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CHAPTER 2
MARKETS
MARKETS
Definition of Markets
•Buyers•Ability to Buy•Willingness to Buy
Consumer Market Segments
•Geographic•Demographic•Psychographic•Cultural/Racial
BUYERS
Consumer Markets Families Individuals
Business Markets Business Government
CHARACTERISTICS OF MARKETS
Consumer Business
Many buyers Few buyers
Small purchases Large purchases
Direct demand Derived demand
DERIVED DEMAND
U.S. Steel Ford Buyer
The amount of steel sold by U.S. Steel to Ford is
derived (influenced) by how many cars Ford sells.
Intel Dell Buyer
The number of computer chips sold by Intel to Dell is
derived by how many PC’ s Dell sells.
ABILITY TO BUY
Income
Credit
Bartering
CONSUMER INCOME
Gross Income – Total income (paycheck) 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 2003
Cash 60% 32%
Checks 30% 15%
Credit/Debit Cards 10% 53% 100% 100%
BARTERING
The negotiated exchange of goods for other goods instead of cash or credit.
Examples
•Tutor a student in exchange for mowing your lawn
•Trading radio time for Astro Tickets
WILLINGNESS TO BUY
Consumer Spending
U.S. Beverage Market
Favorite Sports
CONSUMER SPENDING
Category Examples
Durable Goods Furniture, TV
Nondurable Goods Food, Beer
Services Travel, Education
U.S. Consumer Expenditures(Percent)
Category 1970 2000
Durable Goods 13.1 12.1
Nondurable Goods 41.9 29.8
Services 45.0 58.1
U.S. CONSUMER SPENDING
Category 1960 1990
Food and Alcohol 26% 19%
Shelter 14% 20%
Apparel 10% 6%
Vehicles 13% 23%
Other 37% 32%
100% 100%
U.S. BEVERAGE MARKET SHARE
Beverage 1960 1990
Milk 34% 13%
Coffee 32% 12%
Beer 14% 20%
Soft Drinks 11% 36%
U.S. FAVORITE SPORT
Time Pro Football Pro Baseball
1985 24% 23%
1997 28% 17%
2004 30% 15%
CHANGES IN FAMILY DINNERS
Take-outs
Fast Foods
Plan-overs
CONSUMER MARKET SEGMENTS
Geographic
Demographic
Psychographic
Cultural/Racial
GEOGRAPHIC MARKET SEGMENTS
Rural Areas
Suburbs
Cities
Global
DEMOGRAPHIC MARKET SEGMENTS
Age
Income
Sex
Education
HIGH INCOME MARKET SEGMENTS
Tiffany
Rolex
Porshe
PSYCHOGRAPHIC MARKET SEGMENTS
Lifestyles Business Examples
“Jill” Best Buy
Free Spirit Harley-Davidson
Organic Eater Whole Foods
LIFESTYLE TARGET MARKETS FOR BEST BUY
Markets Description
“Jill” Busy suburban mom
“Ray” Family man who wants his technology practical
“Barry” Affluent professional male
CULTURAL/RACIAL MARKET SEGMENTS
Cultural/Racial Business Example
Black Angel Books
Hispanic Bank of America
Vietnamese Kim Son
BANK OF AMERICA MARKET STRATEGY
Hispanic Market Major Banking
Segments Services
New Arrivals Basic bank services
Transitionals Mortgages, IRA’s
Established Brokerage services
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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