A market is simply a combination of buyers and sellers. These two groups can meet in a physical place (a shop, for example) or can meet across miles, aided by telecommunications (increasingly, the internet). They meet to buy and sell goods or services. The term “Market” is simply a short hand for “any place or situation where , two or more people meet to exchange goods or services”.
A set up where two or more parties engage in exchange of goods, services and information is called a market. The two parties involved in a transaction are called seller and buyer.
The seller sells goods and services to the buyer in exchange of money. There has to be more than one buyer and seller for the market to be competitive.
If you are in business selling a good or a service, you need to know about the market you are selling in – is it a busy one with lots of competitors (other businesses trying to sell the same product), or are there very few competitors? The type of market you operate in will have a big influence on your success.
TYPES OF MARKETS
1) CONSUMER MARKET
An individual who buys products or services for personal use and not for manufacture or resale is a consumer. A consumer is someone who can make the decision whether or not to purchase an item at the store, and someone who can be influenced by marketing and
advertisements. Any time someone goes to a store and purchases a toy, shirt, beverage, or anything else, they are making that decision as a consumer.
The consumer market represents individuals and families purchasing goods and services for personal consumption.
CHARACTERISTICS OF CONSUMER MARKET
The consumer market pertains to buyers who purchase goods and services for consumption rather than resale. However, not all consumers are alike in their tastes, preferences and buying habits due to different characteristics that can distinguish certain consumers from others. These particular consumer characteristics include various demographic, psychographic, behaviorialistic and geographic traits. Marketers usually define these consumer characteristics through market segmentation, the process of separating and identifying key customer’s groups. Which are:
- Demographic Characteristics: Characteristics of consumer markets based on demographics include differences in gender, age, ethnic background, income, occupation, education, household size, religion, generation, nationality and even social class. Most of these demographic categories are further defined by a certain range. For example, companies may identify the age of their consumers in the 18 to 24, 25 to 34, 35 to 54, 55 to 65, and 65+ age groups. Companies often identify these demographic characteristics through market research surveys used to discover which demographic groups comprise the majority of their customer base. Companies can then target their advertising towards these demographic groups. For example, a new cell phone may be targeted toward 18 to 24-year-olds with incomes between 325,000 and 350,000.
- Psychographic Characteristics: Consumer market characteristics can also be psychographic in nature. Psychographic characteristics of consumers include interests, activities, opinions, values and attitudes. Obviously, many magazines are geared toward a consumer’s interest. For example, prenatal magazines target expectant mothers who are interested in learning more about caring for a baby. Additionally, consumer activities can include participation in martial arts or basket weaving. Opinions and attitudes can be both specific or general. A company may better understand consumer opinions and attitudes after conducting a focus group, and can use that information to tailor advertising or marketing campaigns. Consumer values can pertain to how a group of individuals feels about certain social issues, which can be of interest to nonprofit or charitable organizations.
- Behaviouralistic Characteristics: Behaviouralistic characteristics can also be garnered through marketing research. Behaviouralistic characteristics of consumer markets include product usage rates, brand loyalty, user status or how long they have been a customer, and even benefits that consumers seek. Companies like to know how often their consumers visit their restaurants, stores or use their products.Company marketing departments usually try to distinguish between heavy, medium and light users, whom they can then target with advertising. Marketers like to know which customers are brand loyalists, as those consumers usually only buy the company’s brand.
- Geographic Characteristics: Consumer markets also have different geographic characteristics. These geographic characteristics are often based on market size, region, population density and even climate. A small retailer may find opportunities in a small market in which larger competitors have no interest. Companies that sell beachwear will likely sell more products in warmer climates. Consumers in different regions of the country also have different tastes in food and style.
2) ORGANIZATIONAL MARKET: These are individuals and companies who purchase goods and services for some use other than personal consumption.
The organizational buying process is entirely different from the consumer buying process. While buying decisions are made relatively easily and quickly by individual customers, organisational buying involves thorough and deep analysis. Organizations purchase products ranging from highly complex machinery to small components.
In an organization, the purchase decisions are influenced by several individuals and are not made in isolation by an individual. Organizational buyers are more concerned about the price and quality of the product along with the service being provided by the vendor. Price plays a major role, since the price of the raw materials is the investment from which profits are generated. Thus, price is a major factor which affects the profitability of the firm. Service also plays an important role, because no organization would like to buy goods from a vendor who cannot provide timely and efficient service.
Organizations adopt certain methods for buying products such as checking a sample before the actual purchase. Most organizational purchases involve purchase of products in large lots. So it is not feasible to individually inspect each and every item in the lot. In such situations, a sample is checked assuming that this sample represents the entire lot. Like the consumer markets, organizational markets also possess certain demand characteristics. The organizational demand for products or services may be inelastic, derived, joint or fluctuating in nature. Organizational markets normally purchase the goods or services for producing other goods and services, using these as raw materials. There are also resellers, who purchase the products to sell directly to other customers without any modifications. Apart from producers and resellers, there are also government and institutional customers who buy the goods. Government buys goods for public utility or for use in their departments or for production purposes.
The buying decisions of organizations are influenced by environmental factors, organizational factors, social factors and personal factors. Participants in the organizational buying process playas many as seven different roles, namely those of initiator, influencer, user, decider, approver, buyer and gatekeeper. Although organizations differ significantly from each other in their purchasing process, the various stages of industrial buying comprise problem recognition, general need recognition, product specification, value analysis, vendor analysis, order routine specification, multiple sourcing and performance review. Marketers need relevant information about the characteristics of the industries for marketing their goods and services effectively. To search for such information, the prime sources are government and industrial publications.
TYPES OF ORGANIZATIONAL MARKETS
- Producer: These are businesses that make or create goods or services. Producers Buy raw materials and machinery, often from other producers but sometimes from resellers. Marketing to producers requires technical expertise and a knowledge of the producer’s operations. Typical marketing strategies involve identifying problems in the producer’s industry or particular operations and proposing solutions that are cost-effective. Producers have a longterm view of markets since their needs change slowly. As a result, marketing to producers is usually based on long-term relationships.
- Reseller: Resellers buy finished goods and resell them to the next level in a given distribution channel. Resellers do not normally transform products that they sell. The product usually is re-sold without any modifications to the next channel member. However, there may be some value added by resellers. Occasionally resellers will bundle products from multiple manufacturers together. For example, a computer reseller may bundle together computer hardware and software and then offer the total package at a discounted price to the consumer. The key factor for marketing to resellers is to be aware of their added-value proposition. If the reseller is a wholesale company offering low prices for high volume, marketers must develop proposals which address this characteristic. If the company buys specialized equipment according to specifications and re-sells it to customers based on high quality and reliability, the marketing will be different.
- Government market: The government market consists of government units at federal, state and local levels. Agencies at all levels purchase goods and services used in performing critical government functions. Governments are huge customers of all kinds of products.