Markets Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Almost everyone appears to understand the term market. However, different people answer the question “what is a market?” in different ways. Some consider a market as a designated geographical location where buyers and sellers meet to trade goods and services. Others define market in terms of specific characteristics of the potential buyers for a product or service. This essay examines the various ways in which market can be defined and understood.

Theodore Levitt argued that a market is composed of people who have various needs and wants. Economists across the world consider markets as the group of buyers and sellers. Marketers differ from economists in that they consider sellers as the constituents of industry and buyers as constituting the market. Jack Z. Sissors argued that market consists of many things related to selling products that meet consumers’ needs and wants. He further argued that there are two main dimensions of a market: physical and behavioral. Physical dimension considers the physical attributes of the market for a product or product class such as market size, location, and prospective buyers’ demographical characteristics. Physical dimension helps define the market in terms of the product or product class whereas behavioral dimension helps in developing a customer-oriented perspective of the market. Behavioral dimension focuses on behavioral characteristics of the prospective buyers such as the influences, reasons, quantities, frequencies, and timing of purchases as well as their social and psychological characteristics. There are several ways in which markets have been classified.

Traditionally, markets have been defined and classified either in terms of geographical locations or product class. Examples of markets identified by product class include a cotton market, cheese market, food grains market, fruits and vegetables market, etc. Some examples of location-based markets include New York market, London market, Calcutta market, Valencia market, etc. Some of these locations were also very strongly identified with a product class. For example, Valencia market in Spain was traditionally known for cotton and Calcutta market in India was known for jute.

Since more and more companies are selling their products and services abroad, it is now common practice to classify markets as domestic markets and global markets. Some of them classify and identify their international markets based on regions, e.g., U.S. market, European Union market, southeast Asian market, Asian market, Pacific market, Indian market, Chinese market, French market, etc. Many people continue to identify markets in terms of geographical location or product class. Markets are also classified as business markets and consumer markets based on the nature of consumption.

Business Markets And Consumer

Markets Business markets are constituted by those buyers who buy goods and/or services to resell to others or to use them to produce another product and/or service. These buyers are known as organizational buyers or business buyers, and they sell or rent or supply their outputs to other businesses or to individual consumers. Business buyers, although few in number, usually buy in bulk. Industrial markets, institutional markets, and government markets are among the key business markets. Industrial markets include buyers for raw materials, components, finished goods, and/or services. Organizations that are created to provide goods and/or services to people in their care constitute institutional markets. Medical and educational institutions are good examples of institutional markets. They usually operate with a low budget and hence look for good-quality products and services at lower prices. In several countries including the United States, government constitutes the biggest market for several firms. Some estimates show that the U.S. government is the largest customer in the world. Government markets are often good for domestic suppliers as most government organizations tend to favor them and formulate their purchasing systems and policies accordingly.

Consumer markets, on the other hand, are constituted by those buyers who buy things for their personal or household consumption. Professional marketers now use demographic and nondemographic (psychographic) characteristics of the prospective buyers to define and classify consumer markets. Age, family size, gender, income, occupation, education, ethnicity, etc., are among the key demographic characteristics used to identify and define consumer markets. A large number of consumer product companies use age as a criterion to categorize their markets as kids market, teenagers market, youth market, adult market, and seniors market. Some define markets even further, for example, classifying kids market into submarkets such as newborn market, infant market, toddler market, and preschooler market. Due to different genetic and social factors, markets for certain product classes such as clothing, grooming, entertainment, etc., require businesses to define their markets and products on the basis of gender. It has always been very easy to notice that airlines, hotels, clothing companies, banks, etc., often come up with different products and services for market classifications based on the income level of their prospective buyers. Similarly, many restaurants across the world thrive as they identify their market based on ethnicity. One can easily locate Chinese and Indian supermarkets outside China and India that define their markets on the basis of ethnicity.

A cluster of buyers’ characteristics such as education, occupation, income, personal wealth, etc., create an enduring division in several societies that is commonly termed social class. Many businesses identify and define their markets on the basis of social class because social classes exhibit distinct preferences and behaviors. Automobile manufacturers often use social class to identify their markets and develop specific products and services to suit the taste of consumers belonging to a particular social class.

Characteristics

Advances in behavioral science discipline have made it possible for businesses to combine both demographical and psychological characteristics of prospective buyers to better define and classify their consumer markets. Since people within a demographic group often vary significantly in terms of their personality traits, attitudes, beliefs, values, self-image, lifestyles, and aspirations, businesses develop psychographic profiles of their prospective buyers to identify appropriate markets. It works very well for niche marketers because psychographics delves deeper into people’s lifestyles and behaviors, including their interests and values.

More and more businesses today construct their markets on the basis of behavioral characteristics of prospective buyers. For this purpose, they attempt to understand who and what influences their buyers to buy what they buy, why they buy a particular product and brand, when and how often do they buy, are there any special occasions to buy for, in what quantities do they buy, and from where? They try to understand their consumption and post consumption behavior including disposal behavior. Several purchases involve planning by buyers to varying extent. Yet, kids buy candies, chocolates, ice cream, chips, and toys; and adults buy beverages and tobacco products on impulse. Such buyers constitute an important market for marketers of such products.

Businesses also define their markets based on the benefits their prospective buyers seek. Buyers who always seek the lowest price for an item constitute a key market for many businesses. On the other hand, some businesses focus on those markets that are constituted by non–price sensitive buyers who are looking for specific benefits other than economy. Businesses charge premiums in such markets and thus make more money even though they sell fewer quantities.

Consumption quantity is another important behavioral characteristic of buyers that businesses use to identify their markets. Many firms develop bulk packages for their market of heavy users and small packages for their light users. Some firms invest huge amounts of money and effort to develop specific programs for the market constituted by nonusers as they expect them to become heavy users in the future.

Some buyers buy and consume certain products on specific occasions. For example, wedding dresses are purchased or rented at the time of wedding; families go on vacation during school holidays and thus significantly increase the demand for air travel and hotel rooms among many other things; some save throughout the year to splurge during Christmas time; Valentine’s Day, Mother’s Day, and Father’s Day are other occasions on which many people across the world spend good amounts of money to buy gifts. Businesses use these temporal aspects of prospective buyers’ lives to identify markets and develop unique products and strategies for such occasions.

Some businesses operate in several markets. Others focus on specific markets. They evaluate the attractiveness of markets by estimating the size, profitability, potential, and associated risk and then develop appropriate products, services, and programs to market them.

Bibliography:

C. Anderson and J. A. Narus, Business Market Management: Understanding, Creating and Delivering Value (Pearson Prentice Hall, 2004);
J. Best, MarketBased Management (Pearson Prentice Hall, 2008);
Kotler and K. L. Keller, Marketing Management (Pearson Prentice Hall, 2006);
Per Krusell, Toshihiko Mukoyama, Richard Rogerson, and Ayseguel Sahin, “Aggregate Implications of Indivisible Labor, Incomplete Markets, and Labor Market Frictions,” Journal of Monetary Economics (v.55/5, 2008);
Theodore Levitt, “Marketing Myopia,” Harvard Business Review (July–August 1960);
Jack Z. Sissors, “What Is a Market?” Journal of Marketing (July 1966);
Linda Tischler, “Where the Bucks Are,” Fast Company (March 2004).

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