Description Examples

Specialty goods ● more difficult for consumers to luxury merchandise,

acquire artwork, real estate
● more expensive that consumers
are willing to spend more and
would be willing to travel
distances to obtain these goods

Unsought goods ● usually purchased for life insurance, medicine,

extraordinary reasons such as life plans
emergencies
● consumers seldom look for these
goods
● commonly marketed by highly
skilled salespeople that require
aggressive advertising and selling
efforts

Figure 1. Consumer products in a grocery store

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Check Your Progress

Provide examples of consumer goods that you have purchased. Name one
for each type.

Types of goods Examples

Convenience goods

Shopping goods

Specialty goods

Unsought goods

The Individual Buyer Decision Process

Before arriving at a purchasing decision, consumers are affected by internal and external
factors such as cultural, social, personal, and psychological factors. Cultural factors are
influences such as culture1, subculture2, and social classes3. Social factors emphasize the
influence of people around the buyer like reference groups4 and family. Personal factors
include the buyer's age, life cycle stage, occupation, economic situation, lifestyle and
personality. Psychological factors include motives, perception, learning, beliefs, and
attitudes.

In the first unit of this course, you were introduced to the stages in a buyer’s journey. You
already know that generally, a buyer goes through the phases of awareness, consideration,
and decision. You will have a deeper understanding of this process by expanding it into the
five stages of buyer’s decision process: need recognition, information search, evaluation of
alternatives, purchase decision, and post-purchase behavior (Kotler 2017).

These stages show what happens before the actual purchase starts and continues long
after. It shows what is happening before a particular consumer arrives in a decision to
purchase a product.

1
Culture — (noun) a set of values, perceptions, behaviors, and beliefs learned from family and social institutions
2
Subculture — (noun) groups of people with shared value systems at variance with those of the larger culture
3
Social classes — (noun) divisions in society based on social and economic status
4
Reference groups— (noun) a collection of people used as reference to understand social norms

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Figure 2. Buyer's Decision Process (Kotler 2017)

Need recognition is when the buyer recognizes a problem or a need. Internal stimuli like
hunger can trigger this need. External stimuli can also trigger a need, like when a consumer
is exposed to a marketing campaign or promotional activities.

Information search is the process stage wherein a consumer may or may not search for
more information about the product to satisfy their needs. Consumers may gather
information through various sources, such as personal sources, including family or friends.
Consumers can also get information from advertisements, public sources like mass media or
social media, and experiential sources, which is done by examining and using the product
itself. Through information search, consumers may arrive at multiple brands or product
choices.

Evaluation of alternatives is how consumers process information to choose among the

alternative brands they find. In terms of evaluation of alternatives, consumers have varying
ways in which it depends on their interests, way of thinking, buying situation, and other
factors affecting buying decisions.

The purchase decision is when the consumer makes a choice. It comes after the consumer
has evaluated all the options available of a product or service and is purchasing the product
or service already.

The post-purchase behavior will determine if the marketers have been successful in
meeting customer satisfaction. Every marketer's job does not end once the consumers have
purchased the product. After buying the product, the consumer will evaluate the product
bought if it satisfies them.

In a buyers’ journey, consumers also assume different roles, such as initiators, users,
influencers, deciders, and buyers.

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Unit 3: Market Opportunity

Table 2. Different consumer buying roles

Buying Roles Description

Initiators those who start the buying process

those who use the product, whether they had a say in the
Users
buying process or not

those who affect the purchase decision by convincing

Influencers
others that the product is needed

Deciders those who are empowered to make the purchase decision

those who have the money and who are going to give the
Buyers
money for the product

Types of Buying Decision Behaviors

To dive deeper into understanding the consumers, you should be familiar with the different
types of behaviors in buying decisions. These behaviors are affected by the degree of buyer
involvement and the degree of differences among brands. Figure 3 illustrates the interaction
between these two factors and the different buying decision behaviors it produces.

Figure 3. The different types of buying decision behaviors (Kotler 2017)

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Consumers tend to be highly involved when a product is expensive, risky, purchased

infrequently, and highly self-expressive. When combined with significant differences
between brands, many personal considerations occur, resulting in complex buying
behavior. On the other hand, when consumers perceive very little difference between
brands, they may still be highly involved, but they decide quickly. Their decisions are usually
based on reasonable price or purchase convenience, which are characteristics of
dissonance-reducing buying behavior.

Meanwhile, consumers tend to have low involvement when products are inexpensive and
frequently purchased. When they perceive significant differences between brands,
customers seek variety and do a lot of brand switching. This behavior is called
variety-seeking buying behavior. On the other hand, habitual buying behavior happens
when customers do not perceive significant differences between brands, preferring to stick
with what they were used to.

