Types of Markets

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.

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.

Christmas 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 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 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.

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.

Ice 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.

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.

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.

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.