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CHAPTER 2CHAPTER 2
MARKETSMARKETS
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MARKETS
• Definition of Markets
• Consumer Market Segments
• Gray Markets
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DEFINITION OF MARKETS
• Buyers
• Ability to Buy
• Willingness to Buy
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BUYERS
• Consumer Markets
• Business Markets
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CHARACTERISTICS OF MARKETS
Consumer Business
Many buyers Few buyers
Smaller purchases Larger purchases
Direct demand Derived demand
Geographically Dispersed Geographically concentrated
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DERIVED DEMAND EXAMPLES
Intel
U.S. Steel
Component parts
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ABILITY TO BUY
Income
Credit/Debit
Bartering
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CONSUMER INCOME
• Gross Income – Total income before any deductions
• Disposable Income – Total income minus taxes
• Discretionary Income – Total income minus taxes and basic needs
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U.S. RETAIL SALES BY PAYMENT
Store Payment 1995 2010
Cash 60% 20%
Checks 30% 0%
Credit/Debit Cards 10% 80% 100% 100%
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AVERAGE CREDIT CARD DEBT(per U.S. Household)
1996 $5,900
2001 $8,200
2008 $10,600
2014 ?
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CREDIT/DEBIT PROBLEM
• Student Loans
• NINJA Loans
• Overdraft Fees
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NINJA MORTGAGE LOANS IN CALIFORNIA
• No income
• No job
• No assets
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PREPAID DEBIT CARDS
2009 29 Billion
2014 90 Billion
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BARTERING
Negotiated exchange of products and
services for other products or services
instead of cash or credit
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BARTERING EXAMPLES
• Radio ads for Astros tickets
• Bartering on E-bay
• Showrooming Bartering
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ULTIMATE BARTERING BYCALIFORNIA TEEN
Started with a cell phone
Ended with a Porsche automobile
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WILLINGNESS TO BUY
• Consumer Spending
• U.S. Beverage Market
• U.S. Favorite Sport
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CONSUMER SPENDING
Category Examples
Durable Goods Furniture, TV
Nondurable Goods Food, Beer
Services Travel, Education
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U.S. BEVERAGE MARKET
Beverage 1960 2000
Milk 34% 13%
Beer 14% 20%
Soft Drinks 11% 36%
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U.S. FAVORITE SPORT
Time Pro Football Pro Baseball
1985 24% 23%
2010 30% 16%
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CONSUMER MARKET SEGMENTS
• Geographic
• Demographic
• Lifestyle
• Cultural/Racial
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GEOGRAPHIC MARKET SEGMENTS
• Cities
• Rural Areas
• Suburbs
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DEMOGRAPHIC MARKET SEGMENTS
• Age
• Income
• Sex
• Education
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LIFESTYLE MARKET SEGMENTS
• Harley-Davidson Motorcycles for Women
• Tattoos
• Condos for singles
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CULTURAL/RACIAL MARKET SEGMENTS
• African American
• Hispanic
• Asian
• Gay
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AFRICAN AMERICAN ENTREPRENEURS
• George Foreman
• Beyonce Knowles
• Jay-Z
• Oprah Winfrey
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Hispanic Rice Users
Cuban Puerto Rican Mexican
White Rice White Rice Mexican Rice
Black Beans Pink Beans Pinto Beans
Crackers None Tortillas
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GROWTH OF IMMIGRANT ENTREPRENEURS IN HOUSTON
• Inexpensive real estate
• No zoning regulations
• Relatively low labor costs
• Affordable housing
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GRAY MARKETS
Buying in low-price markets and selling in high-price markets
(concept of arbitrage)
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GRAY MARKET EXAMPLES
•Wine
•Prescription Drugs
•College Textbooks