Closer Look

Examples of Consumer Buying Behaviors

● When buying a new car, consumers tend to be highly involved. They
consider the model, attributes, accessories, price, and
appropriateness of the product to their lifestyle. Consumers also
exert effort into learning more about the alternatives; this is an
example of complex buying behavior.
● When buying a new television, customers are also highly involved.
They read some reviews and learn about the product and other
alternatives. However, since most smart television brands have
slight differences in capabilities and features, customers respond to
factors such as price and convenience; this is a
dissonance-reducing buying behavior.
● When buying cereals, customers tend to be less involved. Typically,
there is no prolonged evaluation of a brand. They decide quickly,
purchase the product, then try it out. Next time they go to a grocery
store, they might try a different brand without much consideration;
this is an example of variety-seeking behavior.

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● When buying a pack of sugar, consumers simply go to the store and

reach for a brand. Since they do not perceive significant differences
between sugar brands, they tend to purchase the same brand out
of habit; this is an example of habitual buying behavior.

Check Your Progress

Why is it important to understand the tendencies of consumers and their

behaviors? Explain your answer by providing an example.
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Business Market
Aside from consumers who have needs and wants to be satisfied, business customers also
buy goods and services to produce their products or resell them to others. This transaction
between firms and business customers is called a business-to-business (B2B) transaction.
Compared to the consumer market, the business market involves far more money and items.
But in some ways, the business market is the same as consumer markets because both
involve people who assume buying roles and make purchase decisions to satisfy their needs.

Businesses can sell products in the business market. Unlike in the consumer markets, the
customers in business markets are not the final consumers of products; they either use it to
produce other goods or resell them to others. There are several types of products sold in the
business markets. These are materials and parts, capital items, and supplies and other
services. Collectively, they are called industrial products.

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Table 3. Different types of products in business markets

Classification Description Examples

Materials and These are industrial products that Agricultural products, crude
parts become a part of the business petroleum, iron ore,
customer’s product through further manufactured materials
processing or components. including iron, yarn, cement,
wires, and parts including
small motors, tires, and
castings.

Capital items These are industrial products that Buildings, machinery,

aid in the buyer's production or equipment, vehicles, and
operations. tools.

Supplies and These are industrial products that Maintenance and repair
services do not enter or are used in the items (paint, nails, and
finished product. Firms in their brooms) and operating
other business operations need supplies (lubricants, coal,
these to function effectively. writing paper, and pencil).

Figure 4. The steel used in the construction of a building is an example of industrial goods.

In consumer markets, the individual consumers themselves take on the buying roles.
Individuals respond to market stimuli individually or personally. However, in business
markets, the organizational structure and the authority of individuals become decisive in
their participation in the decision-making process.

3.4. Consumer and Business Markets 12

Unit 3: Market Opportunity

Table 4. Participants in the business buying process

Role of Participants Description

Users Members of the organization who will use the product or

service.

Influencers They help define specifications and also provide information

for evaluating alternatives. Examples of them are the technical
personnel in the company.

Buyers They have formal authority to select the supplier and arrange
terms of purchase. They have formal authority to choose the
supplier and negotiate terms of purchase.

Approvers or Deciders They have formal or informal power to select or approve the
final suppliers.

Gatekeepers They control the flow of information to others to screen or

prevent supplier representatives and vital product information
from reaching others in the buying decision process.

The Business Buyer Decision Process

Like consumers, business customers also undergo a series of stages before arriving at a
purchase decision. But unlike the consumer buying process, the buying activity in business
markets consists of two major parts: the buying center, composed of all the people
involved in the buying decision, and the internal buying decision process of the
organization (Kotler 2017). Both internal and external environments affect these two parts
of the buying activity. Figure 5 summarizes the business buying decision process, the factors
that influence it, and the organization's buying decisions.

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Figure 5. Business buying decision process (Kotler 2017)

Types of Business Buying Situations

Business customers, or more specifically, the buying center, face many decisions in making a
purchase. Solving the problem depends on its complexity, newness of the buying
requirement, the number of people involved, and the time required. There are three types of
business buying situations: straight rebuy, modified rebuy, and new task.

Table 5. Different types of business buying situations

Straight rebuy organizational buying a precisely exact specifications of a product

previously purchased

Modified rebuy ● organizational buying similar to a straight rebuy but with some
changes in the required specification
● order specifications may change due to changes in supplier, end of
supplier contract, and new decisions in business operations

New task ● purchasing products that the organization has never purchased
before or has not purchased for a long time
● typically longer process than compared to other buying situations

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Unit 3: Market Opportunity

Closer Look

Examples of Business Buying Situations

● When a coffee shop regularly purchases an exact amount and a
particular kind of coffee beans from a supplier, it is an example of a
straight rebuy.
● When the same coffee shop finds a supplier that offers the same
kind of coffee beans for a more reasonable price and better terms,
the coffee shop might change suppliers and do a modified rebuy.
Modifications can be in terms of quantity, frequency of deliveries,
and terms of payment.
● When the coffee shop decided to offer a new product that needed
raw materials and capital items that it had never purchased before,
the company‘s buying situation was a new task. The buying
decision might take longer, as the participants in the buying
process would want to discuss the different alternatives and
options.

