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Types of Markets

Types of Markets

The sales team owns the sales funnel. But as a B2B marketer, you feed the top of their funnel.

- Doug Kessler

How often has a business evaluated a consumer market to find it over-saturated with the competition? It is time to find a new concept and evaluate a different market, right? Pause for a moment. Is there a way to tailor a product or service that the aforementioned high quantity of competing businesses will want to buy? Or maybe there is a similar market need in another country with fewer competitors? These are ways marketers can use different types of markets to make the most out of every opportunity; read on to find out more!

Types of Markets in Marketing

A helpful utility in any marketer's tool kit is knowing the various market types - knowing the specifics and strengths will enable effective market strategies. There are four main categories of markets which differ based on the types of customers they serve and the types of goods or services they offer.

Business markets involve business-to-business sales; this can take the form of consulting agencies, intermediary goods, transportation companies, and many more. The main differentiator is that the business market is not selling to the individual consumer but rather another business.

Consumer markets are the final point of sale - businesses sell a product to the final consumer. Consumer markets include fast-moving consumer goods, clothes, automobiles, and mini-golf, to name a few.

Global markets occur when sales are made across country borders, cultures, languages, and lifestyles. This includes goods and services that utilise globally sourced production elements; many products have some aspect that was affected in some way by the global market.

Government markets are characterised by the vast public utility they provide, often without any direct cost of use. These products can be experienced nearly anywhere you go, whether it's the construction and maintenance of the road you travel on or the protection you experience provided by public safety enforcement.

Institutional markets involve buying goods and services to use within their own production of goods and services. These markets tend to experience inelastic demand for providing services such as healthcare, education, and prisons.

Each of these markets has areas of overlap; however, they also have vastly different requirements and conditions to account for.

Types of market refer to how the structure of seller and buyer is formatted in a particular situation - market types include business, consumer, global and institutional.

Continue reading to learn more about the specifics of each market type.

Types of Markets: Government and Institutional Markets

Institutional markets can be identified by serving societal necessities with inelastic demand, as citizens will require some level of service throughout the natural course of their life. Common examples of these markets in many countries may include education, healthcare, public safety, and public transit. Institutional markets can be funded privately and publicly, depending on how the economy is structured.

Government markets occur when firms sell goods and services to a government. Many firms sell a portion of their production, in some cases all of their production, to the government. Government markets tend to be inelastic and react slowly to market changes, allowing businesses to hold contracts longer than in open competition.

Government markets, however, are risky as political agendas can disrupt them. These markets suffer two-faced scrutiny. One side critiques the effectiveness of the public service and its equity. In contrast, the other side critiques its costs and ability to generate revenue.

Types of Markets: Global Markets

Throughout time, transportation and information costs have been trending downward. What started as marathon runners in Greece couriering messages is now email, telecommuting to meetings, and cheap air travel. The availability of global possibilities is constantly increasing. Products that have stagnated in domestic markets can find new life in different cultures and lands, often requiring modifications but less costly than new ventures.

Types of Markets Christmas Colonel Sanders in Japan StudySmarterChristmas Colonel Sanders in Japan, Wikimedia Commons

Deciding whether to go global is a massive undertaking as it requires a careful balance of standardisation and local adaption. The effect of a product should be universal. However, differences in urban structures can make certain goods impractical in their domestic form. For example, many consumers may like giant SUVs, but they are impractical in places such as Tokyo, as they are too big for a densely packed urban environment.

Global markets occur when a firm operates in multiple countries, utilising any production and
financial advantages, and shared research and development (R&D) information.

Global markets bring a bounty of advantages and disadvantages unique to each venture. Global market disruptions such as political instability, trade barriers, market instability, and regulations play a significant role.

Variations in regulation can lead to positive outcomes such as cheaper production costs. For example, many developing nations keep regulatory mechanisms loose to attract foreign business. Adversely, flexible regulations can result in foreign companies taking advantage of unethical business practices.

