CHAPTER 2

MARKETS

MARKETS

Definition of Markets

•Buyers•Ability to Buy•Willingness to Buy

Consumer Market Segments

•Geographic•Demographic•Psychographic•Cultural/Racial

BUYERS

Consumer Markets Families Individuals

Business Markets Business Government

CHARACTERISTICS OF MARKETS

Consumer Business

Many buyers Few buyers

Small purchases Large purchases

Direct demand Derived demand

DERIVED DEMAND

U.S. Steel Ford Buyer

The amount of steel sold by U.S. Steel to Ford is

derived (influenced) by how many cars Ford sells.

Intel Dell Buyer

The number of computer chips sold by Intel to Dell is

derived by how many PC’ s Dell sells.

ABILITY TO BUY

Income

Credit

Bartering

CONSUMER INCOME

Gross Income – Total income (paycheck) before any deductions

Disposable Income – Total income minus taxes

Discretionary Income – Total income minus taxes and basic needs

U.S. RETAIL SALES BY PAYMENT

Store Payment 1995 2003

Cash 60% 32%

Checks 30% 15%

Credit/Debit Cards 10% 53% 100% 100%

BARTERING

The negotiated exchange of goods for other goods instead of cash or credit.

Examples

•Tutor a student in exchange for mowing your lawn

•Trading radio time for Astro Tickets

WILLINGNESS TO BUY

Consumer Spending

U.S. Beverage Market

Favorite Sports

CONSUMER SPENDING

Category Examples

Durable Goods Furniture, TV

Nondurable Goods Food, Beer

Services Travel, Education

U.S. Consumer Expenditures(Percent)

Category 1970 2000

Durable Goods 13.1 12.1

Nondurable Goods 41.9 29.8

Services 45.0 58.1

U.S. CONSUMER SPENDING

Category 1960 1990

Food and Alcohol 26% 19%

Shelter 14% 20%

Apparel 10% 6%

Vehicles 13% 23%

Other 37% 32%

100% 100%

U.S. BEVERAGE MARKET SHARE

Beverage 1960 1990

Milk 34% 13%

Coffee 32% 12%

Beer 14% 20%

Soft Drinks 11% 36%

U.S. FAVORITE SPORT

Time Pro Football Pro Baseball

1985 24% 23%

1997 28% 17%

2004 30% 15%

CHANGES IN FAMILY DINNERS

Take-outs

Fast Foods

Plan-overs

CONSUMER MARKET SEGMENTS

Geographic

Demographic

Psychographic

Cultural/Racial

GEOGRAPHIC MARKET SEGMENTS

Rural Areas

Suburbs

Cities

Global

DEMOGRAPHIC MARKET SEGMENTS

Age

Income

Sex

Education

HIGH INCOME MARKET SEGMENTS

Tiffany

Rolex

Porshe

PSYCHOGRAPHIC MARKET SEGMENTS

Lifestyles Business Examples

“Jill” Best Buy

Free Spirit Harley-Davidson

Organic Eater Whole Foods

LIFESTYLE TARGET MARKETS FOR BEST BUY

Markets Description

“Jill” Busy suburban mom

“Ray” Family man who wants his technology practical

“Barry” Affluent professional male

CULTURAL/RACIAL MARKET SEGMENTS

Cultural/Racial Business Example

Black Angel Books

Hispanic Bank of America

Vietnamese Kim Son

BANK OF AMERICA MARKET STRATEGY

Hispanic Market Major Banking

Segments Services

New Arrivals Basic bank services

Transitionals Mortgages, IRA’s

Established Brokerage services

HISPANIC RICE USERS

Cuban Puerto Rican Mexican

White rice White rice Mexican rice

Black beans Pink beans Pinto beans

Crackers None Tortillas