Check Your Progress

How does the business buying process differ from the consumer buying
process?
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Unit 3: Market Opportunity

Keep in Mind

● Individual consumers and businesses have needs and problems to be satisfied. Thus,
marketers cater to both consumer and business markets. Marketers effectively
identify and determine the needs of these markets by providing consumer products
and industrial products.
● Both the individual customers and business customers go through a buying decision
process. Their respective processes are stimulated by the marketing environment
and influenced by certain factors before arriving at a purchase decision.

● Before arriving at a purchase decision, individual customers are affected by personal,

social, cultural, and psychological factors. On the other hand, business or
organizational customers are influenced by the organization's internal and external
environmental factors.
● Individual customers exhibit various buying behaviors based on buyer involvement
and differences among brands: complex, dissonance-reducing, variety-seeking, and
habitual buying behavior.
● Business customers also face different buying situations depending on the
complexity of the problem being solved, the newness of the buying requirement, the
number of people involved, and the time required. These buying situations include
straight rebuy, modified rebuy, and new tasks.

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Unit 3: Market Opportunity

Try This

A. True or False. Write true if the statement is correct. Otherwise, write false.

________________ 1. The buying process for both business customers and

consumers are absolutely the same.

________________ 2. Business customers buy goods and services for use in

producing their own products or for reselling them to others.

________________ 3. The buyer's decision process ends in a purchase decision.

________________ 4. The buying roles that business customers assume are initiator,
buyer, decider, influencer, and users.

________________ 5. Unlike the consumer buying process, the buying activity of

business customers consists of two major parts.

B. Identification. Write the correct answer on the provided space before each number.

________________ 1. The stage in the consumer buying process where the buyer
recognizes a problem or a need.

________________ 2. The buying behavior where consumers are highly involved in a

purchase and perceive significant differences among brands.

________________ 3. This is an organizational buying situation that has exactly the

same specifications as the item previously purchased.

________________ 4. These are products that are seldom looked for by the
consumers.

________________ 5. This is a type of industrial product that aids in the buyers'

production or operations.

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Unit 3: Market Opportunity

Practice Your Skills

Business Situations and Buyers’ Behaviors

Answer the following questions. Write your answers in the space provided.

1. Jonjie is an entrepreneur who resells mangoes from the provinces to the cities. He
rents a stall in the public market where customers buy his products. Which market
do you think he operates? Explain your answer.
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2. Ken has a fashionable personality and is very picky in choosing what type of cloth he
should wear on any occasions. What do you think is the buying behavior Ken
exhibits, and why do you think so?
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3. Cynthia owns a stall in a wet market. She is a businesswoman selling fish, pork,
chicken, and other kinds of meat. On one occasion, one of her suppliers failed to
deliver on time. She then decided to find another supplier for replacement. What
buying situation do you think Cynthia is in? Explain your answer.
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4. Carl is a software engineer in a technology company. During a meeting, he proposed

that the company increase the capacity of their servers to ensure that their product
will run efficiently and increase the satisfaction of their customers. He provided the
minimum specifications that the company needs and some options they can take.
What is Carl’s participation in the business buying process? Explain your answer.

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Unit 3: Market Opportunity

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5. Jun owns a construction supply company. He is expanding their operations in a new

province. He knows that in so far as construction materials are concerned, there is
not much difference in the quality offered by his company and other firms. His
business targets two types of customers: families planning to construct a new house
and businesses purchasing construction supplies from other firms. What individual
buying behavior and business buying situation should Jun expect? Explain your
answer.
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Challenge Yourself

Short Essay. Answer the following questions. Write your answers in the space provided.

1. Differentiate the business market from the consumer market.

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2. How is the consumer buying process different from the business buying process?
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3. What makes the buying roles assumed by business customers different from
consumer buying roles?
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Photo Credits
Photo of street during daytime, by shawnanggg is free for commercial use under the
Unsplash license via Unsplash.

White and red labeled pack on white shelf, by Franki Chamaki is free for commercial use
under the Unsplash license via Unsplash.

Two men working, by Etienne Girardet is free for commercial use under the Unsplash
license via Unsplash.

Bibliography
Davies, Eric. The Marketing Planning Coach. London: John Murray, 2014.
https://uk.bookshop.org/books/the-marketing-planning-coach-teach-yourself/97814
71801570.

Kotler, Philip, Veronica Wong, John Saunders, and Gary Armstrong. Principles of Marketing.
4th European edition. Harlow: Pearson Education Limited, 2005.
http://library.wbi.ac.id/repository/212.pdf.

Murray, Chris. The Marketing Gurus: Lessons from the Best Marketing Books of All Time.
New York, New York: Penguin Group (USA), 2006.

3.4. Consumer and Business Markets 20

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Philip Kotler, Philip and Gary Armstrong. Principles of Marketing,. 17th global edition.
Harlow: Pearson, 2017.
http://rezakord.com/uploads/91b0c5c8c158421fa332a449c435e1b4.pdf.

Solomon, Michael, Elnora Stuart, Auleen Carson, and J. Brock Smith. Marketing: Real
People, Real Decisions. Toronto, Ontario: Prentice-Hall, 2003.

3.4. Consumer and Business Markets 21