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%
100%
53%
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
Shelter
Apparel
Vehicles
Other
26%
14%
10%
13%
37%
100%
19%
20%
6%
23%
32%
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
“Jill”
Description
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
Segments
Major Banking
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