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Industrial Market

Nicolaas Ackermann, Ashley Johns
  • Author
    Nicolaas Ackermann

    Nicolaas has four years of professional work experience - having worked in hospitality, journalism, and marketing. He has a BA in Communication studies from the North-West University and has completed his TEFL qualification. He also has six years of writing experience complementing his qualified competence.

  • Instructor
    Ashley Johns

    Ashley has taught college business courses and has a master's degree in management.

Learn the industrial market definition and understand how it works. Study industrial market segmentation and how the nested approach is used in industrial markets. Updated: 04/20/2022

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Industrial Market Definition

The industrial market definition is a business-to-business sales where one business serves as a consumer and purchases goods from another business. This market is also called the business market. Consumption in the industrial market does not take place as it does in conventional markets. When businesses consume products that they have bought from another business, it commonly takes the form of economic investment. Businesses buy goods and services from other businesses to invest in themselves with the objective of increasing functionality and profits. Compared to the consumer market, the industrial market differs wildly. Consumers in the industrial market do not consume like consumers in the consumer market. Businesses' consumption of a product relates to selling it or investing in it, whereas consumers' consumption commonly refers to the disappearance of the product like eating the banana that they have bought.

What is Market Segmentation?

Market segmentation is the process of dividing the market into groups according to a set of distinctions. Analysts normally conduct market segmentations with the goal of better understanding a market and/or gaining specific insights about it. The purpose is to determine when the consumers are most likely to make a purchase. The importance of segmenting a market is found in how it helps a company to formulate a business strategy that would be most suitable for capitalizing on certain market demands. Segmentation is the ideal tool for the consumer-centric economy of today. Unlike traditional markets, modernized markets are completely built around the consumer's needs. This is what makes segmentation such an imperative component in the industrial market.

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  • 0:00 What is the Industrial Market?
  • 0:29 What is Segmentation?
  • 0:43 Nested Approach
  • 4:56 Lesson Summary
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Industrial Market Segmentation Approach

When segmenting a market, companies have a number of metrics that they can use. They can segment markets geographically, demographically, psychographically, and/or behaviorally. Since companies struggle with the overarching economic problem of satisfying unlimited demand with limited resources, segmentation allows companies to focus on those limited resources more effectively to satisfy those unlimited needs. Considering the tremendous amounts of money and value that are exchanged on a business-to-business basis in the industrial market, it is even more important to be able to correctly identify one's target audience. The industrial market can be segmented in different ways but the nested approach is the most common approach.

Nested Approach

The nested approach segments the market into layers, beginning with the largest section, the outside layer, and moving inward. As the name of this approach suggests, distinctive categories are nested together and are studied as such. Defining categories like this enables companies to better understand their target audience via an easy method of analysis. It is due to how the nested approach addresses the most pertinent and relevant aspects of the industrial market that makes it the most popular approach to analyzing markets. The layers of the nest approach include demographics, operating variables, purchasing approach, situational factors, and personal characteristics. All of these factors examine a variety of key market elements.

Demographics

The outside layer of the nested approach is demographics. It is the largest layer that is the easiest to analyze. Demographic factors form the basis of the entire analysis. As the most simple layer, it lays the grounds for the study of ensuing layers. Demographics capture a wide range of population metrics. Concerning the business market, these metrics commonly include the size of companies, the industries they operate in, the nature of the product that they deliver, and their culture.

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Frequently Asked Questions

What is the difference between consumer market and industrial market?

The consumer market is made up of companies selling products to individuals. On the contrary, the industrial market comprises companies selling products to other companies.

What is the meaning of industrial market?

It is a marketplace that is exclusively made up of companies. In this space, companies sell products to other companies that use them for their own gain.

What are the characteristics of the industrial market?

The industrial market is characterized by how it is made up of fewer markets than the consumer market. The uniqueness of its consumers is found in the fact that they, similar to suppliers, also provide goods and services.

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