Types of market system

1.Consumer Markets:

It is a very wide market. It consists of the all the people who have some unsatisfied demand. The number of buyers is large in number. But since the purchases done by them are for the personal consumption and not to utilise it for selling or further production, individuals buy in small quantities. Because of the large number of consumers there is no close relationship between them and the manufacturer. Along with the large numbers the buyers as widely distributed also.
The entire world is consumer market. As there is large number of buyers and as these buyers are geographically widespread, there are a large number of middlemen the distribution channel. The purchase is small in quantity and the consumers have many alternatives to choose from. So they are very sensitive to price change. The demand in the consumer market is price elastic.

2.Business Markets:

Very different from the consumer market is the Business market. The business market consists of all the organisations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. Thus the business market do not purchase for personal consumption. These can be of two types:

a) Industrial markets:

Here, the major criterion is keeping production satisfied in order to that materials and components are available for incorporation in production process. The ultimate objective is to satisfy the needs of the company’s customers, be they intermediate manufacturers further down the production chain or end customers.

b) Resale markets:

This is the case where the principal criterion is the mark-up percentage that can be added to goods that are purchased from manufacturers and wholesalers in bulk and then resold to individual customers.
The major industries making up the business market are agriculture forestry, fisheries, mining, manufacturing, construction, transportation, communication, public utilities, banking, finance, insurance distribution and services. The features of business markets are distinctly different from the customer markets. Unlike the consumer market the business marketer normally deals with far fewer buyers. Goodyear Tyre Company’s fate depends on getting an order from one of the Big Three U.S. Automakers.
A few large buyers do most of the purchasing in such industries as aircraft engines and defense weapons. Because of the smaller customer base and the importance and power of the larger customers, suppliers are frequently expected to customise their offerings to individual business customer needs. Sometimes the buyers require the sellers to change their practices and performance. In recent years, relationships between customers and suppliers have been changing from downright adversarial to close and chummy.
All this is possible also because the number of buyers and sellers are small. The producers are geographically concentrated. This helps producers to reduce selling costs. At the same time business marketers need to monitor regional shifts of certain industries. Inspite of so many differences with the consumer market the demand for business goods is ultimately derived from the demand for consumer goods.
For this reason the business marketer must closely monitor the buying patterns of ultimate consumers. The sale of ball bearings of fans depends on the demand of fans in the market. Since the goods purchased are not for personal use but for production of goods to be supplied to customers, the demand doesn’t depend a lot on the price of the goods. The total demand for many business goods and services is inelastic, i.e. not much affected by price change.
For instance, shoe manufacturers are not going to buy much more leather if the price of leather falls nor are they going to buy much less leather if the price rises unless they can find satisfactory substitutes. Demand is especially inelastic in the short run because producers cannot make quick changes in production methods. Demand is also inelastic for business goods that represent a small percentage of the item’s total cost.
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Again the demand for business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output. Economists refer to this as the acceleration effect.
Sometimes a rise of only 10 percent in consumer demand can cause as much as a 200 percent rise in business demand for products in the next period; a 10 percent fall in consumer demand may cause a complete collapse in business demand.
Business goods are purchased by trained purchasing agents, who must follow the organisation’s purchasing policies, constraints and requirements. For example, business organisations request for quotations, proposals and purchase contracts, which are not typically found in consumer buying. Professional buyers spend their professional lives learning how to buy better.
Business marketers have to provide greater technical data about their product and its advantages over competitors’ products. Business marketers now put their products, prices, and other information on the Internet. Purchasing agents and brokers are able to access more information, more easily, than ever before.
In consumer market the consumer himself is the deciding person. But more people typically influence business- buying decision.
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Buying committees consisting of technical experts and even senior management are common in the purchase of major goods. The business buys are often technical purchases. So business marketers have to send well-trained sales representatives and often sales teams to deal with the well- trained buyers. Because more people are involved in the selling process, it takes multiple sales calls to win most business orders, and the sales cycle can take years.
Business buyers often buy directly from manufacturers rather than through intermediaries, especially items that are technically complex or expensive. Business buyers often select suppliers who also buy from them. An example would be a paper manufacturer buying chemicals from a chemical company that buys a considerable amount of its paper form that company.
Many industrial buyers lease instead of buy heavy equipment like machinery and trucks.