Mkt Segmentation Guide #5

In business-to-business categories, customers’ wants/needs can change quickly so that segmentation needs to be reviewed periodically.

Demand in business-to-business product categories is “derived” demand.  Business demand is derived from the demand for consumer goods and services.  The automobile industry’s demand for steel and aluminum is derived from the consumer demand for automobiles.  Sometimes one will have to trace the demand for business products and services backwards through multiple suppliers before the demand for a consumer good or service will be evident, but eventually it can be found.

Business markets are smaller than consumer markets.  Thus in many industries, a shift in demand by a few businesses will greatly influence the demand for any given business-to-business product or service category.  This is why business-to-business markets tend to be more cyclical than consumer markets.  For most business-to-business marketers, when sales are good they are very good; but when sales are bad they are very bad.