CHAPTER 2CHAPTER 2

MARKETSMARKETS

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% 80% 100% 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 BYCALIFORNIA 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