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Evidence · B2B marketing

B2B market structure: competition, market share and concentration

Business purchasing shows the same statistical regularities as consumer buying: studies of aviation fuel, foreign exchange, surgical components and industrial resins find Dirichlet-type patterns of share, penetration and repeat buying. Market share pays off, but less than often assumed and less for B2B firms than for consumer firms. Depending heavily on a few large customers can hurt a supplier's profits, although studies disagree on whether the effect is steadily negative or first positive and then negative.

Definition

Market structure describes who competes with whom, how buyers split their purchases across suppliers, how concentrated buyers and sellers are, and what a larger share is worth. In business markets it also covers how to draw the boundaries of a market from the customer's side, by asking which offerings buyers actually treat as substitutes. The Dirichlet model is a statistical model of repeat buying that predicts, from market share alone, how many buyers a brand should have and how loyal they should be.

What the research finds

B2B buying follows Dirichlet-type regularities

Aviation fuel contracts show the share, penetration and repeat-buying patterns known from consumer goods, as does foreign exchange bought by large multinationals from banks in four countries. The same model described purchase and loyalty in two industrial markets for surgical components, and the negative binomial distribution fitted a year of purchases of industrial plastic resins.[1][2][3][4][5]

Brands share customers in proportion to their size

In retail financial services, customers split their business across brands in line with market share, and brands with similar images did not form separate sub-markets. Industry reports describe the same share-driven pattern among B2B brands.[6][7][8]

Market share pays, but less than assumed

A meta-analysis of 863 elasticities from 89 studies puts the average elasticity of financial performance to market share at .132, lower than for other intermediate marketing metrics, and lower for B2B firms than for consumer firms. Variance studies of profitability find business-unit effects larger than industry effects: in one, business-specific factors explained 32 percent of profit variance and industry 19 percent.[9][10][11]

Define the market by what customers substitute

Classic methods test competitive market structures against substitution and substitution-in-use data rather than managerial intuition, and show that the use situation changes which products compete. Dirichlet benchmarks show what penetration and loyalty are normal for a brand of a given size, and a recent conceptual paper argues that brands compete across the whole category rather than in protected segments.[12][13][14][15]

Customer concentration cuts both ways for suppliers

Among 717 U.S. public suppliers, a more concentrated set of major customers lowered next-year return on assets and sales, while mutual dependence raised them. Among 1,040 Chinese listed manufacturers the relationship was an inverted U, with moderate concentration paying and high concentration hurting. Earlier survey evidence found that technical capability and alternative key customers reduce a large buyer's power advantage.[16][17][18]

Heavy buyers matter less than the 80/20 rule suggests

In consumer data, a brand's heaviest 20 percent of buyers usually account for only about 60 percent of sales, and many of them buy less the following year. Big brands have buyers who purchase the category less often, and a brand's customer base roughly doubles when the time window moves from a quarter to a year. These patterns come from consumer markets and have not been measured directly in B2B.[19][20][21][22]

How strong is the evidence?

The evidence that B2B buying follows Dirichlet patterns is peer reviewed and has been replicated, but it covers few categories (aviation fuel, foreign exchange, financial services, medical components, resins) and comes largely from researchers associated with one institute, the Ehrenberg-Bass Institute. The resin study used data from a single supplier. Evidence on how B2B brands share customers is from non-peer-reviewed industry reports. Market-definition methods are classic but old and were developed on consumer data. The two archival studies of customer concentration disagree on the shape of the effect, with different samples and model forms, so no single optimal level of concentration can be stated. The 60/20 pattern rests partly on a working paper, and the department store study found a stronger concentration, with the top 20 percent of spenders providing 71 percent of revenue. Whether growth in B2B comes more from new buyers than from deeper accounts, and how far doing nothing competes with suppliers, are transferred implications from consumer research rather than measured B2B results.