Western countries have strict patent and copyright laws encouraging costly research to develop products; however, unregulated markets may skirt it and produce a knock-off.

Types of Markets: Consumer Market and Organisational Market

Consumer and organisational or business-to-business (B2B) markets are two different types of markets. The difference starts with how the buyer utilises the product, leading to various marketing strategy differences.

Consumer market definition

A consumer market is defined as the final purchase point of a good or service, whose value is consumed and utilised by the buyer. Buyers in a consumer market do not resell or utilise these products to generate another product for profit. This excludes post-use selling on second-hand markets. Consumer markets examples are bowling, screwdrivers, fancy dinners, housing, bus passes, cell phones, etc.

The consumer market includes households and individual customers who purchase goods and services for their own consumption or benefit.

The marketing mix is a widely used marketing concept, which includes product, price, promotion, and place. How the marketing mix takes form can vary depending on the type of market. Consumer markets respond strongly to convenience and small purchases. This characteristic contrasts with B2B environments that have strong preferences for large quantities.

In the example below, consider two marketers attempting to cater their offering conveniently and appealingly to the customer.

One marketer is selling raw materials to manufacturers. They drive a truck fully loaded with over 30,000 kg of materials. They drive factory to factory, attempting to sell their goods. However, the factories don't have immediate storage available. Some may even prefer a larger quantity for a better price.

Compare this to an ice cream truck, which drives its wares around on blisteringly hot days through neighbourhoods as customers frantically gather to purchase a single item each.

The example above shows how identical marketing techniques for different market types can yield different results. The ice cream truck meets its chosen location's demands - parks, basketball courts, and neighbourhoods. They also sell a lower quantity per customer, requiring less product on hand. This is possible because ice cream is consumed immediately and isn't part of another production process.

Types of Markets Ice cream truck serves customers at the water StudySmarterIce cream truck serving customers, Wikimedia Commons

Organisational or business markets

Organisational markets and business markets are the same concepts; they both refer to groups or businesses that provide a good or service to other businesses. They can seem similar to consumer markets because they involve how retailers and consumer-facing markets are structured. Check this example below for clarity on the difference.

Retailers can engage in both business markets and consumer markets. When retailers buy from several manufacturers intending to sell the goods, they engage with business or organisational markets. The retailer then compiles various goods and presents them to the buyer who will consume the good, which is a consumer market. They operate in the middle of both markets; that is why they are often referred to as middlemen.

Why do organisational markets exist? For certain manufacturers, it's easier to let another company handle the various steps of the journey of a product to consumers. In the same way that factories experience economies of scale, transportation costs are similar; that is why 3rd party shippers pick up many factory products. A recent study correlates this as it shows only 40%1 of producers sell directly to customers, though that number is trending upwards.

Organisational markets tend to be inelastic, meaning not as responsive to changes in price. This is because the organisational market products are a piece of the recipe for providing consumer goods. This is known as derived demand. Manufacturers only demand input materials because of consumer demand for the final product.

Products sold in organisational or business markets have distinct features that aren't as important in other markets. One of the most prominent features is an emphasis on return on investment (ROI). Another feature is that generally, products are purchased in large quantities to minimise cost. Additionally, these products don't require special packaging.

Business Markets Examples

Business markets can take many forms, such as consulting, financial services, marketing services, etc. An example of a firm that operates in a business market is EMDR Consulting.

EMDR Consulting offers training courses for a unique psychotherapy technique called EMDR. According to their FAQ, they provide the following to mental health professionals enrolling in their course.

  • 20 hours of didactic (lecture) – in-class learning (in-person or virtual)
  • 20 hours of experiential practice – in-class learning (in-person or virtual)

This training course provides mental health practitioners with a new technique to better address their customer's needs.2

The example above demonstrates how training and consulting are marketed to mental health practitioners, aiding their practices in providing more options to meet their customers' needs.

