CHAPTER 2
MARKETS
MARKETS
• Definition of Markets
• Consumer Market Segments
• Gray Markets
DEFINITION OF MARKETS
• Buyers
• Ability to Buy
• Willingness to Buy
BUYERS
• Consumer Markets
• Business Markets
CHARACTERISTICS OF MARKETS
Consumer
Business
Many buyers
Few buyers
Smaller purchases
Larger purchases
Direct demand
Derived demand
Geographically Dispersed
Geographically concentrated
DERIVED DEMAND EXAMPLES
 Intel
 U.S. Steel
 Component parts
ABILITY TO BUY
 Income
 Credit/Debit
 Bartering
CONSUMER INCOME
• Gross Income – Total income 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
2010
Cash
60%
20%
Checks
30%
0%
Credit/Debit Cards
10%
100%
80%
100%
AVERAGE CREDIT CARD DEBT
(per U.S. Household)
1996
$5,900
2001
$8,200
2008
$10,600
2014
?
CREDIT/DEBIT PROBLEM
• Student Loans
• NINJA Loans
• Overdraft Fees
NINJA MORTGAGE LOANS
IN CALIFORNIA
• No income
• No job
• No assets
PREPAID DEBIT CARDS
2009
29 Billion
2014
90 Billion
BARTERING
Negotiated exchange of products and
services for other products or services
instead of cash or credit
BARTERING EXAMPLES
• Radio ads for Astros tickets
• Bartering on E-bay
• Showrooming Bartering
ULTIMATE BARTERING BY
CALIFORNIA TEEN
Started with a cell phone
Ended with a Porsche automobile
WILLINGNESS TO BUY
• Consumer Spending
• U.S. Beverage Market
• U.S. Favorite Sport
CONSUMER SPENDING
Category
Examples
Durable Goods
Furniture, TV
Nondurable Goods
Food, Beer
Services
Travel, Education
U.S. BEVERAGE MARKET
Beverage
1960
2000
Milk
34%
13%
Beer
14%
20%
Soft Drinks
11%
36%
U.S. FAVORITE SPORT
Time
Pro Football
Pro Baseball
1985
24%
23%
2010
30%
16%
CONSUMER MARKET SEGMENTS
• Geographic
• Demographic
• Lifestyle
• Cultural/Racial
GEOGRAPHIC MARKET SEGMENTS
• Cities
• Rural Areas
• Suburbs
DEMOGRAPHIC MARKET SEGMENTS
• Age
• Income
• Sex
• Education
LIFESTYLE MARKET SEGMENTS
• Harley-Davidson Motorcycles for Women
• Tattoos
• Condos for singles
CULTURAL/RACIAL MARKET SEGMENTS
• African American
• Hispanic
• Asian
• Gay
AFRICAN AMERICAN ENTREPRENEURS
• George Foreman
• Beyonce Knowles
• Jay-Z
• Oprah Winfrey
Hispanic Rice Users
Cuban
Puerto Rican
Mexican
White Rice
White Rice
Mexican Rice
Black Beans
Pink Beans
Pinto Beans
Crackers
None
Tortillas
GROWTH OF IMMIGRANT
ENTREPRENEURS IN HOUSTON
• Inexpensive real estate
• No zoning regulations
• Relatively low labor costs
• Affordable housing
GRAY MARKETS
Buying in low-price markets and selling in
high-price markets
(concept of arbitrage)
GRAY MARKET EXAMPLES
• Wine
• Prescription Drugs
• College Textbooks