Claims tested against the evidence

References

  1. A.S.C. Ehrenberg (1975). The structure of an industrial market: Aviation fuel contracts. Industrial Marketing Management.
  2. Mark D. Uncles, Andrew S.C. Ehrenberg (1990). Industrial buying behavior: Aviation fuel contracts. International Journal of Research in Marketing.
  3. Douglas Bowman, Shilpa Lele-Pingle (1997). Buyer behavior in business-to-business services: The case of foreign exchange. International Journal of Research in Marketing.
  4. James McCabe, Philip Stern, Scott G Dacko (2013). Purposeful empiricism: How stochastic modeling informs industrial marketing research. Industrial Marketing Management.
  5. John Wilkinson, Giang Trinh, Richard Lee, Neil Brown (2016). Can the negative binomial distribution predict industrial purchases?. Journal of Business and Industrial Marketing.
  6. John Dawes (2014). Patterns in competitive structure among retail financial services brands. European Journal of Marketing.
  7. Jenni Romaniuk How do B2B brands compete (2021). How do B2B brands compete?.
  8. Jenni Romaniuk, John Dawes, Byron Sharp, Arry Tanusondjaja, Magda Nenycz-Thiel (2021). How B2B Brands Grow. Ehrenberg-Bass Institute / LinkedIn B2B Institute.
  9. Alexander Edeling, Alexander Himme (2018). When Does Market Share Matter? New Empirical Generalizations from a Meta-Analysis of the Market Share–Performance Relationship. Journal of Marketing.
  10. Richard P. Rumelt (1991). How much does industry matter?. Strategic Management Journal.
  11. ANITA M. McGAHAN, MICHAEL E. PORTER (1997). HOW MUCH DOES INDUSTRY MATTER, REALLY?. Strategic Management Journal.
  12. Glen L. Urban, Philip L. Johnson, John R. Hauser (1984). Testing Competitive Market Structures. Marketing Science.
  13. Rajendra K. Srivastava, Mark I. Alpert, Allan D. Shocker (1984). A Customer-oriented Approach for Determining Market Structures. Journal of Marketing.
  14. Andrew S. C. Ehrenberg, Mark D. Uncles, Gerald J. Goodhardt (2004). Understanding Brand Performance Measures: Using Dirichlet Benchmarks. Journal of Business Research.
  15. Byron Sharp, John Dawes, Kirsten Victory (2024). The Market-Based Assets Theory of Brand Competition. Journal of Retailing and Consumer Services.
  16. Yoon Hee Kim (2017). The Effects of Major Customer Networks on Supplier Profitability. Journal of Supply Chain Management.
  17. Zhaojun Han, Conghui Yu, Yanxi Li, Jinyan Shi, Yuanyuan Liu (2023). Customer concentration and supplier financial performance: An inverted U-shaped relationship. Industrial Marketing Management.
  18. Douglas W. LaBahn (1999). Avoiding Over-Reliance on a Single Large Customer: The Impact of Technical Capability, Product Development and Alternative Key Customers. Journal of Business-to-Business Marketing.
  19. Byron Sharp, Jenni Romaniuk, Charles Graham (2019). Marketing’s 60/20 Pareto Law. SSRN Electronic Journal.
  20. Arry Tanusondjaja, Jenni Romaniuk, Magda Nenycz‐Thiel, Mototaka Sakashita, Vijay Viswanathan (2022). Examining Pareto Law across department store shoppers. International Journal of Market Research.
  21. John Dawes (2020). The Natural Monopoly Effect in Brand Purchasing: Do Big Brands Really Appeal to Lighter Category Buyers?. Australasian Marketing Journal.
  22. Charles Graham, Rachel Kennedy (2021). Quantifying the Target Market for Advertisers. Journal of Consumer Behaviour.

Bibliographic details only. Follow the DOI to read each study at its publisher.

Related topics

A synthesis of 22 studies, written by ScholarSignal. Last reviewed 2026-09-26.

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