However, business markets can take many forms. Many well-established products loved by millions of customers aren't advertised or sold directly to customers. Consider Gorilla Glass; you may not have even heard of them; however, they might be in your pocket within arms reach as you read this. Gorilla glass is a specially reinforced glass used in many smartphones and laptops. While the manufacturer does sell directly to customers, their primary business is supplying glass to nearly every major laptop brand you could name.

There are many cost-reduction agencies that businesses can outsource things to, such as unemployment cost control.

Thomas & Company3 offers services to mitigate unemployment costs that a company may be required to pay per government regulation. One of the services they offer is unemployment cost management, where they aid businesses in mitigating regulation expenses and benefits to recently separated employees.

The key appeal of a service like Thomas & Company is that the pay incentive is well structured. The more money they can save a business, the higher they can justify their pay.

Considering the nuances and opportunities the various types of markets provide will aid any business in maximising its outcome.

Types of Markets - Key takeaways

  • There are five main types of markets: consumer, business, institutional, government and global.
  • Consumer markets offer freedom over product design and have a large and diverse customer base.
  • Business markets provide tools to other businesses that aim to improve their business, from consulting to financial and advertising services.
  • Institutional markets involve buying goods and services to use within their own production of goods and services. They can either be publicly or privately funded.
  • Global markets occur when a firm operates in multiple countries, utilising any production andfinancial advantages, and shared research and development (R&D) information.

References

  1. https://www.scalefast.com/why-brands-should-consider-selling-direct-to-consumer/
  2. https://emdrconsulting.com/
  3. https://thomas-and-company.com/

Frequently Asked Questions about Types of Markets

The two main types of markets are Consumer and Business markets. However, there are others such as government markets, institutional markets, and global markets.

A monopolistic market is one that has a single producer and artificial or natural barriers to entry. This single producer is not subject to competition in the free market and can output at whatever price or quality they choose.

A captive market is when consumers have no choice but to buy from a producer.

Perfect Competition

Imperfect Competition

Oligopoly

Monopoly

The two main types of markets are consumer and business markets. Consumer markets provide products to aid in people's livelihood. Business markets sell goods and services to other businesses.

Final Types of Markets Quiz

Question

What is a business market?

Show answer

Answer

Business markets involve business-to-business sales, this can take the form of consulting agencies, intermediary goods, transportation companies, and many more. The main differentiator is that the business market is not selling to the individual consumer.

Show question

Question

What is a consumer market?

Show answer

Answer

The consumer market includes households and individual customers who purchase goods and services for their own consumption or benefit.

Show question

Question

What is a government market?

Show answer

Answer

Government markets are characterized by the vast public utility they provide, often without any direct cost of use. These products can be experienced nearly anywhere you go, whether it's the road you travel on or the protection you experience provided by public safety enforcement.

Show question

Question

Schools, public safety, national defense, and public structure construction are examples of what kind of market?

Show answer

Answer

Government markets

Show question

Question

Groceries, clothes, car washes, and mini-golf belong to what kind of market?

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Answer

Consumer market

Show question

Question

______ sell solutions and tools to aid others in production.

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Answer

Business markets

Show question

Question

This market typically requires a blend of adaptation and standardization of products.

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Answer

Global markets

Show question

Question

Which of the following is an example of a consumer market product?

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Answer

Wrenches sold at an auto repair shop.

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Question

Which of the following is an example of a global market product?

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Answer

Wrenches sold at an auto repair shop.

Show question

Question

Which of the following is an example of a business market product?

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Answer

Wrenches sold at an auto repair shop.

Show question

Question

Which of the following is an example of a government market product?

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Answer

Wrenches sold with an attachment for metric or imperial sizes.

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Question

Organizational markets, business markets, and B2B all follow the same market structure.

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Answer

True

Show question

Question

This kind of market has regulation and public scrutiny.

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Answer

Government market

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Question

Winter coats were a huge success in Iceland, based on what we know about global markets they will sell great in Libya.

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Answer

True

Show question

Question

Lowering transportation costs and advances in communication have bolstered what kind of markets?

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Answer

Global markets

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