Derived and Fluctuating Demand
The characteristic of B2B markets that is most opposite of B2C markets is the concept of derived and fluctuating demand. These concepts explain why when consumer purchasing goes down, the effect on the economy is multiplied by all the transactions that occur throughout the channels. A slowdown in consumer spending is not good for the economy.
Here are some examples of derived demand.
A good way to illustrate derived demand is with an example. Observe the increase in tourism that often occurs after a specific location is featured in a blockbuster movie. What businesses might be impacted? Airlines, hotels, AirBNB, restaurants, Uber, and tour guides, of course.
This happened with Mexico City following the release of the 2015 James Bond film Spectre which prominently featured the city in the opening sequence.
Following the success of the Bond film, Mexico City decided to create a “Day of the Dead” experience similar to the film’s opening sequence parade to entertain expected tourists. Companies outside of the typical travel space (e.g., artisans, craftspeople, construction workers) also had to increase capacity to meet this demand. That is derived demand.
Marcus, L. (2020, February 13). Made for travel: When tourists demand something to see. https://www.cnn.com/travel/article/purpose-built-tourist-attractions-intl-hnk/index.html
Can you think of another situation similar to the tourism effect in which derived demand was created by something that happened in the external environment, something that caused other companies to sell their products to meet new demand?