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Unformatted text preview: Synthesis 10. Explain the four concepts of business demand.
DERIVED DEMAND. The demand for business products is derived from the demand for
consumer products. This is because organizations buy products to be used in the production of
consumer products. Therefore, firms must carefully monitor demand patterns in final consumer
INELASTIC DEMAND. The demand for business products tends to be price inelastic. This
means that changes in price will not significantly affect demand for the product.
JOINT DEMAND. Most business products involve the combination of many components into a final product. Joint demand occurs when two or more items are used in combination in a final
product. The text provides an example of microcomputer disk drives and memory chips.
FLUCTUATING DEMAND. The demand for business products tends to be more unstable than
the demand for consumer products. The multiplier effect explains how a slight change in
consumer demand can result in a significant change in demand for the facilities and equipment
needed to make the consumer product.
KEY: CB&E Model Customer OBJ: 07-6 TOP: AACSB MSC: BLOOMS Synthesis 11. Name and briefly describe five of the major differences between business and consumer markets.
There were several points of differentiation discussed in the chapter, and students can discuss any
DEMAND. There are several differences between business and consumer demand. Business
demand is derived from the demand of consumer products, tends to be price inelastic, has joint
demand with related products used in combination with the final product, and tends to be less
stable than consumer demand.
PURCHASE VOLUME. Business customers buy in much larger quantities than consumers.
NUMBER OF CUSTOMERS. Business marketers tend to have far fewer customers than
LOCATION OF BUYERS. Unlike consumers, business customers tend to be much more
DISTRIBUTION STRUCTURE. Channels of distribution tend to be much shorter in business
marketing. Direct channels are also more common.
NATURE OF BUYING. Business buying is usually more formalized with responsibility assigned
to buying centers or purchasing agents.
NATURE OF BUYING INFLUENCE. More people are involved in business purchasing
decisions than in consumer purchases, because many levels and departments of the firm are
involved in the purchase.
TYPE OF NEGOTIATIONS. Consumers are used to negotiating pricing of automobiles and real
estate; however, American consumers usually expect sellers to set the price and other conditions
of a sale. In contrast, negotiating is common in business marketing, with buyers and sellers
negotiating product specifications, delivery dates, payment terms, and other pricing matters.
USE OF RECIPROCITY. Business purchasers often buy from their customers and vice versa.
USE OF LEASING. Businesses often lease equipment, unlike consumers who more often
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- Fall '13